Beware The Annuity: Is It Right For You?

Securities-industry regulators charged the brokers Waddell & Reed last week with improperly switching customers from one variable annuity to another. The firm denies the allegation, but sales of variable annuities — mutual funds with insurance contracts — have been eyed by regulators for years. One reason: high fees, often north of 2% of assets annually. Before you buy, experts say, you should fund less costly tax-advantaged accounts, such as 401(k)s. Ask about surrender charges, which can run up to 7% for cashing out early. And make sure you need the features you're paying for.