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Finance

What Is a Hybrid Annuity?

Kristie Lorette
By Kristie Lorette
Updated May 17, 2024
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A hybrid annuity is an annuity that has characteristics of both a fixed annuity and a variable rate annuity. This type of annuity allows the annuity holder to choose how much money they want to invest in the fixed portion of the annuity. In addition, the holder can choose how much they want to invest in the variable rate portion of the hybrid annuity.

The primary advantage of a hybrid annuity is that it allows the annuity holder to invest more money in the fixed portion of the annuity, which is the more conservative side of the annuity. While the fixed rate portion of the hybrid annuity brings less of a rate of return, it also provides more safety for the money that is invested. It is the variable portion of the annuity that has the potential to offer the highest rate of return to the investor.

A hybrid annuity is the best type of investment vehicle for an investor that has the investment time horizon on his side. The longer the investor has to invest his money in a hybrid annuity, the higher the rate of return on the investment will most likely be.

This type of annuity has a built-in allocation feature which allows the investor to choose how aggressive or how conservative he wants to be when investing his money. If the investor wants to be more conservative then he would invest a higher portion of the money in the fixed portion of the annuity. For those investors who want to be more aggressive and take a little more risk to get higher returns, then they would invest more money in the variable portion of the hybrid annuity.

As is the case with any type of investment option investor choose, it is imperative to gather all of the information on the hybrid annuity that is being considered. Once he has all the information, the investor can weigh the pros and cons of investing his money in a hybrid annuity. If the hybrid annuity meets the investor’s needs and helps the investor to reach his investing goal, then a hybrid annuity may be the investment vehicle for his money.

In addition to those who have a long time frame for investing, a hybrid annuity also provides investors with the options to still invest some of their money in stocks and bonds. The hybrid annuity simply allows the investor to invest in these vehicles in one investment.

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