Demographic studies are showing that people are living longer these days. The latest results indicate that if you make it to age 65, then there is a 50 percent chance that you could live another 25-30 years on average. Thus for some persons, it is possible that they could spend almost one-third of their lifespan in retirement.

Some time ago, we came across a survey conducted by the US Government of persons over the age of 65… and the results were startling:

— 45 percent reported that that they were dependent on family for survival;

— 28 percent relied entirely of public charity and social security;

— 22 percent had to continue to work as they simply could not afford to retire; and finally

— Only five percent reported that they had enough financial resources to meet their needs.

We have no idea what the results would be if a similar survey was conducted in Bermuda today. However, our suspicion is that the result could present a somewhat bleaker picture, especially when we consider that Bermuda has only had mandatory pensions for 14 years and for the first five years the contribution rate was staggered. The result is that for many who are 65 today, they may not have been in a pension plan long enough to have accumulated meaningful sum to retire on.

For the 28 percent that depended entirely on public charity and social security, it should be noted that Bermuda does not have a social security system as comprehensive as the United States’ and its public charity options are very limited.

It is therefore important that current workers take an active interest in their employer sponsored pension plan. Ask questions of your administrator about your investment options and the returns your plan is providing. How often do you see your administrator or those responsible for investing your hard-earned money? Unfortunately, employees feel it is only necessary to ask such questions at retirement…when it far too late to remedy any weakness in your plan.

The May 2006 edition of Business 2.0 Magazine carried an interesting article entitled: More retirees opting to launch startups which reported that “For the past 10 years, adults ages 55 to 64 have been the group most likely to start a new business. Now that baby boomers are reaching retirement age, the trend is only going to grow. People are living longer and are more likely to pursue dream businesses rather than tend to their gardens when their working lives are done.”

Most retirement age entrepreneurs fund their businesses by either using a part of their pension fund balances or taking out home equity loans for working capital. While this is not the safest or recommended method of funding a new business, it is an option that is widely used in the US. Whilst, Bermuda law wisely does not permit such level of risk taking with your pension, Additional Voluntary Contributions (AVCs) could provide a source of future funding for the entrepreneurially minded.

Rebecca Macieira-Kaufman, executive vice president and head of small business at Wells Fargo (a US Bank) in describing this group said: “They’re 58 but look 48; they’re highly active and highly engaged, they have networks and experience, and their kids are out of the house. This group may not be taking on as much risk as the typical entrepreneur who is younger and has less financial security. Indeed, it is believed that ‘strong networks’ are what separate successful retiree entrepreneurs from other entrepreneurs. So, if you are contemplating going this route (starting a small business), you should have a sound business plan, inclusive of a comprehensive marketing strategy, notwithstanding your strong networks.”

The common theme here is that those who prepare for retirement will have many options to pursue, whilst those who have not prepared adequately for retirement will more than likely have to continue working as long as they can or become dependant on friends and relatives.

Successful retiree entrepreneurs are then able to work as long as they desire and on terms and conditions that best suit their lifestyle choices. When they finally retire, they can either pass the business on to heirs or sell-out or enjoy their golden years.

For those retiree entrepreneurs who are not successful, they run the risk of worsening their overall financial position at a time when they can least afford to do so. It would be most interesting to see a study of business failure among this group of entrepreneurs both pre and post the ‘Great Recession’.

If you are considering becoming a retiree entrepreneur, make sure that you not only have the energy to create and grow a successful business, but that you are saving now towards that goal and not hoping to raid your pension saving at a time when you can least afford the risk. Think carefully before you leap!

Marie Jo Caesar is chief operating officer, pensions, of Colonial Group International.