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

[email protected]

Straight Talk on Fixed Index Annuities


Straight Talk on Fixed Index Annuities

Few products generate as much confusion and controversy as fixed index annuities, both pro and con. We’re often asked if these products are any good.
Want the Straight Talk? Money managers dislike fixed index annuities because they lose management assets and many insurance agents simply don’t do a good enough job of explaining how the product really works. This is precisely why opinions about fixed index annuities are so polarizing. But that’s just what they are, opinions. Straight talk is based in fact and cannot be disproven!

Fixed Index Annuities Summarized:

Fixed index annuities are nothing more than fixed annuities with a different means of crediting interest to the account. Fundamentally, fixed index annuities link the appreciation rate of the annuity account balance to a stock market index. In addition, the principle balance is guaranteed so you can essentially make but never lose money. In return for guaranteed protection, the potential growth only works out to a portion of the overall index gain. The basics are simple but a few moving parts gum up the works and that’s where opponents attack.

Critics will call fixed index annuities a raw deal because policy owners are not given full market appreciation and dividends are not included in the interest crediting. If that were true it would seem that insurance companies are stealing gains from the consumer. Such a short-sighted analysis only shows that the claimant understands little of how index annuities work.

You see, because the assets are not directly invested in the market index, no one receives full appreciation and dividends, not even the insurance company. Assets are actually placed in the company’s general account consisting mostly of investment grade corporate bonds and further backed by large reserves that each company is required to hold. It’s a simple risk/reward calculation. If you want principle guarantees, don’t expect the same returns as you’d get in the open market.

Another common misperception is that all index annuities have long surrender schedules approaching 15 years. In reality, surrender terms for most index annuity contracts are no different than those of variable and fixed annuities, ranging from three to ten years. Before anyone criticizes any surrender period they should first acknowledge the basis for such restrictions. If an insurance company has to buy a long-term bond to back any specific product, the company will incur a loss if the contract is cancelled early due to selling bonds or other investment instruments under less than favorable conditions.

Truthfully, fixed index annuities have a solid value proposition in comparison to other investments, no matter the risk factor involved. I too was a major skeptic at first until I took the time to understand the product. Compared to other investment strategies like futures, derivatives, hedge funds and options, fixed index annuities are not at all complicated.

Now to what really matters… are fixed index annuities a good place to put money? All else matters little if the product can offer decent returns. It just so happens that in 2009 the Wharton Financial Institutions Center for Personal Finance completed a study comparing actual index annuities contracts to alternative portfolios of stocks and bonds. Click here to see what they found. The study showed that index annuities were able to produce respectable returns when the market was strong and limited losses during market downturns. Isn’t that exactly what they are supposed to do?
There are a few specific things that every consumer must understand before purchasing a fixed index annuity. Several of the pages on this site dig into the particulars so be sure to poke around and arm yourself with all the information you can before you call.

Most importantly, there are a couple of valuable reports available with a free subscription to Annuity Straight Talk. The Fixed Index Annuity Report is the most complete resource for understanding how the fixed index annuities work,  and the GLWB Report talks about guaranteed lifetime income riders that can be attached to various fixed index annuities for additional retirement income options.