Just to add to my previous comment, I'm not completely against annuity products for people fairly far from retirement.
I own one -- and bought it pretty recently. (Put down the pitchforks, folks.)
I have a flexible deferred annuity with USAA. I opened it in November, and here are the factors that went into my thinking:
1. I already max out my 401K and two Roth IRAs for my wife and me.
2. I wanted a little more tax-deferred growth because it's likely, despite upward pressure on tax rates, that if I no longer have my current job our tax bracket will drop.
3. We have no debt and a sufficient emergency fund. I'm quite sure there is no chance I'll need this money before age 59 1/2. In short, this is money we know we can set aside for a while.
4. The asset protection laws in the state of Texas are very favorable to retirement and insurance products, including annuities, where lawsuits and delinquencies are concerned. I wanted to shield more of our net worth from litigation and potential creditors.
5. The annuity has a currently attractive rate (4.55% for even small balances) AND I get a 4% bonus match for anything I put into it in the first year. That translates to an 8.73% return on the first year's contributions and seems a good return for the fixed income part of my AA.
6. I worry about credit risk of insurers, but USAA is about as solid as they come and if they busted (and if the state backup failed), we'd be so screwed that the small percentage of my assets in it would be the least of my considerations given that probably no more than 2-3% of my net worth will wind up there. I can accept that risk.
7. There was no front-end sales charges, and if I don't need more than 10% of it per year after the first year, there's no surrender charges at all.
[Edit to add #8: I have a guaranteed minimum 2.25% return for the length of the contract (through 2060). If you drink the longer-term deflation Kool-Aid, that's not bad.]
I don't see this as being a big part of my retirement plans. But in my situation, given the points above, I have no problem plowing a fair amount of my excess cash flow into this annuity, particularly for the first year when I get a 4% match on anything I put in.
But we're talking about a totally different animal here. I'm not a big fan of annuity-type investments within an IRA or 401K. I still believe that deferred annuities are wrong for most people who ask about them, but when I looked at my situation closely, I decided I was a pretty good candidate for one.