DEFINITION of 'Hybrid Annuity'

An insurance contract that allows buyers to allocate funds to both fixed and variable annuity components. Most hybrid annuities allow the investor to choose the amount of assets to allocate to the more conservative, fixed return investments, which offer a lower but guaranteed rate of return, and what amount to allocate toward more volatile variable annuity investments, which offer the potential for higher returns.

BREAKING DOWN 'Hybrid Annuity'

Hybrid annuities can be useful for those who have longer time horizons and wish to participate in the stock and bond markets.

Careful consideration must be taken as to how much risk an investor wishes to take; variable investments can fall just as quickly as equity mutual funds and no guarantees are offered. Also, investors should make themselves aware of the fees for both the fixed and variable portions of a hybrid annuity.


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