I made a topic a while ago talking about just how bad it was, compared to my 2011 iMac which was only $100 more in retail price.
Comparison:
2011 iMac
QuadCore i5 @ 2.5Ghz
4GB (upgraded to 12GB) RAM
500GB 7200RPM HDD
Radeon HD 6750M
1080p display
2014 iMac
DualCore i5 @ 1.4Ghz
8GB (non-upgradeable)
500GB 5400RPM HDD
Intel 5000
1080p display
In comparison, the 2011 is around 20% faster in multi-core, but the 2014 is marginally faster in single-core.
More and faster RAM.
HDD is slower speed, but also smaller size, hence higher density, meaning performance difference will be minute.
2011 has slightly higher-performing graphics card, which can also be overclocked in Windows quite easily and well.
In summary, yes the iMac is underpowered. It's only $100 cheaper than what the base-model iMacs used to be but around the same speed. Note that the 2011 iMac is nearly 4 years old already, so it's really inexcusable.
I personally would either get the 2.7Ghz iMac if affordable, or buy second-hand. You can get a very nicely specced older iMac for the same price as the current base model. Even an older 27" is within your reach.