Hopefully I will not get too long-winded with regards to clearing up a few points regarding VAs. mathjak did an excellent over view of the product. While I realize most people on this board recoil in horror at any discussion of this product, it might have merit for some people in some circumstances.
Based on the posts here, it sounds like mathjak was presented a Nationwide LINC VA (Lifetime Income Rider)
There are 2 "columns" that are of interest. The first is the contract value (CV). This represents "your real money". The amount changes on a daily basis due to market fluctuations. At any time, much like other products, your value could be less or more than what you invested. The second column is the one that is more confusing. Most companies refer to it as an "income base" or "guaranteed withdrawal base" or something like that. It is NOT an amount you can walk with if you decide to cash in the policy, and it is higher than the contract value.
In Nationwide's case, they credit your "income base" by 2.5% a quarter or 10% a year for the first 10 years. So, in effect, they are promising that if you put in $100,000, after 10 years they will let you take a guaranteed payment of 5.25% (assuming you are 65 or older) of the $200,000 base, even if your contract value is $100,000 or $150,000 or even zero. You do NOT have to annuitize (give up the contract to Nationwide) to get the 5.25% of the $200,000. If your contract value is higher than $200,000 at the time you take income (unlikely), you get 5.25% of that number, or $10,500 a year for your life and your spouse's life. If there is any money left over, it goes to the contingent beneficiary.
We must keep in mind that Nationwide does NONE of this for free. The internal expenses end up around 4% or so. So, the asset drag is significant. In order the get the "10%", you have to pay 4% in fees and expenses. The 10% is not a REAL number, it is a percentage applied to the income base. The real way to look at it is that you are paying 4% in fees every year to get 5.25% in income payments, albeit guaranteed for life. Pretty hefty cost for a guarantee. Despite that, these products have hundreds of billions invested in them and people continue to buy (are sold) them. With pensions all but gone, it allows someone to get guaranteed income for life. It is however a spendy proposition. In effect, like brewer has illustrated, one could do this themselves if they use a fairly simple option strategy and index funds, and do it a lot cheaper. But, most investors don't understand or like options, so they won't do that.
VAs today are more expensive than ever. Insurance companies underpriced their risk significantly pre 2008 and now have raised their fees and expenses considerably since most of them took huge losses in the financial market debacle. They do work in a number of respects like a pension. Folks that have COLA's pensions in effect have a SPIA with favorable rates. However, a lot of pensions ahve a variable component that can affect their monthly payments up or down. That is similar to a VA, except the VA has higher cost, but is available to everyone. YMMV..........