This NY Times article (reg. reqd.) drives the point home that you have to be extremely careful when dealing with Annuities. They can be completely inappropriate in a whole host of situations. And they attract an aggressive salesmanship due to commissions topping, at times, 12+%.

The investment the Aquinos had chosen was an annuity, an insurance product that not only tends to carry high fees but also requires that most of the money stay locked up for years, making it especially inappropriate for many older investors, regulators say. In fact, the one they bought carried a staggering 17.5 percent surrender charge if it was cashed in during the first year, their daughter explained. Exit charges were not scheduled to disappear until 17 years after the purchase.

This meant that Mr. Aquino, who is 65, and Mrs. Aquino, 63, could not cash in the annuity without paying a surrender fee until they were in their 80's. The executive had not told them about the lockup requirement, the Aquinos said, although the brochure he left with them described the fees in small print.

With rates still historically low, seniors are reaching for yield. A lot of annuities claim to solve this predicament. Please go slow, have everything explained 2 or 3 times and read the fine print. Press the salesman why an annuity is suitable in your situation. In fact, before signing anything take all the paperwork and get an independent second opinion. As the saying goes, more money's been lost reaching for yield than at the point of a gun.