A variable annuity is a type of annuity contract offered by insurance companies as an investment vehicle for retirement planning. It allows investors to allocate funds among a selection of investment options, often including stocks, bonds, and mutual funds. The value of a variable annuity's underlying investments can fluctuate, affecting the annuity's performance. Variable annuities can provide potential for growth, but they also carry investment risk. They offer a variety of features, including tax deferral and the option to convert the accumulated value into a stream of income during retirement.