Pixy's prior response seems to answer the question. You can roll the lump sum into an IRA and so not pay large taxes on it. The Annuity offers safety against market fluctuations, but no hedge against inflation. The risk with the lump sun is that you will not do as well as the annuity over the long haul. If you look at the risk profile of a retirement protfolio then you could ask 'What is the lowest, safets investment for the base of the portfolio pyramid' Govt Bonds ? Well if the Annuity beats Govt Bonds then it has value. Somehow the fact you can allways draw down the lump sum principal, or leaveto heirs, is another consideration. IMHO
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