Retirement Income Security FAQs

What does having Retirement Income Security mean?

Compass Investors defines Retirement Income Security as receiving an amount of money equivalent to your final salary, every year of your retirement, for as long as you live.

This means NEVER having to worry about running out of money AND having the financial flexibility to live your retirement years as you deserve after your lifetime of hard work.

How do I ensure my Retirement Income Security?

Most importantly, you will need to amass an amount that is equal to twenty (20) times your final salary.

For example, if that salary was $50,000, you should save $1,000,000 (i.e., 20 x $50,000).

Then, invest this amount in one of several options (i.e., fixed income bond fund, guaranteed annuity) that guarantee at least a 5% annual return. The interest alone will provide a yearly income equal to your final salary—forever! For example, $1,000,000 invested at 5%, would yield $50,000 every year. ($1,000,000 x 0.05 = $50,000).

The best part is that your initial investment remains in tact and is available to you throughout all your retirement years to improve your quality of life or respond to unforeseen needs.

Why is my retirement plan essential to Retirement Income Security?

Compass Investors believes that you should never depend on anything you cannot personally control. Most of your potential retirement income sources are outside your control. Social Security and Medicare are significantly underfunded; pension plans are being reduced or eliminated; real estate is not the wealth-producing vehicle it once was.

The ONLY truly reliable retirement income source that you can directly affect is your retirement plan.

Therefore, it is imperative that you take all necessary steps NOW to grow and protect this cornerstone of your Retirement Income Security.

Your rock-solid retirement plan will ensure your future happiness and financial security—the perfect combination for worry-free golden years.

If other income sources continue to be available, then you are ensured an even higher standard of living. Regardless, in this highly unstable and turbulent world, you will be confident that you have grown your retirement account large enough so that your family will be secure forever.

Shouldn't I be able to live on less money once I retire?

Compass Investors believes that you should be highly conservative when planning for your future. Actuarial tables show that once you retire, you are likely to spend two or more DECADES without a steady income.

You will be far better off setting an aggressive financial goal and netting more money than you actually need than having to reduce significantly your standard of living or be forced to return to work because your cost-of-living estimates were too low.

All costs will continue to increase—particularly those for medical and energy. Pension plans are either being eliminated or are under-funded; the future of Social Security is in doubt. Additionally, higher interest rates and inflation are strong possibilities.

To be prepared for these and other future unknowns, Compass Investors, along with other financial experts at Morningstar and Wharton, strongly recommends that people who are retired be able to replace 100% of the salary they had prior to retirement. Doing so will help you avoid the unthinkable—running out of money when you are no longer working. Getting a job as a senior also may not be a viable or desirable option.

You only get one chance to amass the money you will ultimately need and it is important to consistently do it right during your working years.

Will increasing my contribution level alone help me have Retirement Income Security?

No. For your investments to grow large enough to provide you with Retirement Income Security it is necessary to couple contributions with higher long-term expected returns.

If you can afford it, increasing your contributions is always a good idea because of the tax benefits. However, increasing your contributions has only a LINEAR effect on your portfolio's ending value while increasing your investment return has an EXPONENTIAL effect.

Without a sufficiently high enough return—such as those that Horizon produces—increasing your contributions is like throwing good money after bad.

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