A Hybrid Annuity: Tips and Tricks

Shawn Plummer

CEO, The Annuity Expert

What is a hybrid annuity? A hybrid annuity is a type of annuity that has two or more components wrapped into one contract. This guide will discuss how hybrid annuities work and what you need to know about them before investing in one!

How a Hybrid Annuity Works

Hybrid annuities are a combination of two different types of annuity contracts. Most have a fixed and variable rate component inside the same contract.

Hybrid Variable Annuities

A variable annuity is a retirement investment type that allows investors to split their funds between fixed-rate and variable-rate elements. As a result, investors may separate their savings into conservative assets with a guaranteed rate of return and riskier investments with the potential for greater returns.

For example, a hybrid variable annuity has a Guaranteed Lifetime Withdrawal Benefit that allows an owner to invest in the market while receiving a steady income stream for life. This contract has the components of a typical variable annuity and the guaranteed income an immediate annuity provides.

Hybrid Fixed Index Annuities

A fixed index annuity combines a fixed annuity with an indexed product to give you complete security on your principal in both areas. In addition, owners can earn a fixed interest rate based on the performance of an external index like the S&P 500 or both.

Therefore, a fixed index annuity offers the components of earning interest based on stock market performance similar to a variable annuity or a fixed interest rate like a traditional fixed annuity and offers protection from any stock market losses.

Hybrid Income Annuities

An Income Rider is an optional extra that can be added to the fixed, fixed index, and variable annuity contracts, typically for an additional fee, that aims to boost guaranteed lifetime income while maintaining the annuity’s value.

In addition to providing a paycheck for life, the income rider can also assist in paying for LTC expenses or enhancing an estate plan for beneficiaries.

An example of a hybrid income annuity would be a deferred annuity with a lifetime income rider. Annuity owners benefit from earning interest from Day 1 and generate an income stream like an immediate annuity. The best of both worlds are provided for savings and income ability.

Hybrid Long-Term Care Annuities

Long-term care annuities are a hybrid of a fixed annuity and a long-term care insurance policy. The primary purpose of an LTC annuity is to pay for most, if not all, of a retiree’s long-term care expenses for a nursing home, assisted living facility, and home health care.

Global Atlantic’s ForeCare long-term care annuity is a traditional fixed annuity with a long-term care insurance rider. The annuity owners are growing their savings tax-deferred but can utilize the account tax-free for long-term care services and facilities.

What Is A Hybrid Annuity?  What Are The Pros And Cons Of Hybrid Annuities?

Next Steps

Hybrid annuities are becoming more and more popular with investors. If you’re looking for a way to ensure that your retirement savings are safe and will continue growing, a hybrid annuity might be the right choice. Contact us today for a free quote on this type of investment! We can help you decide if a hybrid annuity is right for your financial future.

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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