The investment markets have made a spectacular, and to some people, questionable recovery.  The market averages are close to 50% higher than they were in March of 2009. What has been overlooked is that this still represents a 36% reduction from the levels of mid-2008.  In short, there is still a very long way to go. For those investors who are using or hope to use their IRA and other retirement plan portfolios to provide retirement income, the picture is still very bleak. There is a large group of investors who are quite content. These are the folks who agreed to use a variable annuity with lifetime income guarantees as a retirement income investment.

Many of these folks have account values that reflect the same performance as all investors. That is, their values are 30-40% below the high levels of a year ago. What is the difference; why are these people so satisfied? The reason is that they opted to include a guaranteed minimum income benefit,or a guaranteed withdrawal benefit  in their annuity purchase.

Here is a case in point.  A client invested $1,000,000 in a variable annuity contract nearly two years ago. The value of that contract today is not quite $700,000.  However, the contract provides an income benefit that will provide an annual income of $60,000 to this client, and to his spouse, so long as either is alive. If that income were coming from his account value, he would have to be generating an income of over 8.5% - not likely today. If the market recovers completely, and alues rise above those of last year, his income will increase --- but, it will never go down.

The advent of the 401K and other retirement plans has removed the guarantees once provided by company pension plans.  These have all but disappeared. The variable annuity contracts with income guarantees have provided a replacement for those lost guarantees. We will all be better off when the markets return to the lofty levels of just over a year ago, but no one knows when that will be.  For now, with millions approaching retirement age, the availability of income guarantees is extremely attractive.