Ask TheStreet: Annuity Analysis

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What are the pros and cons of annuities? I am 55 years old and was forced to retire from a telecommunications company. An investor is trying to get me to give up my FDIC-insured certificates of deposit and go with a guaranteed annuity. Thanks, Bob

My opinion: Stay away.

It's going to take you 10 to 15 years to recoup the high fees you'll have to pay to own an annuity.

Granted, there are some pros to an annuity. You pay a premium -- either in a lump sum or over a period of years -- to open one. After you're paid in full, the annuity company will make regular payments to you over your lifetime or over a shorter specified amount of time, whichever you prefer.

Then it's a lot like a nondeductible IRA. You contribute after-tax dollars, and the earnings grow tax-deferred until you start withdrawing at age 59 1/2. That's the biggest perk. So if you've made the maximum annual contribution to your Roth IRA or traditional IRA, an annuity could be a great way to continue your tax-deferred savings, if you truly understand these products.

Another upside to an annuity is that there are no contribution limits. So you can put in as much as you want each year. In addition, you are not forced to start withdrawing from your annuity at age 70 1/2, as with an IRA. You can leave the money in your annuity as long as you like.

But, of course, there's a catch. And it's big! There are a ton of high fees associated with annuities. (Ah, I can feel the emails coming!) There are big upfront sales charges and back-end surrender charges if you withdraw the money too soon. In addition, there are mortality and expense charges to cover the risk the insurance company takes on to pay you income over a lifetime. And then there are administrative and annual records-maintenance fees.