56 • MARTIN H. RUBY
Here’s the special magic: Your account has a floor of zero. This means the least amount of interest you can be credited in a year is zero percent. If the market drops 15 percent this year, your ac- count receives no interest . . . but it doesn’t lose any value, either. It just stays where it is. In the following chart, the bottom line represents $100,000 in- vested in the S&P 500®, including dividends — the most common measure of the stock market, as you may remember. This is the same line we examined earlier in the book. As you can see, after the tech bubble burst in 2000, the market dropped for three straight years. It built back up through the middle of the decade and then dropped again when the real estate bubble burst. At the end of last year, after nineteen years in the market, your $100,000 grew to $324,059, for an average total return of 6.06 percent a year. We’ve already discussed the problems you face when earning an average of 6 percent on your savings and how, minus fees and taxes, that’s just not enough growth for the retirement income you’ll likely want in the future. Now, let’s do a comparison and see how indexing performed during this same period. The top line of the chart represents the concept of indexing in- side an IUL policy. 13 Look at the difference in growth. You can see that, by eliminating the down years of the market, your account never loses value and therefore can grow money much more effi- ciently.
13 The indexed example utilizes a hypothetical index with a cap of 11.5% and a floor of zero percent. It does not reflect expenses or any specific product or policy.
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