Like all annuities, there are pros and cons of hybrid annuities. So the essential first step is deciding if hybrid annuities are right for you is to look thru the good and the bad. That’s the only way you can make an informed decision.
Pros and Cons Of Hybrid Annuities- The Positives
First, the pros: Hybrid Annuities offer a unique combination of benefits that accomplish many typical objectives in retirement income planning:
- Hybrid annuities offer partial market participation
- As with all fixed index annuities, there is no risk of loss to principal
- With guaranteed lifetime income riders, you have lifetime income
- As with all annuities, there is the potential for liquidity through withdrawals
- and unlike variable annuities, on of the main positive qualities of hybrid annuities is that they come with very low fees
- Finally, another pro to hybrid annuities is additional Long Term Care and Enhanced Death Benefit options
This really is a wide range of benefits rolled into one product. For many people, it’s just perfect. Lets look in a bit more detail at the pros….
Lifetime Income- This is reason #1 people should be considering Hybrid Annuities. Securing sufficient income for life is key to optimizing your assets. Hybrid annuities are a great source of lifetime income, bundled with other benefits.
Principle Guarantee- As with an Index Annuity, your initial investment has no risk of loss and may even be guaranteed to grow at a minimum rate. The contract will state the minimum amount you can expect to receive at the end of the surrender period.
Tax Deferral- Like other annuities, the principal grows on a tax-deferred basis.
Reset Points Lock In Gains – Depending on the crediting method in your contract, reset dates may lock in gains that subsequently erode in the marketplace. Timing is everything, but we have seen index annuities outperform markets due to the reset dates.
“The mule always appears to me a most surprising animal. That a hybrid should possess more reason, memory, obstinacy, social affection, powers of muscular endurance, and length of life, than either of its parents, seems to indicate that art has here outdone nature.”
Now: The Problems With Hybrid Annuities
It’s critical to take a moment to investigate both the pros and the cons of the hybrid annuity. As with anything, there are downsides to be aware of.
Complexity: Cap Rates, Participation Rates, Crediting Methods, Spreads:
All index annuities have a learning curve to overcome and hybrid annuities are no exception. It can sometimes be hard to individuals to see the benefits when grappling with unfamiliar terms and calculations.
But, lucky for you, we at Annuity Straight Talk have recorded a superb and concise index annuity training video- just sign up to the right and get started on your way to being an expert in no time. If you can get over the hump and understand how it all works, they really do offer a lot of benefits.
Perception Issues: Income Rider Account Value Vs Real Acct Value:
Perhaps our biggest issue when discussing Pros and Cons of Hybrid Annuities is one of perception and deceptive marketing by others.
If someone is telling you an annuity they offer is guaranteed to go up by some rate, like 8% per year roll up, they are lying to you. It’s deceptive marketing that gives these products a bad name.
Rather, the Income Account Value may be guaranteed to roll up at 8%… but that is not real money you could walk away with. If you don’t understand this concept yet, be sure to sign up and get our Hybrid Annuity Product Detail Report , and also, read up on Income Riders.
Final Negative: Long Surrender Periods- Hybrid annuities with lifetime income riders should be approached as a one way investment that you don’t plan to surrender. You should consider the money invested as a permanent investment in a future lifetime income stream. With that mindset, the long surrender is a non-issue, however if circumstances change, you should be aware that early surrender could be costly.
Hybrid Annuities: Summary
How does it stack up for you with the Pros and Cons of Hybrid Annuities? We have extensive information in these pages on Hybrid Annuities, but sometimes it’s best to just give us a call to go over your situation. If you seek a qualified adviser well versed in Hybrid Annuities, please do not hesitate to contact us.