In booming markets in which all investments seem to move upward, fixed annuities fall by the wayside. Fixed annuities promise modest returns and may have costly fees. The products offer guaranteed returns of principal, and thus function in part as a life insurance policy. But such guarantees can be cheaply secured with low-cost term life insurance, freeing up investment funds that can be placed in more attractive holdings.

[See 10 Steps to Fine-Tune Your Retirement Plan.]

Today, of course, investment markets are limping, not booming. They also are prone to large swings. Interest rates are so low that other safe, yield-based investments are unappealing. Low rates also reduce the promises that insurance companies can make on annuity returns. Even so, sales of these “plain vanilla” annuities have been rising.

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