In the first none months of 2011, about $25 billion was invested in index annuities. Major Wall Street firms and insurance companies are offering them now. Thus, you might be offered the chance to invest. Before you make a commitment, here’s what you should know.

Index annuities are a form of deferred annuity. The good news is that you’ll owe no tax until you take money out. Over the long term, tax deferral can boost returns substantially.

The bad news? Deferred annuities are meant to be long-term vehicles held until you retire. If you hop in and out, you’ll owe substantial taxes and fees. You should consider them only if you are looking for supplementary retirement income.