| This Canadian doesn't know U.S. rules about the subject of annuities. Especially regarding tax consequences of the transmutation of a piece of property carrying a potentially high tax liability into an annuity. Whether the purchase of a vehicle whose purpose is at least partially to support one's retirement needs would have a major effect on the current tax liability. An annuity is you giving a major pot of money to an entity, usually an insurance-related agency, in return for their guarantee to pay you a pre-determined amount on a regular basis (usually monthly, sometimes quarterly or annually) for a certain contracted period. Sometimes the "guaranteed period" is till death. In some cases you can provide the asset now, with the understanding that the initial payment would be deferred - you'd begin to collect at a certain pre-determined time, e.g. age 63. Should you become disabled at age 60 and unable to work - tough cookie - no payout till 63, if that was the original contract's provision. A regular annuity would agree to pay you that pre-specified amount, possibly monthly, as chosen at the time of purchase, for that specified period - often for life. If you die next month, the issuer smiles - and keeps the rest of the pot of money that you'd given them. So - many ask for a guaranteed payment period of, say, 10 years. In which case a specified beneficiary or your estate would receive the rest of the guarantee - whether regularly for 9 years and 11 months or, more likely, agreeing to accept a payment in full now of a reduced amount, being the amount needed to underwrite the cost of making that ongoing payment to your beneficiary/estate. In which case - as there are extra contingencies that might cost them more money - the amount of the regular payment that they'll offer is reduced. Or, one can choose to have the income support both members of a (usually aged) couple for life. Resulting in another reduction in the amount of the regular payment that they're willing to offer. With a life insurance policy, you bet that you may die, and they assume that you'll probably live. Here, you're betting that you're going to live long enough to receive full benefit of the amount you'd invested - possibly more, if you live longer. They bet you're going to die sooner, rather than later. In each case - they've got the actuaries. Once you set up the originally agreed plan, it's pretty well set in stone - almost impossible to change it. I've never been in a strait-jacket or handcuffs - and have no desire to arrange to be in them. One of my main emphases as a financial planner has been to encourage folks to learn how to manage their own money. I charge for my time - sell no financial products - so my clients don't need to worry that I'm trying to sell them some financial product - which in most cases is one of often a limited selection that they sell, out of a great variety available. Another reason that I don't like an annuity at this time is that the rate of the agreed payout relates very closely to the level of interest rates available at the time that the annuity is set up. And interest rates are at historically low rates, just now. But if interest rates should rise substantially in the next few years - which they may do, for the U.S. government is running large deficits currently - and promising tax cuts. Which usually results in inflation, so interest rates rise. But - the person who arranged an annuity at present will be stuck with that low level of payout rate from here on. An old lady of past 80 told her nephew and niece of her idea of buying an annuity. They called her financial planner in another city. He spoke of the idea that the basic annuity dies at the death of the annuitant. They thought not. He cancelled another appointment to visit her, as the contract was about to be finalized. They asked the agent selling the annuities how much residual value there'd be on her death - "Oh, they didn't make such guarantees!". On that type of contract. Good wishes to all, joyful guy/Ed | 
