Catching the end of a mutual fund radio show this morning, I heard that there are a good number of people out there (reportedly some 70,000 with a single insurance company that escapes my name) with tax-deferred variable annuity retirement accounts.
Don't open one up. If you've a putatively trusted advisor or insurance agent who suggests you do so, boot him. His conduct is a dereliction of fiduciary duty and will earn him greater revenue through the extra cost but do you no good. If you have opened one, taking the 10% penalty now to pull it out is still likely the right move if the sum isn't enormous.
It makes absolutely no sense to open one, unless you've maxed out all your other tax-deferred options (like 401k, IRA, etc), and even then it's sub-optimal, because if life expectancies have been increased drastically by the time you retire (SENS breakthrough, for example), your monthly stipend will be infintesimal. You'll pay extra fees (in the general range of 1%-4%) on top of the mutual fund fees/commissions that the annuity provider will invest you in (or allow you to choose to invest yourself in). Then, at some point past the age of 59.5, you'll be able to begin collecting an annuity until death based on your life essentials at the time of election. So you'll pay extra to eventually enter into an annuity you would just as well enter by cashing out your 401k or other tax-deferred retirement account (without the extra fees) at the same age and sticking it into an annuity at that point.