Variable annuities may be a good alternative for your wealth building, but shop carefully since there are so many tricks.

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.

VARIABLE ANNUITIES: Unlike their fixed counterparts, variable annuities are designed to pump up your savings by giving you a chance for long-term capital growth. They do this by allowing you to invest in anything from half a dozen to 20 or so stock or bond mutual-fund-like portfolios called subaccounts, many of which are run by such established fund managers as Strong Opportunity Fund's Dick Weiss and Templeton emerging markets guru Mark Mobius. As with fixed annuities, gains escape taxation until withdrawal.

...

BOTTOM LINE: If you've already maxed out your contribution to 401(k)s and IRAs--both of which provide tax deferral without annuities' extra layer of fees--then variables can be a good way to boost your savings for retirement. To get the most out of them, however, you should limit yourself to ones with low annual fees and forgo expensive options that dampen long-term growth potential.