How a Variable Annuity Works
In the accumulation phase, you (the annuity owner) send your premium payment(s) (all at once or over time) to the annuity issuer. These payments are made with after-tax funds, and you may invest an unlimited amount.
You may choose how to allocate your premium payment(s) among the various investment options (also called subaccounts) offered by the issuer. Generally, you can also transfer funds among subaccounts without paying tax on investment income and gains.
The issuer may collect fees to manage your annuity account. These may include an annual administration fee, underlying fund fees and expenses which include an investment advisory fee, a mortality and expense risk charge, and charges for optional benefits (riders). If you withdraw money in the early years of your annuity, you may also have to pay the issuer a surrender fee.