Now that we've stuffed you with reasons not to buy variable annuities, let us give you a few examples of instances where annuities actually make sense.

Sleepless Retiree
If you're retired and barely have enough money to meet your annual expenses or fear that you will outlive your capital, then consider purchasing an immediate annuity. You'll get a guaranteed income stream, even if you outlive your annuity's principal. Of course, if you die tomorrow, the remaining balance of the annuity goes to the insurance company, explains annuity analyst Patrick Reinkemeyer of Morningstar.

For some, that risk is worth the price. "You're buying peace of mind," says Mark Mackey, president and CEO of the National Association for Variable Annuities. "No one would question you if you bought homeowners insurance to protect against a fire, even though a fire is unlikely."

Young Trader Saving for Retirement
If you are under 40, trade mutual funds several times a year and have maxed out your 401(k) and IRA, a variable annuity might make sense. Why under 40? You may need more than 20 years for the benefit of an annuity's tax-deferral to exceed the benefit of the 15% long-term capital gains rate on profits from selling your mutual funds. (Remember, annuities are taxed at ordinary income tax rates, which run as high as 35% at the federal level.) Of course, the lower your tax bracket in retirement, the better the case for annuities becomes.

Why a trader? Because if you did that kind of trading in a taxable account, you'd get hit with short-term capital gains taxes at rates of up to 35%. In an annuity, your money can continue to compound until you withdraw it. "Switching and asset rebalancing are one of the great advantages of a variable annuity," notes Reinkemeyer. "Most annuities allow you to switch investments up to 12 times a year for free, and after that it's about $10 a switch." Of course, if this description fits you, make sure you pick an annuity with plenty of attractive subaccounts. Or, better yet, one with no surrender charges. Otherwise, you are likely to be hit with a fee as high as 9% if you try to move your money to another annuity provider (a so-called 1035 transfer) before your surrender charges expire.

Malpractice Target
Other suitable annuity investors: potential targets of lawsuits. "Assets in life insurance policies and annuities are credit protected in many states," says financial planner Ben Baldwin. "As long as the money wasn't put there in defraud of creditors, it's safe from malpractice suits. Anyone in the personal services business today who's likely to be sued -- doctors, lawyers, CPAs, architects, financial planners -- might want to take a second look at these products."

Whole Life Loser
If you own an underwater universal life insurance policy, you may want to transfer the assets to an annuity. Typically, life insurance losses are not tax deductible. But, if you move the money into an annuity, the losses can be used to offset the annuity's gains.