I don't disagree with you but perhaps let me give you an example. I have a client that needed to guarantee his income because of poor planning and saving on his part. A SWR of 4% would not be enough to replace his employement income in retirement. Heck, I don't even believe in that number any more. I think it might be 3-3.5% now but I digress...I recommended the invest in a product that would give him 6% guaranteed. It also guaranteed to grow his income base at 6% a year, or market performance with annual step-up whichever is better. It was an expensive option for him. The fees eat up 2+% of the investment return a year but he gets his 6% regardless.He bought in January of 2007 with a 50/50 mix. His account grew nicely through 2007 so he locked in a healthy gain that year. Next year, the market and his account tanked. Come January of 2009, he locked in a 6% gain. His account came back in 2009 and 2010 but not enough to surpass the 6% locked in gain on future income. Same thing looks to happend in 2011. Due to the high fees on the account and market performance, his account balance is negative (but then so is the market). Even if you look at morningstar's moderate allocation index, it is barely positive over the last four years. By comparison, the client has a bucket of future income that is worth 38% more than his initial investment. Even if his account were to go to zero, he will get the income.The client sacrificed liquidity and maximum possible return (those high fees) for at least a guarantee of 6%. At least he now knows that when he retires, his income will be much higher than if he had simply left it in his 401k with a moderate allocation.How happy do you think he is today knowing that?Would I recommend that solution to everyone? No way - but it does make sense for a few. With so many people these days with no pension and not enough savings, I fear it is an option that more and more will be forced into.
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