I am a non practicing CFP who works for Execplan express financial planning software, a maker of tax and retirement planning software for professional adviosrs so hopefully my broadbase of experience can be helpful

First if you have this much money, to invest, you probably should talk to a professional, not take advise from someone off of the internet. Paying someone $2000 of $2500 for what to do with 500K over the next five years works out to .1%, most annuyties have 1.5%+ in internal fees. And the reason you want to pay for advise is simple, are annuities the right tool for your needs and the best way to assess that is to understand, your income tax exposure, your personal cash flow needs, your estate objectives etc.

With that said, generally annuties are a poor investment vehicle. Yes they provide tax deffered growth, but if your are considering a variable annuity that invest in equities, equities outside of an annuity also provide mostly tax deffered growth since you are not taxed until you sell the stock, and you have the ability to sell stock at anytime without penalty, not so for an annuity. And stock sales are taxed at lower rates than annuity liquidation

If you need fixed income that is deffered than buy stocks that pay high dividends, these dividends need to be paid on an ongoing basis but are taxed at much lower rates. If you are buying annuities for guarantee rates and security of principle, remeber that the annuity is only as good as the company see AIG.

What annuityies may be good for is if you need a guarateed income for life and afraid of running out of money. Here nothing beats an annuity since what you are doing is pooling life expectancy and sharing risk, this allows the annuity to pay for as long as you live in return you give up the asset, so if you live 30 years you make out, if you live 2 years youd dont, but you will not know it so....