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I know nothing about Federal annuities so I will assume that nothing your husband does at this point with regard to earning money can endanger his continued receipt of that annuity income. If that is the case, then the real central question becomes: "What is the best deferred savings mechanism for an independent consultant?"

I would suggest that your husband either incorporate making an "S" election or become an LLC (Limited Liability Company. The choice here is complex, so I will skip the details at this time. Suffice to say, IMHO it is always wise for an independent consultant to have limited liability.

There is a second benefit. Either the corp. or the LLC can adopt a profit sharing plan. Typically, though not necessarily, the profit sharing plan will have 2 components:

1. A money purchase component which is an annual mandatory contribution equal to X% of pay; let's say 10%.

2. A profit sharing component which is a discretionary contribution equal to Y% of pay; let's say 15%.

The sum of X and Y can not exceed 25% and Y can not be greater than 20%.

Almost any discount broker can set you up with their regional prototype plans at minimal cost ($25 to $100 per year). This structure & plan adoption mechanism beats the pants off of SEP's, SIMPLE's and IRA's put together.

Regarding your question about receiving a lump sum versus monthly payments --- I would assume a lump sum can be rolled into a Rollover IRA. If so, it's pretty easy to tumble the numbers. Let's say the lump sum is $100,000 & the monthly amount is $500. That's 6%. I think any FOOL can do better than that; thus take the lump sum. On the other hand, if the monthly amount is $1500, that's 18%; pretty tough to beat.

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