When deciding if an annuity investment is a good idea, one of the options that should be investigated is a hybrid annuity. These annuities are a combination investment that typically works best for a younger investor who is willing to accept some risk with their investments. When you are considering a hybrid annuity in Florida, it is important to understand they carry two primary features, a fixed component and a variable component. There is no single hybrid annuity, instead there are a number of different programs that can be tailored to the individual investors needs.
The basics of a hybrid annuity
There are two basic values associated with a hybrid annuity. Any time you are considering a hybrid annuity in St. Petersburg, it is critical to understand the risks and rewards associated with this type of an investment. The primary value is known as the account value. The account value is calculated by adding your initial investment plus the value of the guaranteed growth rate based on the specific index it is tied to. The second value is known as the benefit value which is the amount of benefits that will be paid over the life of the annuity. These values should never be confused when investing in a hybrid annuity as they are very different.
Account value versus benefit value
When investing in a hybrid annuity, understanding the difference between account value and benefit value is imperative. When an investor is informed about growth rates, the growth is typically quoted on the benefit value and not the account value. Oftentimes, an investor will be told that their account will grow a specific percentage a year, but this is not the account value, it is actually the benefit value that is growing. The income component grows at a faster rate than the account value (which cannot be accessed). This is how a hybrid annuity works when it has an income component: (note amounts are estimated)
- Investment amount: $100,000
- Guaranteed growth rate: 8 percent
- Investment account value after year 5: $110,250 (5 percent)
- Income account value after year 5: $146,931 (8 percent)
Understanding the index option
It is important to understand if you elect to invest in a hybrid annuity in Florida that you are not investing in the stock market, so you are not at risk of losing your principal investment, you participate only in a portion of the upside of the market. Typically an insurance company offers a hybrid annuity by using the interest to invest in high-quality, low risk investments such as Treasury bonds. In the event the investment makes money, your account value increases. If the investment loses money, you lose nothing.
What is the income rider option?
In addition to the index option, a hybrid annuity offers income riders. There are three basic types of riders that may apply including a guaranteed lifetime income, an enhanced death benefit option and a long-term care option. Each of these options offers benefits to the annuitant and to their heirs.
Before you invest your hard earned money, it is important to speak with an advisor who understands how a hybrid annuity in Florida works. While you can protect your investment, there may be decreasing surrender penalties if you need to liquidate a hybrid annuity.
Advanced Capital Management, Inc. will show you how to get better returns on your retirement dollars and provide you with the pension style income you need. To find out more about how a lifetime income annuity rider works, or if a Hybrid Annuity or Equity Indexed Annuity is the right option for you. Just click on the orange “Get Annuity Quote” button to the right and see how you can generate guaranteed income, for your retirement years.