No. of Recommendations: 1
1. If you can follow a simple recipe, you can manage that pile of money using a simple index fund strategy (such as the "Couch Potato Portfolio") and have larger payouts than the annuity is promising. See also "The Retire Early Home Page" for additional info.

The risk is low but there is risk. Whether the pullback occurs in the first year or 5 years later makes a lot of difference.

2. If you need access to a lot of that money all at once, the fees for getting it back from the insurance company are typically extreme.

Which is why in most cases it isn't a good idea to put most of your funds in an annuity.

3. The earnings from an annuity are taxed as regular income. Long-term capital gains and qualified dividend income have lower tax rates.

The payout is treated a combination of premium and earnings. The part that is deemed premium isn't taxable.
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