Like all annuities, there are pros and cons of hybrid annuities. First, hybrid annuities offer a unique combination of benefits-
- Partial market participation
- No risk of loss to principal
- Lifetime income
- Liquidity through withdrawals
- Low fees
- 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.
But take a moment to investigate the pros and cons of the hybrid annuity. As with anything, there are downsides to be aware of.
First, The Good Stuff:
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 low 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.
Now, The Bad Stuff:
Complexity: Cap Rates, Participation Rates, Crediting Methods, Spreads:
All index annuities have a learning curve to overcome and hybrids 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- Hybrids with lifetime income 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 this section 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.