Jul. 6--In the wake of a slide that erased half the value of the U.S. stock market, legislation has been introduced in Congress to make annuities and similar retirement plans offering guaranteed lifetime payments more attractive.

But even before introduction of the proposal in the House of Representatives, investors burned by the stock market collapse were warming to annuities as a source of guaranteed retirement income.

The House measure would provide a tax advantage on payments from annuities, investment retirement accounts and other retirement plans that offer lifetime, guaranteed income. Defined-benefit company pensions, which also provide lifetime payments, would be excluded.

The tax advantage would vary depending on an individual's tax situation and details of the retirement plan. For example, 50 percent of otherwise taxable portions of annual payments from lifetime annuity plans -- up to $10,000 -- funded through after-tax dollars could be exempt from income taxes. Twenty-five percent, or up to $5,000 for an individual and $10,000 for couples, could be exempt from plans funded with pre-tax dollars.

The stock market's decline during the last six months of 2008 dramatically worsened the retirement outlook for many middle-class Americans, said Bill Waldie of Americans for Secure Retirement, citing a study the group released this month.

Nearly half the country's households own at least some stock, and many workers' retirement savings are invested in 401(k) accounts or other accounts dependent on the stock market.

The report highlights the importance of a guaranteed stream of income in addition to stock market investments and Social Security, Waldie said.

For the study, Ernst & Young LLP re-examined the finances of six typical middle-income households approaching retirement that it first looked at last year. The group's retirement assets decreased by 14 percent to 17 percent in the last six months of 2008.

A stream of guaranteed income helped, the study found. For example, a recently retired married couple earning $75,000 a year with a defined-benefit pension had a 57 percent chance of having enough money in retirement, Waldie said.

The same couple without a guaranteed source of stable income had only a 6 percent chance of financial success, he said.

Waldie said his group, a Washington-based coalition representing small-business owners, farmers, women, minorities and the life insurance industry, backs the proposal in Congress to give tax advantages to financial vehicles designed to provide lifetime benefits.

Social Security benefits help, but they aren't enough, Waldie said.