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Are Hybrid Annuities Too Good to Be True?

Stan Haithcock
October 5, 2023
Are Hybrid Annuities Too Good to Be True?

Welcome! I'm Stan The Annuity Man, America's annuity agent, licensed in all 50 states, and I'm glad you joined me. I've written several books, and you can get 6 for free to fully understand annuities. Click on this link, and you can download them instantly. Now, what you're looking at today and the reason that you clicked this blog, Are Hybrid Annuities Too Good to Be True? First, because you're using the word hybrid, you typed in the word hybrid, and it attracted you, which only means one thing. It means that some agent, some advisor, has pitched you what they're pitching you as an Indexed Annuity. Nod your head. They use the word hybrid to make it seem better and feel like you're getting more for your money. You're smarter than that. So, what we're going to do today is talk about the word hybrid. Why they are using it, they, the agents, and people trying to sell it to you. I sell Indexed Annuities when they're appropriate, and they fit. But the short answer to your question, are they too good to be true? No, they're not. They're contracts. We're going to go through all of the sales pitches and all of the stuff that you've probably heard, debunk all of that factually, and then tell you where Indexed Annuities fit. So, hang in there.

‌Okay, so hybrid annuities. To me, hybrid's a plant, hybrid's a mattress, hybrid's a car. I had a hybrid car one time. I had one of those Honda Insights if you remember that, and I put my logo all over it and drove it all over the world. That was way back in the day, but I had one, and it got 63 miles to the gallon, but it was a hybrid, and it had hybrid on the car. So, every time I see the word hybrid, I'm thinking, man, I loved that car. And then agents are out there using it to sell Indexed Annuities, which I think is a mistake. I think you shouldn't have to sizzle something up. Tell people the facts. Tell them the truth of what they are.

‌Indexed Annuities

‌Indexed Annuities aren't bad products. They're fixed annuities and life insurance products. They're not securities and are regulated at the state level. They were put on the planet in 1995 to compete with CD returns. Yes, CD returns. That's not what you've heard, right? What have you heard? Go ahead and tell me. Go ahead. Exactly. Market upside with no downside. Tell me the other one you heard. Right. Market participation with principal protection. Come on, man. You have to be smarter than that. There is no such product. Do Indexed Annuities sometimes have a pretty good return? Yeah, because it's based on an indexed call option but a blended return over time, CD-type returns. And that's okay. So, to answer you, when it comes to annuities, any type of annuity, any sales pitch that you hear, if it sounds too good to be true, it is every single time, without exception, period. End of story.

‌Let's Break It Down

‌What is a hybrid? It's a car, it's a plant, it's a mattress, right? It's not an annuity. Agents use the word hybrid because they're saying, hey, hybrid's multiple benefits. It does a myriad of things. It's just wonderful. It's have your cake and eat it too. But what are they actually saying? Let's break it down. Number one is the accumulation value, which is the real money, the growth part, the part that they're hooking you on. And they're saying, "Hey, market upside with no downside." Now, if that's true, doesn't the FED buy just Indexed Annuities? Doesn't everybody on the planet just buy Indexed Annuities? Doesn't Warren Buffett just buy hybrid Indexed Annuities? No. But that doesn't mean they're bad. They're CD products. So, this is based on an indexed call option. We're not going to get in the weeds of that, but let's say there are limitations on the upside, and the rules can change at the carrier's discretion. Just understand that. That's the CD type. Number two, you can get an income benefit called an Income Rider, and you can attach it at the time of application to an Indexed Annuity for future income needs.

‌Stan The Annuity Man, America's annuity agent. That's where I use Indexed Annuities. What I call income later planning when you need income in the future, and we quote Deferred Income Annuities and Indexed Annuities with Riders. Why? For future income guarantees. So that's one. And then number three, typically, they'll throw on what's called a confinement care benefit. Agents typically use the phrase, long-term care, which technically is wrong because long-term care is a health product. It's its own standalone product, but confinement care means that when you get sicker, you get your money back quicker. An example of that is, let's say your income benefit rider kicks off $7,000 a month when you total the income stream. Remember, the income stream is based on your life expectancy at the time you take the payments, not interest rates.

‌And so, the confinement care benefit rider, which is kind of cool, if you're one of those people that can't qualify for traditional long-term care, or you want some additional coverage that you don't want to go through the medical testing because this is guaranteed issue. Then what they'll do is jump through hoops, contractual hoops based on the carrier rules on whether you can't do two of the six daily functions or you're in a nursing home or blah, blah, blah. Everyone's different, by the way. There's no, on the confinement care side, they're all different. And you can contact me, and I'll walk you through that if that's something you're really interested in. But just for conversation's sake, on the Stan The Annuity Man YouTube channel, which is fantastic, subscribe to it. What they'll do is they'll just increase that to say double it.

‌Quicker When You Get Sicker

‌And you'll hear many people out there say, "You can get an income doubler. Long-term care income doubler." Does that sound familiar? That's what they're talking about. But in essence, they're giving your money back quicker when you get sicker. I'm from the South, so we always have to say it. So, with this confinement care benefit, you get your money back quicker when you get sicker. That's my grandmother talking. Typically, this is for about five years. It's five years because when you have qualified for that enhanced benefit, you live an average of three years and a maximum of seven. Annuity companies have the big buildings for a reason. They know what they're doing. You're not going to beat them at it. But when they say hybrid, hybrid means multiple benefits. So, here are the multiple benefits.

‌The Multiple Benefits

‌With Fixed-Rate Annuities, gains lock in permanently on an annual basis. Typically, with most Indexed Annuities, it's an annual lock-in, but some have two- or three-year lock-ins. Then you can put an income benefit rider on there, and then you can also have a confinement care benefit rider. I'm going to add one more. I will put it as a star because it's really not a benefit. What I call this, don't take this wrong. It's candy for the stupid, and you're not stupid. Why? Because you're reading this blog. But some people say, "Well, I bought this annuity, and they gave me this upfront bonus. They gave me money for signing the application." I need you to listen closely here. There's no philanthropist in the annuity industry. No CEO wakes up in the morning at an annuity company and goes, "You know what? I think I'm going to give money away today. I just want to give it away." They're not doing that.

‌There are a hundred pennies in the dollar. They're going to take it away somewhere. Are bonuses bad? No. It's all part of the overall contractual guarantee, but it's not free money. And if you don't believe me and you bought an annuity with a bonus, and you're arguing with Stan The Annuity Man, which is a mistake, call that carrier and say, "Hey, that bonus you gave me, send it to me." You'll get a wake-up call because you can't get to it. Now, that doesn't mean it's bad. It can be attached to the income benefit rider. Enhance that a little bit. Or it can be attached to a Fixed Index Annuity, and typically, it's vested. You have to hold it for a long, long time. My point is this, remember the original question: are hybrid annuities or indexed annuities too good to be true? No, they're not. And the bonus is an excellent example of that. It's not free money. That doesn't mean it's bad. It's just part of the overall contractual guarantee.

‌So, hybrid annuities. I hate that word because it doesn't need to be used. You could just talk about the good and the bad and limitations of Indexed Annuities, and you understand if they're appropriate and suitable for you. Now, I do a ton of these blogs and videos, as you know. Stan The Annuity Man YouTube channel, you need to subscribe, but one of the videos that coincides with what we've been talking about that I've done in the past that you need to view now is called The Disadvantages of Fixed Indexed Annuities. Yes, I went through the bad stuff that you need to know. That doesn't mean they're all bad. You just need to know the good and the bad so you can make an informed decision. Now, you clicked the subscribe button. That's a good thing. You're going to go to our site to get Indexed Annuity quotes, talk to us one-on-one, and get the information on the Indexed Annuities.

‌The other thing you need to do is get the book. I've written a book on Indexed Annuities, Indexed Annuity Owner's Manual. Click this link to download this and my other books for free with no strings attached. Thanks for hanging in there with us. See you next time.

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