The term “vars,” often encountered in the context of finance and economics, typically signifies “variable annuities.” These are contracts sold by life insurance companies offering investors a range of investment options during the accumulation phase, followed by periodic income payments during the annuitization phase. The return on investment within these annuities is directly linked to the performance of the underlying assets chosen by the investor, differentiating them from fixed annuities. A common example includes allocating funds within the annuity to different stock or bond market sub-accounts.
Variable annuities provide a mechanism for tax-deferred growth, offering potential advantages for long-term retirement savings. The earnings within the annuity are not taxed until withdrawn, allowing for potentially greater compounding over time. Historically, these products emerged as a response to the need for investment vehicles that could keep pace with inflation and provide a stream of income throughout retirement, offering a degree of market participation alongside insurance benefits.