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A 403(b) refers to the section of the IRC that creates this particular form of retirement savings vehicle. As I believe Zev pointed out, contributions are made with pre-tax dollars. There are annual funding limits, and under some circumstances there are "catch-up" provisions which allow you to contribute more.

A variable annuity is an investment vehicle available through life insurance companies. I believe that they are the only financial entity that , by statute, can offer this vehicle. It is not, however, a life insurance product, though variable annuities do have a life insurance component, to wit, if you die before annuitizing (beginning to take scheduled periodic distributions) your estate or beneficiary will receive an amount at least equal to your contributions, less any withdrawals you have taken.

A variable annuity is an investment vehicle, not a retirement plan. When a variable annuity is used as the investment vehicle in a retirement plan such as a 403(b) it is classified as a "qualified annuity" which simply means that contributions are made with pre-tax dollars, and that all money paid out is taxable income. Thus the term tax sheltered annuity; not only is the growth sheltered until distribution; the initial principal is also sheltered.

When money is invested in an annuity which is not in a retirement plan it is referred to as a non-qualified annuity. That simply means that the funding is with after-tax dollars, and that rules governing qualified retirement plans using VAs as funding vehicles do not apply.

Zev is correct in noting that monies housed in a VA inside a qualified retierment plan can br rolled into an IRA when you leave an employer. The IRC permits this. But in rolling this money over you may incur a surrender charge if you surrender the annuity contract. This charge will be articulated in the annuity contract, and is not a function of the IRC; it is strictly a function of the contract.

You can, however, reclassify the annuity contract from a 403(b) to an IRA, while maintaining the contract. This will not result in a surrender charge. Then, when the surrender period disappears you can reposition the money into alternative investment vehicles if you choose without incurring a surrender charge.

In short, a 403(b) and a 401(k) are qualified retiement plans. Both can use variable annuities a funding vehicles, which is what VAs are.

Hope this helps. If not, ask some more questions.
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