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]

Written By

Bryan Anderson

Bryan Anderson is a licensed insurance producer and a career finance specialist. With Mr Pulsifer, he started Annuity Straight Talk to bring his unique views on guaranteed retirement income and planning to a wide audience. He enjoys working with investors around the US from his offices in NW Montana.

6 thoughts on “What is a Hybrid Income Annuity?

  1. Well written!  "Self-made labels . . ." designed to make the advisor appear exclusive or unique in his offering may seem innocent but they're not (unless clearly disclosed as such).  This is an unfortunate tendency among advisors that probably won't end.  Thanks for helping consumers with this "straight talk."   Advisors don't have to "gild the lilly."

  2. What is a guaranteed rate REALLY worth?
    Looking at the so-called "Hybrid Income Annuities" in their best case guaranteed scenarios.
    Income Floor grows at 8% per year.
    Withdrawal rates of 7% from the Income account at age 80 plus (6% at age 70 to 74 and 6.5% at age 75 to 79).
    So after 10 years at age 82 (using my DOB) the Income Account Value would be $215892.50 giving a yearly annuity of $15112.47(7% of the Account Value).
    But….even though the 8% growth and 7% withdrawal sound like nice high numbers, plugging that withdrawal amount into AnnuityShopper dot com, give a deposit needed to get that withdrawal to be $116716.40, a growth rate of 1.56% for the 10 year period according to the Return Rate CAGR calculator at MoneyChimp dot com.
    A 10 year CD at 3% or a Fixed Deferred Annuity at 3.75% would give much better guaranteed returns then the Hybrid Income Plans. 

    1. Nelson-
      You are quite right in your analysis- with a hybrid annuity you are purchasing primarily the guarantee, the set and forget peace of mind. As such, the products ARE valuable and do serve a purpose, however for you, you are looking at it as an accumulation and growth vehicle, and that is not its strongest attribute.

      As with anything that tries to be all things to all people, there definitely shortcomings. You are absolutely right to point out that using a different strategy for you deferral period can be more lucrative. We happen to think Secondary Market Annuities are the best available option currently, with rates of 7% or better for some of the longer term deferral products, and guaranteed by top rated companies.

      So re-do you analysis assuming a 10 year deferral in a Secondary Market Annuity at 6.5% Then after your deferral period, at that time convert the lump sum generated by the SMA (or fixed annuity, or CD) into guaranteed LIFETIME income and buy the benefits of longevity insurance, with an immediate annuity. you can check the available SMA contracts here: https://preview.annuitystraighttalk.com/secondary-market-annuities/current-availability/

      I think you will find this to be the most lucrative strategy available anywhere, yet still with rock solid guarantees. Assuming you are 82 when you buy an immediate annuity, look at the guaranteed lifetime income then… it’ll be significantly higher income than any hybrid plan can offer today.

      1. I appreciate yet don’t understand your reply.
        Are you saying there are annuities purchasable in the secondary market, like mortgages in the secondary market?
        And therefore are they less expensive and paying out higher returns? Are they the top rated ones by AM Best, Moody’s, etc? Where and how do I find these? Are hybrid’s available? (see below. Hybrids seem a really good option for someone in early 60’s who wants immediate payout, upside growth without cap, safe, floor protection, reasonably liquid. I’m a neophyte and learning as fast as I can.

        I’m early 60’s, about to purchase immediate annuity, with payout to beneficiary if I pass. It’s highly rated (Nationwide), paying almost 6% and I need to make a decision as I’m living on cash.

        Guidance/information would be greatly appreciated. Thank you so much!

  3. Very informative post. Like what you have said “I’d rather see it done right and end up with happy, knowledgeable clients.” Thanks for sharing.

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