The Benefits Of Hybrid Annuities


A hybrid annuity offers the potential for market based appreciation, protection from market volatility, and the benefits of lifetime income, all in one product.  Hybrids also offer liquidity for emergencies, and accelerated payouts for home health care issues.

An Index Annuity with Guaranteed Lifetime Income Rider, or ‘hybrid annuity’, is invested conservatively.  Earnings from the annuity are invested by the issuing Insurance Company in a way that credits you a portion of the gains in a market  index, such as the S+P 500 or the Dow Jones.  These gains can increase your account value, but losses in the market do NOT affect your account.

You have no volatility and no risk of loss to your money in an index annuity.

Lifetime Income Without Annuitization

Hybrid annuities also offer lifetime payout options, without ‘annuitizing’ your assets and forfeiting your money.  To calculate the lifetime income amount, the Insurance Company grows an ‘income account’ every year that you leave your money invested.  The longer you leave your money invested, the larger this income account grows.

When you decide to start taking lifetime income, the company uses a ‘payout rate’ to calculate your lifetime income.  For example, if you started with $100,000, and your income account rolled up at 7% per year for 10 years, your income base would have grown from 100,000 to roughly 200,000 in that time.  The payout rate depends on your age when you start income, but lets assume it’s a 6% payout.  Rollup Rates and Payout Rates vary with each carrier.

When you decide to start the lifetime income, you receive 6% of the 200,000, or $12,000 per year, for life.  Of course, this income can be a joint payout too for you and a spouse. Even if your actual account value drops to $0, the lifetime income continues.

Account Value

One of the many benefits is that if you die after only a few years of income, your heirs will get whatever is in your account value.  This is a huge advantage over other kinds of annuities.

A few other perks of these contracts include: provisions to increase your income if you have a Long Term Care or disability issue, enhanced death benefits for your heirs, and provisions to allow withdrawals of a portion of your money each year for liquidity needs.  Some also offer a signup ‘Bonus’ credit to your Income Account when you open a new account.

Low Fees

One of the best aspects of hybrid index annuity contracts is that they come with very low fees.  The lifetime income rider is typically just 1% of the account per year.  And while there are no other fees, you may be subject to surrender schedules just as you would have with a CD.  Overall, the low fees are a major advantage over expensive Variable Annuities.

Hybrid Annuity Benefits Summary

In sum, Hybrid Annuities offer potential appreciation, zero volatility, lifetime income, together with liquidity options and long term care benefits.  They are a great option for investors seeking safety, security, income, and flexibility in retirement.

Learn more about Hybrid Annuities and sign up for our special reports on these exciting retirement income opportunities.

All You Need To Know About Hybrid Annuity Crediting Methods


Every hybrid annuity, whose core is an index annuity, comes with one or more crediting methods which are nothing more than a means to calculate the amount of interest to be applied to the account value.

Total interest credit is subject to any one or more of the caps and participation pricing controls previously mentioned, as defined by the contract.  There are several crediting methods available depending on the contract, but I’ll focus on the most common methods.

Annual Point to Point– The beginning and ending index value are used to calculate the total gain or loss.  For example, if the S&P 500 starts the year at 1000 and ends at 1100, the interest credit would be 10%, subject to the participation rate, cap rate or spread.  If the annual return is 0% or less, no interest will be credited.  So, while the option contract that gives you participation in the market expired ‘out of the money’ the underlying principal value, guaranteed by contract, cannot lose value.

Monthly Point to Point Same as above, but the period is a month rather than a year, and also subject to the participation rate, cap rate or spread.

Monthly Average Each monthly anniversary, the level of the index is recorded.  Those levels are added up at year’s end and the total is divided by twelve and compared to the index level at the beginning of the year.  The difference represents the gain or loss for the year, subject to the participation rate, cap rate or spread.  If the annual return is 0% or less, no interest will be credited.  Again, while the option contract that gives you participation in the market expired ‘out of the money’ the underlying principal value, guaranteed by contract, cannot lose value.

Monthly Sum The gain or loss in the index every month is recorded.  Each value is totaled to calculate the annual gain or loss, subject to the participation rate, cap rate or spread.  If the annual return is 0% or less, no interest will be credited.  Again, while the option contract that gives you participation in the market expired ‘out of the money’ the underlying principal value, guaranteed by contract, cannot lose value.

What Is The Best Hybrid Annuity Crediting Method?

Extensive studies attempt to determine which crediting method is most profitable.  No single method has shown total superiority as each works well in different market conditions.

Most Index Annuity contracts offer multiple crediting methods and ways to change allocation for portions of the account between different methods.

Choice of crediting method will depend on your view of where the market is going.  But since no one really knows for sure, the prudent strategy is to divide your premium investment between the various crediting methods available in your contract.

Understand Exactly How a Hybrid Income Annuity Works


The most common hybrid income annuity is a ‘fixed index annuity with guaranteed lifetime income rider’. The catchy phrase ‘hybrid annuity’ is easier to type so we can go with that from here. But, before trying to understand how it works, you must first understand how a basic fixed index annuity works.

Fixed Index Annuity Summary:

Essentially, an index annuity gives you the opportunity to capture a portion of market gains without the risk of losing your principle. Annuities are backed by conservative investments like bonds and treasuries.

With an index contract, the insurance company takes the interest earnings on those investments and purchases an option in a market index. If the option turns a profit, the gain is credited to your account subject to the Crediting Methods and subject to the Caps and Participation. If it expires worthless then nothing is lost. So, you can win but you can’t lose.

What Makes It A Hybrid Annuity?

A hybrid income annuity adds an income component to this basic index annuity contract, and is designed to offer a future guaranteed level of income regardless of market performance.

In addition to income, you will see options for an enhanced death benefit and long-term care riders. Explore these Hybrid Annuity Income Riders Here. 

As layers are added it can seem to get more complicated but it’s fairly simple if presented properly. Let’s briefly explain each component in order to keep things organized.

  • Guaranteed Lifetime Income– This is the level of lifetime income you will receive. There are really two guarantees here. There’s a guarantee that the level of income will increase by a certain percentage for each year of deferral and the guarantee that when payments start they will not stop or decline in amount as long as you are living.
  • Enhanced Death Benefit– At death this benefit guarantees that your heirs will receive a greater amount of cash than would be available if just the account balance were paid out.
  • Long-term Care Rider– This allows for a substantial increase to your guaranteed lifetime income amount in the event that you require long-term care assistance. Definitions, requirements and enhanced payment amounts will vary greatly between contracts.

Putting the Pieces Together:

Now that we have those defined I need to show how they all work together to create a hybrid income annuity.

For starters you have your initial deposit that grows as only a fixed index annuity can, which means you achieve interest credit per the crediting methods and according performance of a market index  but cannot lose money in any given year.

Next you have the death benefit that is paid to your heirs when you pass away. This will equal either the enhanced death benefit amount or the account value, whichever is greater.

And finally we have the guaranteed lifetime income rider that accumulates for every year of deferral and is paid out on an age based percentage, guaranteed for life.

The Hybrid Income Annuity In Action

Let’s take a look at this plan in action… I assumed the purchase of a contract on January 1, 2001 and deferred for ten years. This happens to have been a wonderful time to have owned an index annuity as the volatility of that time period wreaked havoc on retirement accounts for most people. For this example I will use the annual returns from the S&P 500 including the following contract components that are essential for making all the calculations:

  • Annual Index Annuity Cap Rate: 5%- indicates the maximum growth available in your account
  • Income Account Value: 8%- each year of deferral, your future income benefit will increase by this amount regardless of account performance. Additional fees may apply.
  • Enhanced Death Benefit: 4%- each year of deferral, your death benefit will increase by this amount regardless of account performance. Additional fees may apply
  • Income Payout Rate: This is an age based percentage applied to the income account value in order to calculate your level of guaranteed lifetime income. Generally ranges from 3.5% up to 7% of the Income Account
  • Long-term Care Rider: 2X Guaranteed Lifetime Income should you be in the need of long-term care assistance. This varies with every carrier but 1.5-2X is fairly typical.

Please note that this example is used for illustrative purposes only as availability of contract terms varies by state and depends entirely on current market conditions. We’ll assume the contract was purchased at age 56 and held to age 65. Please note that additional fees for some of these riders and benefits may apply but have been eliminated from this illustration for purposes of simplicity.

Hybrid Annuity Illustration Table

hybrid annuity illustration

hybrid annuity illustration

In the table above the colored columns indicate the different riders. This is where all the confusion starts but I’m going to make it as simple as possible… you will only get the value of ONE of these columns.

Notice that the Income Account Value column is not highlighted and has no dollar sign. You WILL NOT receive that in a lump sum or in any other way because it is not your money. It is simply an amount used by the insurance company to calculate the lifetime income amount shown two columns to the right.

If what you just read seems contrary to what someone else is telling you, then stop talking to that person because they are lying to you.

Here are the basics of what you can expect:

  • If you decide to cancel the contract, you’ll get the account value less any surrender charges.
  • If you die, your heirs will receive the death benefit.
  • If you take the lifetime income benefit, you will receive the scheduled payment annually for life.
  • If you qualify for long-term care, you will receive the indicated boost in lifetime income.

It’s hard to make it more complicated than that but apparently plenty of advisors do.

Now, you must remember that if you begin taking lifetime income, your income payments will be deducted from your account value. Your account value may continue to grow in the market, but the balance will also be going down by any income payments taken.

However, even after you start the income stream, there will be a remainder account value and death benefit for a certain period of time, until your cumulative withdrawals deplete the account value and your payments are made fully by the Insurance Company. It is possible for you to still walk away with a chunk of cash or pass money to your heirs before that time, but as time goes by and the income payments are subtracted from both the death benefit and cash value, the account value dissipates.

Using The Hybrid Annuity For Retirement Income

These contracts have a definite place in the retirement portfolios of many individuals. They work very well for a variety of situations, but must be understood clearly in order to be used correctly.

For case studies and to see how this type of annuity can work for you, be sure to sign up to the site for case studies and a guide on how to select the right hybrid annuity for your situation.

All About Hybrid Annuity Caps, Spreads, And Participation Rates


Hybrid Annuity Caps:

There are three different ‘pricing controls’ an insurance company can place on a contract that are specifically meant to apply an interest credit that’s in line with the net gain from the option.  Depending on the company or product you are considering, you may see one or more of these terms.

Participation Rate- This specifies the percentage of the index growth available for credit to the account.  Example- a 10% gain in the S&P Index in a contract with a 50% participation rate means you would be credited with a 5% gain to your account value.

Cap Rate Another option is to have a stated maximum level of interest, or a cap, available for account crediting.  Example:  A 5% cap rate means if the index goes up 10% and you have a 5% cap, you will be credited the 5%.

Spread- This is a fee imposed on the index credit that represents overall operating expenses for the insurance company. Example: In a year when the index gained 10% and you have 50% participation and a 2% spread, you would have 50% of the gain- 5%- and that 5% credited gain would be reduced by a 2% ‘spread’ charge.  You would net 3%.  In years where there is no index gain, no spread is assessed, so you can’t go backwards.

Pricing Controls Summary:

Every annuity will apply one or more of these pricing controls.  They have only so much income from the ‘fixed’ account to work with as an option investment, so it’s only logical that they would limit the amount of gain.  These limitations are also explored in the page about Crediting Methods.

Remember, your money is NOT invested directly in the markets, and NOT subject to risk of loss.  So don’t think that the insurance company is ‘taking’ anything away from you with their caps, participation, and spreads.

You are buying appreciation potential, AND downside protection.  Downside protection necessarily comes at some cost.

Of course, we’re ready to assist you picking the best contract for your needs.  Simply give us a call.

To Get Started With Us Call 800-438-5121

The Definitive Guide To Hybrid Annuity Income Riders And Rates


Hybrid Annuity Income Riders

The hybrid annuity income riders are optional attachments to many contracts. This is the point where an index annuity becomes a ‘hybrid annuity’.  When lifetime income riders are attached to the underlying fixed index annuity, the annuity takes on new benefits, and a little more complexity.

With an income rider, a calculation starts at the beginning of a contract, and accumulates for each year the annuity is invested and accruing.  This ‘Income Account Value’ and the ‘Payout Rate’ is how the insurance company calculates your lifetime income when you turn on the income option.

The income account may be phrased as an ‘income account’, ‘benefits base’, or other terms.  Acronyms are usually IAV and BB.  We’ll use ‘income account’ through this report.

Account Value Vs Income Account Value

A key element to clarify in our discussion of hybrid annuities is the difference between your actual account value, as opposed to your income account value.

These are two very different things that are frequently confused by investors and advisors alike.

If anyone is telling you that a hybrid annuity they are selling is ‘guaranteed to go up by 7% per year’ they are flat out lying to you.  Let this tripwire be your gauge of the integrity of any sales person you encounter- if they mess this one up, what else do they not understand?

If you want, go back to the Benefits Of Hybrid Annuities page where I gave a marketing focused description of a Hybrid Annuity.  Reading carefully, it may seem like the annuity account grows at 7% per year, but that is not what it actually says.  It’s the Income Account that ‘Rolls Up’ at 7% per year.

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The account value is YOUR money- real dollars that may appreciate (or lose value, in the case of a Variable Annuity).  That’s the core of the annuity as an investment product.

An Income Account Value is NOT real dollars.  It’s just a number that the insurance company uses to calculate future payout rates from. It’s the bridge between the investment, and the income insurance.

Income Rider Fees

The income Rider on a typical Index Annuity incurs an annual fee of ranging among carriers between .75% and 1% of the account value per year.  Compare this to the fees in Variable Annuities, averaging 3% to 5%, and this lifetime income option is a good value.

Index annuities marketed as lifetime income products with this rider may have lower caps and participation rates, however.  Be sure to know your goals going in- if you are looking for safe appreciation only, without the lifetime income, it may be more lucrative to buy an index annuity with higher caps and participation that does not offer a lifetime income rider.

Rollup Rate: How An Income Account Value Works

Income accounts generally start with the same value as your premium investment.  If you invest $100,000 at the start, your Income Account will also start with 100,000.  Notice, there is no “$” in front of this number. Companies may also use a Bonus that will add to your Income Account at the contract start.  More on the bonus in just a moment.

With a $100,000 investment, just the Income Account calculation rolling up at 8% per year would look like this:

Hybrid Annuity Income Account Rider

Hybrid Annuity Income Account Rider

Bonus Rate

Some companies additionally offer a ‘Bonus’ on new accounts.  It varies from company to company, but usually, the bonus is credited to your Income Account Value.  For example, a $100,000 investment in a contract with a 10% bonus would have an Income account value of 110,000 on day one.  This 110,000 would grow by the rollup rate each year.  Using the table above with a 10% bonus, it would look like this:

Hybrid Income Annuity Income Account With Bonus

Hybrid Income Annuity Income Account With Bonus

Payout Rate:

The payout rate is an aged based percentage of the Income Account Value that determines your lifetime income amount.  In most contracts, once you start taking income, the rollup of the Income Account stops.

Some companies allow you to start and stop income a few times, and reinstitute the rollup when you are not taking income, but this is not available in all contracts.

In the chart below, I show the rollup rate from above, an aged based Payout Rate that gets better the older you get, and the corresponding annual income amount.  You could commence a lifetime income of the amount in the right hand column in any year, but once you start, the rollup stops.

Your payout rate will vary depending on the carrier and your current age.  Below is just for illustration purposes.

Hybrid Annuity Income Account Rider With Payout Rate

Hybrid Annuity Income Account Rider With Payout Rate

Hybrid Annuity Complete Table

Now, to tie it all together we have the following table.  It shows the rates described above and how they all fit together.

hybrid annuity illustration

hybrid annuity illustration

In the table above the colored columns indicate the different riders. This is where all the confusion starts but I’m going to make it as simple as possible… you will only get the value of ONE of these columns.

Notice that the Income Account Value column is not highlighted and has no dollar sign. You WILL NOT receive that in a lump sum or in any other way because it is not your money. It is simply an amount used by the insurance company to calculate the lifetime income amount shown two columns to the right.

If what you just read seems contrary to what someone else is telling you, then stop talking to that person because they are lying to you.

Here are the basics of what you can expect:

  • If you decide to cancel the contract, you’ll get the account value less any surrender charges.
  • If you die, your heirs will receive the death benefit.
  • If you take the lifetime income benefit, you will receive the scheduled payment annually for life.
  • If you qualify for long-term care, you will receive the indicated boost in lifetime income.

Of course, we’re ready to assist you picking the best contract for your needs.  Simply give us a call.

To Get Started With Us Call 800-438-5121

Understand The Pros and Cons of Hybrid Annuities


Like all annuities, there are pros and cons of hybrid annuities.  Remember, a ‘Hybrid Annuity’ is just a fixed index annuity with additional add- on riders.

So in looking at the pros and cons of these hybrid annuities, be sure you actually NEED all the benefits these contracts offer.  Nothing comes for free, and why pay for something you don’t need?

(This is the main message of the FREE AST Flex Strategy videos, so check it out!)

The Pros and cons of Hybrid Annuities

The Pros and Cons of Hybrid Annuities

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:

  1. Hybrid annuities offer partial market participation
  2. As with all fixed index annuities, there is no risk of loss to principal
  3. With guaranteed lifetime income riders, you have lifetime income
  4. As with all annuities, there is the potential for liquidity through withdrawals
  5. Unlike variable annuities, one of the main positive qualities of hybrid annuities is that they come with very low fees
  6. 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 are considering Hybrid Annuities.  Securing sufficient income for life is key to optimizing your assets.  Hybrid annuities are one way of achieving lifetime income.

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.

Charles Darwin https://

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.

Income- You’re right, we listed this a one of the benefits of hybrid annuities too, however often we find that using an income rider on an index annuity is not the most efficient way to secure guaranteed income.

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: Pros And Cons Summary

How does it stack up for you with the Pros and Cons of Hybrid Annuities? Does the cap, participation, spread, and crediting method boggle the mind, or are you fine with the partial participation and  see the benefit in downside protection?

Feel free to explore the rest of 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.

How The Rich Play The Market- New WSJ Article


feature-box-goldA new article in the Wall Street Journal caught my eye.  “How The Rich Play The Market” is a fresh reminder that human nature is just that- human.

The ‘Rich’ don’t necessarily have any secrets, better will, stronger nerve, or more skills.  In fact, even the ‘Super Rich’ suffer from the same impulses and trading habits as everyone else.  They may simply have more resources and be able to recover faster.

These households, with an average net worth of roughly $90 million, invest intelligently, for the most part, spreading their bets widely, seldom trading and keeping their investing taxes to a minimum.

But the superrich also commit rookie mistakes. Their approach to diversification might not always be ideal. They chase investment fads like people chasing Audi A3 deals. They freeze with fear just when bravery is most likely to be rewarded. Maybe the “smart money” isn’t so different from the middle-class “dumb money” that Wall Street likes to mock.

The last paragraph of the article, which appears Here, really says it all.

You’re better off doing what Wall Street can’t: cultivating patience, trading as seldom as possible, focusing only on those rare companies where you might know something everyone else doesn’t and, finally, rebalancing when it is hardest.

Right now, that might mean trimming stocks a bit just as other people are most tempted to add to them.

So how best to lock in gains? Consider annuities.  A Fixed Index Annuity offers some attractive options, chief among them a guaranteed floor that protects you from losses.

Other options which move more to the Hybrid Annuity category, include

  • Return of premium
  • Partial liquidity ( i.e. 10% free withdrawals, nursing home and terminal illness waivers, income)
  • Lifetime Income annuitization options
  • Additional cost of living increases, LTC type enhancements and death benefit enhancements with NO UNDERWRITING… if need be.

Index Annuities are an excellent way to lock in gains, protect from losses, yet still participate in some of the market upside.  If you’ve had a good strong run, re-balancing out of riskier positions just makes sense.

New Index Annuity Calculator


Understanding  the benefits of an index annuity can be a daunting task for investors, but it’s totally worth the effort to become proficient and give these a serious look.

Index Annuities are very safe investments much like a fixed annuity, yet they have the possibility for gains linked to a market index.  And further, they can go up but not down due to the methods used to generate the market participation.

There are index annuities oriented towards appreciation, and there are index annuities geared towards the income rider.  Most people are familiar with index annuities in conjunction with income riders- these are often known as Hybrid Annuities.  But outside the guaranteed lifetime income rider component of Index Annuities lies the potential for a very safe appreciation vehicle.  

The nice calculator below is wonderful for illustrating the power of annual reset – this is an index annuity crediting method that builds account value annually (subject to participation and caps).  Use the start year to scroll through turbulent years and see how the annuity would perform.

Your comprehensive annuity investment guide: Annuities.

This calculator comes from another online resource so we can’t vouch for the complete accuracy of the historical data sets.  So please use this for a visual illustration and give us a call to select the best fixed index annuity with the highest crediting methods and most beneficial caps and participation.

Case Study- Is A Fixed Index Annuity The Right Tool For This Job?


This post is one of a series of questions and answers from our readers who are seeking the right annuity for their needs.

This came in via email:  This reader listed the following parameters for their desired annuity;

1. An annuity that keeps 100% of my principle investment for my children.

2. Pays the most income per month

3. Has the lowest fees.

4. Pays on 100% of my investment.

5. Protects my principle investment in a down market but increases my principle in an up market.

Great parameters, and this describes to a T the attractiveness of fixed index annuities, often marketed as a ‘hybrid annuity’.  The easy answer to this inquiry is to find the best Fixed Index Annuity for this individual, however that is not truly the best combination of Safety, Flexibility, and Profitability.  You can’t wrap all these goals into one annuity and expect each goal to be met perfectly.

Our answer to this question is below:


I appreciate the brevity and clarity of your question, unfortunately, the answer is long.  Here’s the summary: you can’t guarantee MAX principal/inheritance amounts AND take out Max income for life from the same annuity contract, and have both goals perform to their full potential.   One or the other of these objectives will suffer and your probability of failure goes up.  If you’re willing to let your future inheritance suffer, a Fixed Index Annuity may be just the ticket.

However, you CAN guarantee that BOTH goals are maximized with two annuity contracts- a deferred lump sum annuity paying your heirs, and an income annuity supporting you.  Separating your goals and using the right tools for each job locks in BOTH objectives, and does so at a lower cost, with lower fees, and with higher degree of certainty.

Here’s the full answer:

We believe that what makes the most sense is for you to use a deferred annuity for the inheritance, and have a separate income focused annuity for income purposes.  Trying to accomplish both goals with one hybrid annuity is likely to be disappointing.

What you asked for is a perfect description of the benefits that are used to market index annuities, however with the important caveat that if you are intent on absolutely preserving your investment base for inheritance, you will not be able to draw income in down years without invading principle.  Did you see our posts on ‘reverse dollar cost averaging”? This would be your plight.  You can’t guarantee principal AND take MAX income without some consequences.

A look at a Fixed Index Annuity with Lifetime Income rider illustration will show impressive growth in the ‘income base’ or ‘benefit base’, much lower projected growth in actual account value, then when income starts, you will see the account value dissipate in 10 years or so.  Income benefits are paid our of YOUR money first before you ride on the Insurance company’s shoulders, therefore, its’ quite likely there will be little or nothing left for inheritance.

Any scenario with a product whose performance may vary (variable annuity or index annuity) where you absolutely must have a certain income every month could box you in to spending principal.  In fact,  if you avail yourself of the guaranteed income benefits riders in index annuities, those income streams WILL erode your account value principal and put your inheritance goals in jeopardy.

There are always tradeoffs, but please consider the following alternative.

By using secondary market annuities, whose returns are fixed, and guaranteed, but which come in a variety of timelines, we could put together a winning solution.

We would use a deferred growth contract so that the future payout of the deferred contract equals or exceeds your total initial investment today.  Then, additionally, we would use an immediate income type contract which offers the highest potential payout for income purposes now.

This income could also be obtained with a plain immediate annuity if you prefer, which offers longevity insurance, or an index annuity with the GLWB type income benefits.  However, I must say our secondary market annuities almost always beat the index annuity assumptions and come with no fees, variables, or assumed future rates of return.

Now, what I’ll describe sets a period certain date when your inheritance dollars will be paid- and regardless of your passing.  If you want it to be contingent on your life, then we should look at life insurance to fill that need.  However I think you’ll see my proposed solution below is superior.


Basically what I’m thinking of is a scenario like this- let’s assume you have $600,000 cash today, and you wish your heirs to receive $600,000.  I’ll assume you are 60 and in great health, so conceivably could enjoy another 30 years, and you want the most income possible in that time period.

By placing roughly $100,000 of your portfolio on a long term, deferred, lump sum contract, you lock up and guarantee that you or your heirs will receive this windfall at a specific date in the future.  I’ll illustrate with this currently available secondary market annuity:
$95,552 investment today, pays $634,090 in one check on September 5th, 2039.  You can set this up today in an LLC, and gift the LLC membership to your heirs over time.  When the income comes in the future, it will pay to the LLC and it won’t matter if you are still living or not.

So- future inheritance, locked in and guaranteed today.

Now, for income….


Based on my hypothetical scenario, you still have $500,000 to work with to generate income.  As I said, you could look at an immediate annuity which will ensure against your longevity risk, or you can consider other period certain secondary annuities.  Or, you can consider an index annuity but take advantage of all the income benefits and bonuses and riders and disregard the account value concerns.

Because your took care of the inheritance with your long term deferred contract, you can focus solely on income now.  Depending on your age, a Secondary Annuity or an Immediate will likely pay more than an index or hybrid product.

A secondary annuity or an index annuity will also ensure additional inheritance to your heirs- an immediate annuity will not.

To place this $500,000 in secondary market annuities, you will end up with much higher guaranteed and certain payments, but it will be a variety of contracts and terms.  That’s just the nature of this marketplace.  This contract is illustrative of one we’d use in crafting your portfolio:


An immediate annuity on a 60 yr old male is appx $2900/ month income with a $500,000 premium, and depending on various factors.

The same premium in a fixed index annuity with no deferral period is appx $2200/ month.  Again, there are many varieties and contracts to chose from.

We would most likely get from $3500 to $4500 per month in Secondary market annuity cash flows over a 30 year certain period, from multiple carriers.  This will depend on availability and readiness to take action, however.

Now, as to the fees:


There are no costs or fees on the Secondary Market Annuities- the total cost is the purchase price.   Likewise, with an immediate annuity, there are no ongoing fees- you will simply trade your lump sum for a monthly lifetime check.

Bear in mind, too, we have nearly every annuity available nationally at our disposal- we don’t market one particular company or product, but rather, market our services putting the whole package together.  We’re not captive to one company.

Additionally, we won’t sell certain B rated, Index Annuity products that are marketed as ‘Hybrid Annuities’ with Swiss Army Knife lists of characteristics.  We don’t see the credit risk of the issuer as one worth taking.

As to the income component of your scenario, I need a few pieces of info such as your home state to illustrate further……

Would you like this sort of attention and analysis of your annuity questions and retirement goals? Contact Us today!

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]

Guaranteed Lifetime Income


What are your major concerns when considering how to distribute those hard-earned retirement assets?  Robert Powell, editor of Retirement Weekly covers the topic well in a piece on

Each goal comes with an associated risk so planning with that in mind leads to fewer surprises when they are least wanted.  Individual objectives can be matched to available products and strategies tailored specifically for each purpose.

Now, there will likely be some tradeoffs when it comes time to allocate assets between various financial vehicles.  Knowing where risk is warranted in exchange for insured guarantees is a critical decision point.  This is why it will take time to define exactly what success means to you throughout retirement.

Every person will arrive at a different product mix based on priorities unique to each individual.  For starters, it’s nice to know what’s available, what the products are capable of doing and what concessions must be made in order to balance your retirement portfolio properly.

Again, this article covers it all and I highly recommend it for any and all prudent future retirees.  Annuity Straight Talk is here to help when it comes time to weigh the pros and cons of annuities to determine the best strategy for guaranteed retirement income.

Please read Robert Powell’s article here.

Fixed Index Annuities- Safety and Growth Amid Uncertainty


Where can one find the best value proposition in the annuity industry these days?  Fixed rates are very low and variable products don’t protect against market volatility and contractual guarantees can be expensive.

Let’s take a look at fixed index annuities for a moment, a product that offers upside growth potential with protection of principle.  John Rafferty of American General Life tackles the subject in a recent Insurance News Net blog.  Here is John’s article.

Since cap rates on fixed index annuities fall with interest rates, John offers some insight on how to choose the proper crediting method in order to maximize growth.

The way I see it, safety is of paramount concern in today’s economic environment.  Few pre-retirees can afford to risk valuable retirement assets and even fewer want to do so.

The value in fixed index contracts is clear… consistent protection and growth potential in addition to the highest levels of guaranteed future income available.

If you don’t have a pension waiting for you, consider fixed index annuities as a way to ensure a reliable income source in your retirement years.

For information on how these products work and availability in your state, contact me at your convenience via phone (800.438.5121).

Visit here for a refresher on fixed index annuities