You should start by figuring out how much money you have accumulated in other tax-deferred savings plans or pensions before you purchase an annuity. Determine how much money you will need to live within your retirement assets.

Look at the three types of annuities to see which best fits your financial plan. Do you need a steady and guaranteed investment? If so, you need to consider a fixed annuity. However, if you are willing to ride out the risk of the stock market in order to make more money, you might consider a variable annuity.

Calculate how long you will need to have your money in a contract. Most annuities require you to keep your money in the annuity for at least 10 years. You must also consider how long you need to keep your money in to pay for the high fees associated with annuities. On average, it takes 10 to 15 years of tax-deferral to make a variable annuity a better choice than a mutual fund.

Look at the financial strength of the insurance company or provider. Most states will protect you from the insolvency of the annuity provider. However, there are limits to the protection. Most states have a limit of $100,000 in protection for the current value of the annuity, or $300,000 in lifetime benefits. This means that if the annuity goes under, you are no longer assured your income for the rest of your life.

Pay careful attention to the fee structure of the contract. Fees vary greatly, so make sure that you compare several different contracts for good value.

Often, annuities come with features and riders that are beneficial. Some offer long-term care riders and others give a bonus of up to 5% of your investment upon opening an annuity.