A 10 percent penalty on the taxable portion of your annuity is forfeited to the IRS if you're under 591/2 years old. What the government gives, the government taketh away -- it's the price you pay ...

Typically, annuity commissions are between 4 and 7 percent, although some are still in double digits. Commissions on variable annuities tend to be higher than commissions on comparable mutual funds.

A modern-day annuity is a contract between you and an insurance company. To get an annuity, you'll need to pay a premium — usually a large lump sum — and then the insurer invests it.