Name any type of annuity and you ll likely get an earful from regulators and at least some financial planners. So-called variable annuities are notorious for having onerous sales charges and huge fees if you sell them early. Fixed annuities payouts end when investors die, leaving nothing for their heirs unless they bought an expensive rider. And the returns on indexed annuities, which are partially tied to the stock market, are capped, so if the market soars, investors may miss out. Some insurers have been forced to raise money to cover their annuity obligations. Even some financial-industry executives who like and sell annuities admit they have drawbacks. Variable annuities are expensive to manufacture, expensive to sell and expensive to buy, says David Carroll, head of Wells Fargo s wealth, brokerage and retirement group.

But don t tell that to baby boomers looking for retirement security at a time when their 401(k) plans are still hurting; they just keep buying annuities. Through the first six months of the year, total annuity sales were almost $127 billion, only a 3 percent drop from 2008. Meanwhile, fixed-annuity sales soared, and those of indexed annuities, which offer a guaranteed payout and the chance to earn more if the stock market rises, jumped 22 percent, to nearly $16 billion. And though the popularity of variable annuities waned, the product still had $63 billion in sales.

The allure is easy to see, and even detractors say the right kind of annuity can be useful. Fixed annuities guaranteed payout as much as 7 percent a year in some cases looks good compared with those of most bank CDs these days. Mutual funds can grow faster, but they can also crash. You can t market mutual funds with the word guarantee, says Jordan Kimmel, market strategist for the brokerage firm National Securities Corp.

Are annuities for you? Experts say the peace of mind may be worth it, especially now that regulators aim to make certain insurers have enough cash for future payouts (new guidelines require firms to look at how severe market conditions can affect policies and force insurers to hold more reserves). Still, many pros say people who want to invest in the market should probably buy a mutual fund or a stock. An annuity might cushion a loss, but investors often pay a big price for that security and if the market soars, the insurance company, not the investor, captures much of the gains.

Common Types of Annuities

FIXED: Investors get paid a set amount every month.

VARIABLE: Payouts depend on the performance of a portfolio of stocks and/or mutual funds.

INDEXED: A fixed payout plus a chance to earn more if stocks do well.