That’s a topic that is weighing on the minds of many these days…and apparently it has been for some time. In fact in preparing this blog I Googled “Market Due For Correction” and most of the first page of results was stories or pages with datelines more than six months old.
Historical data would suggest we are due for some sort of correction. It has been nearly 36 months since we’ve seen a correction of 10% or more in the S&P 500®. Typically we seen one of those every year or so. If 2014 ends positive it will be the sixth straight positive calendar year for the S&P 500®.
What about a larger correction? In 2002 the S&P 500 declined 23.4% and in 2008 it declined 38.5%. (Remember it takes a bigger increase to get back to “even” – a roughly 62% increase is needed to offset that 38.5% decline)
Nobody is suggesting they can time the market. I certainly don’t. Will it correct? History says so. Will it recover? History says it will.
What if there was a way to get equity-like returns without all of the corrections?
Consider the design of Indexed Universal Life Insurance. Crediting methods vary but the design is the same: your account is credited interest when the index you select increases. If it decreases, you simply aren’t credited interest in that period. “Zero is your Hero!” You never lose money because of market declines.
A popular misconception is that the caps on returns in an IUL mean you’d give up much of the upside in a Bull Market. To the contrary several carriers have indexing options that have averaged returns of 9% or 10% over the last 25 or 30 year “look back period.” So 9% or 10% returns on average without the -38% years in there. Many people in their accumulation years are saying “sign me up!”
The indexed design that protects against market losses coupled with the tax advantages only available in a life insurance product is driving a great deal of interest and growth in IUL. For more and more American families, a prudent, safe retirement plan includes Indexed Universal Life.