We are retired, I'm 62 and my husband is 58. We have $150,000 in savings, a 401K at $105,000 and another 401K of $75,000. The home mortgage has a balance of $160,000 with 18 years left on a 20 year mortgage at 3.85%. 

Should we invest in annuity or pay off the mortgage? The annuity has a 5% guaranteed with 3% fee. I have ss 1525.00 and pension 1275.00 he has 2300.00 pension. We live in New York. 
Should I use my 401. $105000 monthly or use cash saving till I reach 65. Thank You