Beware- Variable Annuities - A top 13 bad idea

Each year the organization that represents state financial regulators issues its list of the worst investment scams on the planet. Scams denote something that is completely crooked, like a Ponzi scheme, but state regulators say they are worried about more than outright scams - they are concerned about what the group now calls Investor Traps. In 2006, this group, the NASAA, issued its list of "Unlucky 13 Investor Traps." Number 13 on this list - Variable Annuities.
Variable annuities are tax-deferred investments that typically place mutual funds inside of an insurance wrapper for tax deferred potential investment growth. While these products are legitimate investments, regulators are concerned about their popularity in the sales community. Commissions to those who sell variable annuities are very high, which provides incentive for sellers to engage in inappropriate sales. Variable annuities are only suitable for a very small percentage of the investing public and generally are not appropriate for most seniors. The steep penalties for early withdrawals also make variable annuities unsuitable for short-term investors. Be especially wary of any broker who wants to sell you a variable annuity to hold inside a 401(k) or IRA. You are already getting tax-deferred growth in an IRA or a 401(k), and the variable annuity simply adds a layer of cost with no additional tax benefits.