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There will be a tax to pay on the annuity earnings. Also you may, depending on the annuity you have, be requried to pay a penalty or maintenance fee when you close it out.
However, most financial advisors today, do not feel the annuities are the bargain they used to be many years ago. Over the past 5 to 10 years, annuities have actually become one of the least favored investments.
If you are getting a return on the annuity, I would say, at less than 5%, you may wish to cash it out and re-invest it into another type or class of investment, such as large cap funds, CD's, etc.
This of course is more complicated in deciding than we can provide you here. IF you were to sit down with someone, say from Charles Schwabb, or Fidelity, you and they would do a complete analysis of your current financial situation, your age, retirment goals, risk aversion (how much risk you are willing to assume for yourself and can financially handle), and other factors to make a final decision.
If your annuity is bringing you say 7% or more, you would not necessarily benefit from closing this out.