THE NEW RULES OF RETIREMENT SAVING • 81
So what would an indexed insurance product have looked like during the Great Depression? First, some assumptions. Let’s give this index the range of a common IUL product in the market today — a floor of zero percent and a ceiling of 11.5 percent. Secondly, we’ll continue using those same back-projected estimates of the S&P 500®, since that measurement didn’t exist in the 1930s. Here’s what indexing looked like in the Great Depression:
Pretty amazing, right? The $100 in our hypothetical index would be worth $154.56 by 1938. That’s a growth rate of 4.45 per- cent a year . . . during the GREAT DEPRESSION! How is this possible? It all comes down to math. When you eliminate any negative years and you never give back the interest you’ve accumulated, it’s easier to realize net-positive gains over
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