Hybrid annuity

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Hybrid annuity

A type of insurance company investment that combines the benefits of both a fixed annuity and a variable annuity.

Hybrid Annuity

An annuity that allows the annuitant to make contributions to both a fixed annuity and a variable annuity at once. For example, if an annuitant contributes $1000 per month to the hybrid annuity, $800 may be allocated to the fixed annuity and $200 to the variable annuity. This provides the holder of the hybrid annuity the stability of a fixed annuity with the potential for a higher return that a variable annuity brings. A hybrid annuity is most useful for retirees who expect to live for a long time and wish to participate in the stock market.

hybrid annuity

A single annuity in which a part of an investor's payments purchase units of a variable annuity and the remaining funds purchase units of a fixed annuity.

Hybrid annuity.

With a hybrid annuity, you allocate part of your annuity's assets to providing fixed income payments and part to making variable income payments.

For example, you could buy a hybrid immediate annuity with a lump sum of $50,000, and allocate $35,000 to fixed payments and $15,000 to variable payments.

The fixed portion would lock in a specific yearly income, while income from the variable portion would depend on the performance of the underlying investments you selected.

This approach allows you to combine the advantages of both types of annuities -- regular income from the fixed and growth potential from the variable -- in a single package.

References in periodicals archive ?
Usually built around a fixed immediate annuity chassis, annuity/LTC products gain appeal from their tax-favored status (distributions from combination annuities used to cover LTC costs are tax-free if handled properly), plus their ability to provide a measure of long-term care coverage to people who either don't want to purchase or can't affordably purchase a stand-alone long-term care insurance policy.
For one, it's a way for suppliers to capitalize on--, including a provision that gives tax-free status to distributions from combination annuities used to cover LTC costs.
Effective January 1, 2010, this applies to new combination annuity contracts as well as older contracts that are exchanged into new combination annuities with long term care.
In addition, the Pension Protection Act of 2006 also goes into effect this year for combination annuities, which allow annuity distributions to fund long term care tax-free.
With it comes a change to federal tax law that allows extremely favorable treatment of so-called combination annuities.
Given this new tax advantage, and the compelling need for LTC insurance that is not being sufficiently met by stand-alone LTC products, development of combination annuities to be introduced on or after Jan.
As early as last year, prominent industry authorities and organizations suggested, rightly in my view, that combination annuities will overtake stand-alone LTC insurance within 10 years.
Recall that the PPA only sanctions favorable tax treatment of non-qualified combination annuities.
But, in combination annuities, the LTC provisions (or separate rider) are treated as a separate contract, and so charges taken from the annuity to pay for the LTC are considered distributions.