Hybrid annuities are structured to provide both growth and income for their investors. These vehicles can, in fact, serve many purposes, but the question is, how well can they really perform each of these functions? Read on to learn about what hybrid annuities offer—and what they don't.

How Hybrid Annuities Work

Hybrid annuities are a combination of two or more types of annuity contracts. Most products combine fixed and variable annuity contracts that are housed inside the same chassis. Those that have a variable annuity in one segment are designed to allow a portion of the client’s money to grow in the 澳洲幸运5开奖号码历史查询:mutual fund subaccount portion ofౠ the contract while providing guaranteed income that the client cannot outlive on the fixed side.

Other types of hybrid contracts pair a fixed annuity with an indexed product in order to provide a complete guarantee of 澳洲幸运5开奖号码历史查询:principal in both segments. Like other types of annuities, their payment can either be 澳洲幸运5开奖号码历史查询:immediate or deferred with fixed or flexible premiums. They can also contain the standard litany of other annuity features commonly offered today, including living and 澳洲幸运5开奖号码历史查询:death benefit riders an🎀d accelerated payouts for chronic illness or long-term care ༺expenses.

And, of course, they also offer tax-deferred growth with a range of payout choices for those who choose to﷽ annuitize their contracts.🌊

Who Are Hybrid Annuities for?

Hybrid annuities are generally most appropriate for retirement savers who are seeking a combination of growth and income. Those who are more oriented towards getting a stream of income that will keep up with the pace of inflation over time may also want to take a look at these instruments. The amount of risk that you are willing to take o𓆏n the growth s𒁃ide will determine whether you should use a product with a variable or indexed segment.

Some advisors say that they would not use these products with younger clients because those who have de꧋cades to go before retirement will probably come out ahead by investing directly in equities for the long term.

Clients who are well in🍬to their retirement yeꦇars may not be good candidates for these products either, as they may not get the chance to profit adequately from the growth portion. For them, a simple immediate annuity contract may provide a better payout with no risk to principal.

Pros

Hybrid annuities offer a couple of key benefits to clients in addition to the standard features found in other types of annuities. Their dual nature can provide guaranteed increasing income to clients because the growth portion provides them with a hedge against infl𒅌ation. Contracts that combine a fixed and variable annuity can also provide clients with a lower level of downside risk than a variable annuity by itself, because the fixed portion will continue to pay out, regardless of🎃 the performance of the variable subaccounts.

Cons

But while hybrid annuities claim to be one-hit wonders that can do almostꦉ everythingꦉ, many critics feel that they are over-designed and too expensive. The dual chassis model makes these products especially complicated, and many clients are not capable of understanding all of their technical features or limitations.

Many planners have also hawked these vehicles as being one-size-fits-all products tha𝔉t can be all things to all people. This, of course, 🥃is not true.

Many hybr༒id products also come with extremely high fees and back-end surrender charge schedules that clients may not see clearly at the time of purchase. They also often pay inordinately high commissions to planners, which can easily sway them to show clients these products in lieu of something else that may be a better fit.

A final criticism of these products by many pundits is simply that they are not really what they claim to be. The “hybrid” phrase was coined a few years ago by the marketing segment of the insurance industry in an effort to capitalize on the recent success of the hybrid car movement. But any type of annuity can provide both growth and income in some fashion, as virtually all variable and indexed annuity products today come with guaranteed income riders and other features that allow investors to lock in a stream of guaranteed income and still enjoy some form of upside potential.

The Bottom Line

Hybrid annuities package two complete annuity contracts into a single product that can essentially perform two different functions at the same time. Although hybrid annuities represent the fastest-growing segment of the annuity industry since the 澳洲幸运5开奖号码历史查询:Great Recession, their true value remains unproven to many skeptics. Their ability to combine two complete products into one vehicle is their greatest selling point, but the jury is still out on whether they are genuinely able to provide a level of benefits that cannot be matched by their traditional cousins. For more information on hybrid annuities, consult with a 澳洲幸运5开奖号码历史查询:financial advisor.