Almost everyone is looking for some type of guaranteed income when planning their financial future. This is one of the reasons that fixed annuity sales have been increasing this year. The increase in fixed annuity popularity has been driven in large part by fixed indexed annuities. In Life Health Pro’s “Why Clients Want The New Fixed Indexed Annuities,” Robert Bloink and William H. Byrnes introduce a new kind of fixed indexed annuity product. These indexed annuities offer a wider choice of indices from which to choose, so that consumers have a greater participation in the markets. Markets have been stable for some time now, but consumers are still worried about losing money like many of their family and friends did back in 2008. With newer hybrid fixed indexed annuity products, you have more potential to achieve large market gains but you are still protected from large losses.
Hybrid indexed annuities are known by a few different names in the industry. Their basic difference from traditional indexed annuities is that they tie your market gains to more than one stock market index. There are a few benefits to tying your market gains to more than one stock market index. You have less risk of loss when your money is allocated between multiple indices. You are also able to maximize your potential for gains when your money is allocated this way. Many hybrid fixed indexed annuities allow you to allocate money in smaller, nontraditional indices that are not often available with basic indexed annuities. Fixed indexed annuities offer you a cushion against losses. The trade-off is that your market gains are capped. By combining more than one market index with a hybrid indexed annuity, you typically put yourself in a better position to balance gains and losses. Money is shifted often between stock and bond market indices as the markets change. This allows you to maximize your potential for growth and minimize the risk of any losses.
Keep in mind that some of these hybrid fixed indexed annuities are marketed poorly. Fixed indexed annuities are capped and have participation rates to allow insurers to maintain their books while still offering you great benefits. So-called “uncapped” indexing does not truly give you a full 100% participation rate. Insurance companies have to protect themselves in the case of down markets. Make sure that you know the details of your cap, participation rate and spread with hybrid fixed indexed annuities. These products do not offer unlimited growth potential, but they do offer valuable growth potential and downside protection. Indexed annuities are likely to remain popular because of their income guarantees and potential for market upside combined with downside protection. Combining traditional and nontraditional indices is a good way to take even more advantage of market upsides. If you are considering a hybrid fixed indexed annuity, an expert at Annuity FYI would be happy to answer your questions.