Chances are that you have read a few things about annuities and have a general understanding of how they work. Our knowledgeable and experienced representatives at Advanced Capital Management, Inc. know exactly how they work, and will be happy to answer any of your questions and address all of your concerns.
When you were younger, you could afford to take more risk. If one of your investments did not work out so well, you had time to recover. Now that you are older, your risk tolerance is lower. You need safe money that will not disappear if the market eventually takes a big nosedive. One of the best ways to assure that you will never lose money and still have growth potential is to buy a fixed index annuity, sometimes also referred to as an equity index annuity or a hybrid annuity.
What is a Hybrid Annuity?
It is very easy to get confused about the different types of terminology used when talking about annuities. While your Advanced Capital Management Rep can explain the reasons why terms like equity index annuity, fixed index annuity and hybrid annuity are used almost interchangeably, here is a simple way to think about such annuities.
Not all hybrids have the same goals. You can compare hybrids on the amount of guaranteed income they provide. You can look at your participation rate in the positive growth of the index. You can see the percentage payout amount when you elect to start withdrawing regular payments (lifetime) income from the annuity.
A hybrid annuity combines some of the features from other types of annuities to create a product that can give you guaranteed income for life, a guaranteed rate of return and a chance to earn a greater return when the market goes up, while also not risking any of your capital when the market goes down.
- An immediate annuity feature can provide a guaranteed lifetime income.
- A fixed annuity feature can provide a guaranteed rate of return.
- A variable annuity feature can allow you to participate in the profits of a bull market while protecting you from losses in a bear market.
An immediate annuity starts to pay you a stream of income within a short time after you make your principal investment. Essentially, the annuity helps you apportion your money so it will last you for the rest of your life. The amount you will receive each month, or other selected interval, is based on your life expectancy.
Fixed Index Annuity
A fixed index annuity is the part that guarantees you a minimum return on your investment. While it may only be 3 or 4 percent, that will seem pretty good when the going rate for a safe CD is only 1 or 2 percent. This feature is particularly attractive when you do not want to settle for low current market rates on traditional safe investments and want some return on your principal investment.
Variable Annuity Feature
This feature borrows from variable annuities in the sense that they allow you to select certain investments that have a chance to grow and earn higher returns. An equity index annuity gives you growth potential, but that growth is tampered down by a trade-off that most risk-averse investors are happy to make. In exchange for a guarantee that you will never lose any of your principal or safe money if the market declines in any given year, you will receive a percentage of the increase in the index in any positive year.
Finding the Best Index Annuity
Are you tired of tossing and turning in bed each night because you are worried about stock market declines? At Advanced Capital Management, we understand why so many people are concerned with protecting their money and still earning a steady return on their investment. When you work with a professional representative who is thoroughly familiar with all of the different annuity products out there, you can have confidence that you will never be sold an inferior product. For the best index annuity, ask about achieving the highest growth potential by linking your annuity to one of several of the best un-capped, un-biased and un-unbeatable stock market indexes.