by KYW's Salil Gutt

Rates on FDIC insured CD's have plunged. The sharks smell blood in the water. Sales of single pay five year fixed annuities have soared causing alarm bells to ring in the offices of regulators.

Insurance companies are guaranteeing five year rates on annuities in the 4.5% range. The pitch says the money is tax deferred, deferred mind you, not tax free.

Here's the downside.

Say you bite and want to cash out five years later or earlier if you need the money. You get hammered two ways. You will owe federal taxes on the gain along with a 10% penalty for withdrawing the money before age 59.5. Wallop number two is from the insurance company that will take a surrender charge of up to 10% of the entire amount of the annuity.

In short, money in hand will be way higher if you just stuck to CD's. One more thing, CD's are FDIC insured, the annuities are not.

Annuities only make sense for someone earning well into six figures. Yet they are sold to people with limited resources.

One final note. Deferred and variable annuities make no sense for seniors regardless of age and income.