“Income floor,” also referred to as an income rider is a feature of the hybrid income plan you probably have been hearing about in annuity news recently. Aside from enabling you to take part in market gains without having to lose any money if the market crashes, the hybrid income plan (indexed fixed annuities) include a minimum amount that your account is likely to grow every year.
The minimums are usually between 4% and 8%. So, you may be thinking that of course you would prefer to choose an 8% income floor. Perfectly makes sense. Yet often, when the floor is higher, there are other terms that offset that favorable term. Things that offset a higher floor are:
- longer maturity term, and
- simple vs. compounding interest
Having a complete understanding about the two can make a tremendous difference in the amount of income you will receive and when you will receive it.
What Are The Advantages of Hybrid Income Annuity?
- 6-8% growth of an income base account for future income.
- The limited chance to have increasing income as an inflation hedge.
- Upside market potential using well-known indices such as the S&P 500 or the Dow Jones IA.
- No specific market investment and no downside market risk.
- Pension styled income that can’t be outlived.
- Majority control of assets for unanticipated expenses.
- The capability for heirs to acquire the full account value of what has not been pulled.
On the contrary, a lower floor may present benefits that a higher floor does not. For instance, your earnings may increase each and every year, irrespective of market performance, simply based on a predetermined percentage, which has been outlined in the terms of your plan.
This scenario can be totally confusing for lots of people, and doing some research on your own and consulting an annuity expert can help shed some light on the options available for you.
Keep in mind that the annuity experts would be pleased to answer your questions. Call 800-438-5121 today if you would like personal guidance about annuities and this hybrid income plan that will allow you to take part in the market upside without having to worry about the downside.
When choosing a type of annuity, make sure you choose the one that keeps you control of your money and get a fighting chance against inflation.