Solely relying on fixed annuity is probably not a good idea for a robust retirement plan.

When it comes to building assets for retirement, you have a choice of two types of annuities: fixed and variable. Since each type raises different issues and requires different analysis, we'll examine them separately.

FIXED ANNUITIES: Fixed annuities are essentially CD-like investments issued by insurance companies. Like CDs, they pay guaranteed rates of interest, in many cases higher than bank CDs. In September, for example, annuities yielded 4% to 6% on average vs. 3% to 5% for CDs, and some insurers offered bonuses that pushed yields into double digits. Throw in their low investment minimums--usually $1,000 to $10,000--and the fact that the interest they pay escapes taxation until you pull it out, and it's no wonder people tired of seeing their savings pummeled in the stock market have been snapping up fixed annuities like never before.

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BOTTOM LINE: When it comes to building savings for retirement, fixed annuities should probably play a minor role at best as a CD substitute in the conservative part of your portfolio. Even then, they may be more trouble than they're worth, considering how easily surrender charges, market-value adjustments and tax penalties can undo whatever rate advantage they may have on CDs. To the extent you use them at all, you're better off with a surrender-charge-free version like TIAA-CREF's fixed account, or CD annuities.