Ask TheStreet: Annuity Analysis

So all those fees will defeat the point of the tax deferral on your earnings, unless you open them at a younger age.

And another downer: You owe ordinary income tax, which could be as high as 35%, on your annuity withdrawals. If, instead, you had your money in mutual funds, you'd only owe the 15% capital gains tax on the earnings.

One more big bummer: Annuities are in many ways the worse thing to leave to your heirs because there's no "step-up in basis." That means, for tax purposes, your heirs will owe ordinary income tax on the annuity's value from the day you opened the account.

So if you opened an annuity fund for $100 and it's worth $1,000 when you die, they'll owe tax on all the growth, or the $900. With a regular mutual fund, your heirs will get the step-up in basis and won't owe a dime. Instead, they'll have a $1,000 mutual fund investment in their portfolio.

So annuities may not be the right choice for you at this time. "We have mixed feelings about them. We like the tax deferral, but are concerned about the loss of capital gains and dividend tax rates," says Bill Fleming, director of personal financial services at PricewaterhouseCoopers in Hartford, Conn.

Granted, there are some low-fee annuities out there from Vanguard, Schwab and T. Rowe Price .