Are "Hybrid" Annuities Too Good To Be True?
The Annuity Man
Hybrid is a car. Hybrid is a mattress. Hybrid is a plant. Hybrid is a word that is used to over-hype an over sell Fixed Index Annuities (FIAs). Whenever someone asks me what I think the best hybrid is, I always answer..."Honda has a good one, but I think Toyota has them beat." Any time I get that question, all it means is that someone has been to a bad chicken dinner seminar or has been improperly pitched a Fixed Index Annuity (FIA).
FIAs are not bad products, they are just ridiculously over sold. FIAs are CDs products, pur and simple. In 1995, Fixed Index Annuities (FIAs) were introduced to provide CD type returns (or a shade better) along with full principal protection. Nothing wrong with that combination, and that's exactly what FIAs do.
FIAs are also efficient delivery systems for attached benefit Income Riders if future income guarantees is a goal. Income Riders can be added to a policy at the time of application for future pension needs.
FIAs also offer a non-guaranteed but limited upside that is attached to a call option on an index. The typical index used is the S&P 500 (non including dividends). Any gains are permanently locked in on the contract anniversary date, and the principal is fully protected from market losses due to the fixed annuity structure.
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