(Dow Jones) The 2008 market crash focused many investors' attention on the need for guaranteed retirement income. Take a client who came to Clifford Michaels, president of New York-based Institutional Investment Advisors Corp., in early 2009.

"She was a 64-year-old semi-retired divorcee with $500,000 in her retirement accounts-down from nearly $900,000 at the beginning of 2008-and she had an adult child and an aging mother," says Michaels. "Her portfolio had lost quite a bit due to mismanagement and its failure to reflect her risk tolerance. She was pretty panicked."

In addition to her depleted retirement funds, the client had a pension of around $18,000 per year, along with $12,000 from some part-time work with a charity and $15,000 in Social Security payments. All told, her annual income was $45,000, in addition to the $13,000 she was earning in dividends. Still, she had serious, legitimate concerns that she'd outlive her savings.

Michaels saw that the client's growth-heavy investments prior to the crash had yielded only 1.5%. "Someone had looked at her age and at the mortality tables and decided that she had almost a 30-year timeline, so why not put her into growth stocks," he says.

Michaels set about changing his new client's asset allocation. He shifted some money from stocks to bonds and bond funds. He also made her equity portfolio more conservative by focusing it on stocks with healthy dividends.

But Michaels didn't want to sell all the client's stock with the market down so much, so he waited for the market to rebound before implementing a second major shift to his client's investments, which he performed in the fourth quarter of 2009. Now that the portfolio had recouped some of its losses, he took an IRA worth $250,000 and used it to purchase an annuity. "For each year she didn't make any withdrawals, she was guaranteed a 10% increase in payments," says Michaels. "For most of my clients, their number one concern is to take their money today and transfer it to the future, so they receive an income they can't outlive."

The changes Michaels made boosted his client's annual dividend income to $20,000, taking her overall income from $58,000 to $65,000. And she'll get a further boost when she's 71 and has to start taking required minimum distributions from the Internal Revenue Service; at that point the annuity in it is guaranteed to be worth $425,000, resulting in RMDs of $21,250.

"We were able to make up some of her capital loss with a guaranteed annuity. She now has less risk, more diversification, a tax write-off from some of her losses, guaranteed income for life and the ability to meet her RMDs each year," says Michaels. "But the biggest change is that she no longer feels like the glass is three-quarters empty."


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