Hybrid Annuities – Advantages and Disadvantages
Hybrid annuities are insurance contracts that allow the buyers to allocate the funds on both variable and fixed annuities. Hybrid annuities provide investors the capability to select the amount of assets that they can allocate to those conservative, fixed investments in which they offer lower, guaranteed rates on returns. The hybrid annuities also offer the investor the choice on the amount they would like to allocate on variable annuities that are more volatile investments, yet they offer higher returns.
Hybrid annuities are ideal for those with long time horizons who are willing to participate in stocks and bonds investments. It is important to be careful when investing, especially with how much risk the investor can take or is willing to take. This is true with variable investments where investments can easily fall very quickly as those equity funds and the sad part is that there are no guarantees that are offered. Also, the investors have to be very aware about the fees that they have to pay in terms of variable and fixed aspects of hybrid annuities. Are you willing to spend a lot of money for such an investment? This is ideal so that you can make the most of the investment and be satisfied about it.
Hybrid annuities have their unique advantages that are also derived from variable and fixed annuities. One of the benefits of the hybrid annuities would be a growth rate of around 6 to 7 per cent in terms of income base account which serves as yo0uir future income. The hybrid annuities can also offer limited liability to the increasing income as the inflation hedge. The hybrid annuities also offers an upside market potential using notable indices like Dow Jones or S&P 500. Also, this annuity does not have any actual market investment and there are no market risks. You will receive a pension-styled type of income that is guaranteed to be worth your investment since it cannot be outlived. You also have a control of your assets for those unexpected expenses. This type of annuity also offers the heirs the ability to receive full account value of whatever amount you have not withdrawn.
However, the hybrid annuities also have their misconceptions and disadvantages. First off, the 6 to 8 per cent growth guarantee is not cash. Most do not carry increasing income as inflation hedge. This is a very specific aspect in hybrid annuities. The gains are very limited as well even if you can put your investments on popular indices. Another disadvantage of the hybrid annuities would be charges on income riders which cost less than 1 per cent. There are also surrender charges which amount to 10% of excess withdrawals. With the hybrid annuities, the heirs can pay ordinary tax rates based on how the hybrid annuities are structured.
Are you interested about getting hybrid annuities? Let us help you make the right choices. Select your state and receive estimates from top insurance companies in your area and find the right option.