What type of annuity allows the owner to purchase accumulation units and maintains a separate account?

A variable annuity is designed to allow the owner to purchase accumulation units, which represent their investment in a separate account. This type of annuity differs from fixed annuities in that it does not provide a guaranteed rate of return; instead, the value of the accumulation units can fluctuate based on the performance of the assets in the separate account, which typically consists of mutual fund-like investments. This structure gives the owner the potential for growth that is linked to market performance, making variable annuities suitable for those looking to invest for retirement while taking on some additional risk.

In contrast, fixed annuities offer a guaranteed return and do not involve separate accounts or accumulation units, and immediate annuities usually begin payments shortly after purchase, focusing on providing a steady income stream rather than accumulating units. Indexed annuities have their returns tied to a stock index and may offer some growth potential but do not function like variable annuities in terms of purchasing accumulation units.