Posts

What is a Hybrid Income Annuity?

Since a fair number of people have recently found my site with this exact question, I figured it’s time to give a straight answer. What is a hybrid income annuity?

To put it bluntly, the term ‘hybrid income annuity’ is nothing more than a marketing name for a fixed index annuity with a guaranteed lifetime income rider. This is marketing lingo meant to create a mysterious aura around this ‘exclusive product that no one knows about.’

Now, Index Annuities with income riders are wonderful and innovative retirement income options.  They have a lot of benefits and features.  There are a wide range of options offered by many carriers, so you need a well versed adviser not biased towards one  company in order to select the best contract for a client’s goals.

That’s our job- to help you determine your needs, then scour the landscape for the best deal for you.

You can read more on Hybrid Annuities here– for now, let’s stay on point about the marketing term for a moment.

I can’t tell you exactly why ‘hybrid annuities’ are  frequently presented as exclusive or mysterious investments,  but there are several clues that make sense to me. Here’s my interpretation of that form of marketing.

Creating a Niche– After searching the internet for relevant information, you should have a pretty good idea that you can cross-check information between different sources. Applying a self-made label to an existing product presents the agent as a specialist who is above everyone else and limits the opportunity for consumers to verify the credibility of those claims. That’s exactly why so many are searching for it- there is a massive marketing push behind Hybrid Income Annuities.

Avoiding Negative Press– While considering fixed index annuities there’s no way to avoid Wall Street’s aversion to these products. If an agent calls it by another name then it’s harder to find the negativity associated with it.

The honest approach is to confront negative opinions head-on so you, as a consumer, are given the chance to make a fully-informed decision on a suitable strategy. We do exactly that on our Hybrid Annuities pages. A sales gimmick leads consumers down the path of least resistance to a quick sale, but it’s not ethical.

Exclusive Access– If you like the long string of benefits that come with “hybrid income annuities,” you’re not alone. These products can be extremely useful for protected market participation, income needs or asset flexibility in retirement.

But remember, no single product can be all things to all people. While the fixed index annuity marketplace achieved sales of more than $30 Billion last year, I would call it anything but exclusive. Be careful dealing with anyone who tries to tell you otherwise… there is likely a secondary motive that may not be within your best interests.

The bottom line here is there are good and bad ways to sell anything.  My objective is to provide straightforward advice on the annuity and retirement planning marketplace so consumers will realize that none of this needs to be complicated.

Flashy headlines and product gimmicks do nothing more than put a little fog on the roadway.  For the record too, I do sell and recommend hybrid annuities…. when it’s the right tool for the job, it’s hard to beat.

Many people within this industry have told me I have an anti-sales message. I prefer to see it as a pro due diligence message. I’d rather see it done right and end up with happy, knowledgeable clients. Any financial product, annuity or otherwise, can be good or bad depending on the context of each individual. You deserve a straight approach and that’s exactly what I aim to deliver.

You can continue your discovery process here, and learn How Hybrid Annuities Work.

Use this site to verify what you hear from other people and don’t be afraid to ask a question if something doesn’t seem right. That goes for anything you hear from me as well. I don’t mind the heat so go ahead and hit me with it.

Have a great week!

Bryan J. Anderson

800.438.5121
[email protected]

Increase Your Retirement Nest Egg Through Fixed Index Annuities

From an early age, we are taught to work hard, save money, and deposit our money  in a savings account. Savings go towards buying a house, education, or for our retirement.

We are also taught to scrimp and save and make deposits faithfully every month. When our savings reaches a threshold, say $5,000 or $10,000, we may then consider converting that amount to a CD for a higher rate of return than our savings account. While it will earn more money in a CD than in savings, you do have other vehicles that can earn you even more than a typical savings rate, and may also be tax deferred.

The Chapel Valley Commercial Landscaping are a viable alternative to traditional CDs or money market savings accounts. When you purchase an annuity you are buying a contract from an insurance company. The terms of the contract provide you a specified rate of return and your gains are tax deferred. The Federal government ensures your money is safe by enforcing  cash reserve levels on the carrier  to cover the annuity. States also have guarantee funds to safeguard your money.

All annuities offer returns based upon your premiums paid. But annuities come in many shapes and sizes. There are immediate annuities which offer immediate income payments. There are also deferred annuities which still earn returns, but in which you do not collect income payments until a future date. You may pay a one time premium for these or make yearly contributions, which is also known as a flexible premium annuity.

The most common annuity is a fixed deferred annuity and quite popular for funding college tuition or retirement income. This is because these annuities guarantee a specified rate of return for a specified time frame. This rate of return is usually better than any bank CD or money market savings account can offer. This product is more conservative than a fixed index annuity, which can garner higher rates of return.

While a fixed index annuity guarantees a base rate of return on your principal balance, the actual rate can vary.  Annuity funds are invested usually in a bond portfolio, and returns are based upon the performance of another stock market index such as the S&P 500 or the Dow Jones Industrial Average. Thus, if the stock market performs well, you share some of the gains. If the stock market does not perform well, you do not incur any losses. It’s really a win-win scenario for you, as you can experience some of the rewards without any risk to your money.

When you take into account a higher rate of return on your money, a risk free guarantee on your money, tax deferment and bonuses, you may well earn more on a fixed index annuity in a fraction of the time it would take you to earn it through an account with your savings bank.

Learn more about this on the The Annuity Report by signing up below or to the right.  Or, explore these  pages on Fixed Index Annuities or these pages on their popular income- rider siblings, Hybrid Annuities.

Case Study – Sales Tactics

How Bad Products are Sold to Good People: There is a clever way to spin information in an annuity contract to make it appear safer, more lucrative and less restrictive than it really is. We need to dive in to this subject so that you can see first- hand just how difficult it can be to deal with some of the people selling annuity products.

One online resource on annuities sends a free booklet when you enter your contact information. Because of their claim to be a trusted, reliable source for information on annuities, we took them at their word and sent away for the booklet. What arrived in the mail was something completely different. As we’re not looking for a libel suit, we won’t name the site here, but almost any Internet search on ‘annuity’ will return this site near the top. It is interesting to note that they claim to be a resource and offer the headline ‘Don’t get Scammed!” The information steered all discussion to a fixed indexed annuity, and then to a specific product.

The book gave just enough background information to appear as a resource, but spun important facts we outline in the Critical Decision Tools in a skewed direction. In fact, we got so riled up we posted a special report on the  “Pros and Cons Of Fixed Index Annuities ” with more detail on these popular products. Some of the Sales Spin we trudged thru in this ‘Trusted Resource Report’:

The booklet reveres fixed indexed annuities as a ‘no lose’ proposition without mention of other types of annuities on the market.
The booklet states that a long surrender schedule may give you “more contractual benefits.” Absolutely false!!!
The booklet refers to minimum fixed rates of 3% within fixed indexed annuities, yet the product promoted with the booklet, in fine print, offered a paltry 1% minimum. Can you say Bait and Switch???
A guaranteed minimum rate of 1% is laughable. What kind of assurance is that? Especially with a 14 year surrender penalty!

And now for the Straight Talk…

True, Fixed indexed annuities potentially offer returns that match the market while eliminating the potential for loss, but….
The fees on these contracts are substantial and there is no promise of solid returns,
Contractual caps on appreciation and dubious methods of calculating Index Averages further reduce your Yield,
You should expect only 60-70% of the actual market average to be credited to your account, BEFORE fees. With historical averages around 10%, this would leave you with a return of 6-7%. With market volatility, you may also loose or simply just meet the minimum.
Long surrender schedules NEVER provide you with additional contractual benefits!
 The product they promote has a 14 years surrender schedule!!!
 I guarantee you’ll find another use for your money before 14 years has passed.
 Long surrender schedule only benefit the insurance company directly and the agent indirectly.
Ground Rules: You are loaning the insurance company money and they are assessing serious penalties if you want your money back in a reasonable time frame.

These are a few of the concrete examples we found in this free booklet. The ambiguous language in this online booklet makes it hard to call this anything other than a sales pitch. Obviously, during the verification phase, you would find that these guys do not deserve your trust. On another important note, the sales commission paid to the agent is disturbing. If you purchased the annuity promoted in conjunction with this ‘Trusted Resource’ booklet, your ‘trusted agent’ earns an astounding 9% commission.

No wonder the product has such a miserable guarantee and a binding surrender schedule!

The lack of information in combination with the sales pitch tells us that these guys are either idiots or common criminals out to make a quick buck. Honestly, we think they are a little of both. This is specifically why I want each person who reads The Annuity Report to be able to objectively determine why sales tactics like this are dishonest, misleading or just plain ignorant.

No matter how you look at it, it is dangerous to do business with people like that. On a final note, the SEC agrees with our assessment of this kind of sales tactic in a July, 2008 speech on the matter Here: If you are sick of being Sold on junk and like our approach, please Contact Us. We can help you find an Annuity Expert who shares our values and that meets our Criteria.

Pages

Fixed Index Annuity Rates

There are many components to fixed index annuity rates, and they have plenty of working parts that make the contracts seem complicated when they don’t need to be. Among the perceived complexities are the various rates that contribute to overall contract performance. A true professional takes a surgical approach to the analysis so let’s go piece by piece and when finished I think you’ll agree; fixed index annuities aren’t that complicated.

The Various Fixed Index Annuity Rates:

Declared Fixed Rate- Most index annuities offer the option for a simple fixed rate that is exactly like the rate offered in a plain old fixed annuity. Each contract will note the current declared rate, contractual minimum renewal rate or specify that the rate is guaranteed for the entire time period.

Participation Rate- This tells you the percentage of the associated market index that will be credited to the account when asset values are locked in.

Cap Rate- This indicates the maximum amount of interest that will be credited to the account when asset values are locked in.

** Pertaining to Cap and Participation rates, asset values typically lock-in annually but can do so in several other annual time periods as specified in the contract. This is called a contractual reset which can range from one to ten years.

Guaranteed Income Growth Rate- One of the more popular additions to fixed index annuities in recent years is the opportunity for guaranteed lifetime income regardless of account performance. With this option, the account value will grow only when the market does while the income benefit is guaranteed to increase at all times. This affords the contract owner of some level of certainty as to what level of retirement income to expect.

Death Benefit- Many fixed index annuity contracts offer an optional death benefit. With this the contract owner is guaranteed the greater of the account value or a guaranteed annual percentage increase at death.

Payout Rate- When the option for guaranteed lifetime income is elected, payments will be calculated based on the age of the contract owner and joint annuitant if applicable. Different payout rates will be available based on these factors an expressed as a percentage of the guaranteed income benefit or account value, whichever is greater.

Fixed Index Annuity Rates Summary:

This basically sums up the various rates that indicate the potential performance of a fixed index annuity. As there are several moving parts to this type of annuity product, all of the points above relate directly to certain contract provisions that require further explanation for proper knowledge before purchase.  Feel free to Contact Us  for help in selecting the right annuity for your unique situation.

Refer to additional information on this site for more detail on the inner-workings of fixed index annuity contracts. If you are considering the use of a fixed index annuity for retirement income planning be sure to seek the advice of an unbiased professional. The Annuity Report is a great place to start… sign up below for more info on annuities.