With so much talk about how unprepared most people are to retire, it's not surprising that annuities have new appeal. An annuity is an insurance product designed to pay income for a period of time. Typically, you make a lump-sum payment or a series of payments to the seller, often an insurance company. In return, that company agrees to make payments to you. Sounds good, but annuities are not simple.

Study up: Annuities can be fixed, offering a set payment, or variable. A variable annuity invests in underlying funds that can consist of stocks, bonds or a combination of the two.

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"As with other investments consider your objectives, risks, charges and expenses of the variable annuity and its underlying investment options before investing. Read the prospectus," says Joseph Storzinger, an adviser with Kuttin-Metis Wealth Management in Melville.

Ask tough questions: Don't choose an annuity solely on the highest illustrated rate of growth potential. Review its benefits and limitations. "Is the fee for my income rider guaranteed or can it change? Is there any 'renewal' protection, such as a bailout rate or cap to protect my growth potential against future volatility?" asks Eric Taylor, annuities sales manager for Genworth in Richmond, Virginia.

Don't let your fear be their sales tool, says Chris Alberta, president of Alberta Enterprises, in Brighton, Michigan. Calculate retirement income and expenses. Are there gaps? Says Mark Fitzgerald, national sales manager at Saybrus Partners in Hartford, Connecticut, "Your adviser can recommend the best annuity to enhance your income, generate a guaranteed income stream or help meet other retirement goals."