Michael Fox — Licensed Insurance Advisor
Michael Fox Insurance
Phone: 856-676-9358
Email: michaelfox133@icloud.com
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The Break-Even Burden
What a market loss really costs
Printed September 1, 2026
The math nobody explains
A 50% loss needs a 100% gain just to get back to even.
Losses and gains are not symmetrical. When your account drops, there's less money left to do the climbing — so the percentage required to recover is always bigger than the percentage you lost. That gap is the break-even burden, and it's the quiet reason retirement plans fall behind.
The break-even burden, in one table
What return you need in the following year to get back to where you started.
| Percentage of loss | Return to break even | Years at 6% |
|---|---|---|
| -10% | 11.1% | 1.8 yrs |
| -15% | 17.6% | 2.8 yrs |
| -20% | 25.0% | 3.8 yrs |
| -25% | 33.3% | 4.9 yrs |
| -30% | 42.9% | 6.1 yrs |
| -35% | 53.8% | 7.4 yrs |
| -40% | 66.7% | 8.8 yrs |
| -45% | 81.8% | 10.3 yrs |
| -50% | 100.0% | 11.9 yrs |
Loss vs. the gain it takes to undo it
Notice how the two bars start close together and then split wide open. Small losses are forgivable. Big losses compound against you.
Run your own number
Put in a balance and a downturn. See the dollars, the gain required, and how long the climb back takes.
Balance after the loss
$350,000
$150,000 gone
Gain needed to break even
42.9%
You only lost 30%
Years just to get back
6.1 yrs
Years that bought you nothing new
With a 0% floor
$500,000
Down year credits 0% — nothing to make back
A full cycle: exposed vs. floored
A sample 12-year run of up and down years. One account takes every move, good and bad. The other never credits less than 0% in a down year — but its upside is limited in the strong years. The trade is real, and so is the result.
Fully exposed, end of year 12
$649,827
With a 0% floor, end of year 12
$987,141
Illustrative only. Assumes a hypothetical sequence of annual returns and, for the floored account, interest credited between 0% and a 9% cap. Not a prediction, not a guarantee, and not the performance of any specific product or index.
Why this hits hardest near retirement
You lose money and time
At 35, a bad year is an inconvenience — you have decades to recover. At 62, those same recovery years are the years you planned to spend.
Withdrawals make it worse
Taking income out of an account that's already down locks in the loss. Now the smaller balance has to produce the same paycheck, and break-even moves further away.
Avoiding a loss is worth a lot
Nobody credits you for the loss you didn't take. But a year that credits 0% instead of -30% saves you a 42.9% climb. That's the whole point of a floor.
The trade, stated honestly
Protection is not free. Strategies with a 0% floor limit how much of a strong year you keep — through a cap, a participation rate, or a spread. In a straight-up decade, full market exposure wins. In a choppy one, avoiding the deep holes often wins. The right answer depends on how much of your money still needs time to recover, and how much of it you plan to spend soon.
Most people don't need to pick one side. They need to know which dollars can afford a bad year and which ones can't.
Important — educational illustration only
The figures shown are hypothetical and produced by a simplified model for education and discussion only. They are not a quote, projection, recommendation, or guarantee of future results. Actual outcomes vary based on your individual circumstances — including age, health, income, tax filing status, state of residence, time horizon, market performance, product design, carrier underwriting, and changes in tax law. Tax-advantaged strategies referenced (e.g., Roth conversions, cash value loans, qualified plan withdrawals) carry rules and consequences that depend on your specific situation; cash value life insurance assumes the contract is properly structured (non-MEC) and remains in force. Nothing on this page constitutes tax, legal, accounting, or individualized investment advice. Please consult your own licensed tax professional, attorney, and financial advisor before acting on any concept presented here.
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