Under the scenario you painted my choices are $15,000 a year income and $500,000 in the bank or $20,000 a year income and $0 in the bank.

No brainer, I'll take the half mill thank you. Why? Because your scenario is highly flawed.

Your analysis falls short in two key areas. First, the interest rate you qoute as a return for the non-annuity scenario is ridiculously low. The fact is the spread between what you can earn safely on your money and what the annuity is paying isn't nearly as wide as you state it is. When you recaculate using accurate return rates what you suggest makes no sense.

Also what you fail to mention of extreme importance to your analysis is that you put yourself in a position where you have no emergency fund. That is about as poor an idea as anyone could possibly suggest as financial advice. The whole reason we save and invest is to have an available supply of funds to draw on not just live on but to deal with unforeseen expenses and emergencies. Under your scenario if an extraordinary cost arises there isn't anyway to deal with it other than borrowing money. Bad, bad, bad.

Your example does NOT reflect real world conditions. But it is a great suggestion if you happen to sell either of or both of these vehicles. Commissions are a wonderful thing.