Welcome to the New Bermuda Resident Retirement Primer, a series of articles to be featured in The Royal Gazette every month, or more often, on demand.

We will cover the gamut of retirement planning issues: retirement cost of living, inflation, longevity, to work or not in the jobs market, pension investments, contributions/distributions, health costs, an easy way to figure out what you need to save, family support complications, ramifications of where should you live — stay here or go there, eldercare, estate issues, qualify of life satisfaction.

A number of anonymous volunteers have already agreed to share their retirement plans and experiences with me. This is their truth as they see it from genuine folks who know from their own experience the challenges living on a fixed income in Bermuda. We will meet them as composite cases over the life of the series. I encourage readers to feel free to provide any relevant input, challenges and concerns directly to me, confidentially, of course, at martha.myron@gmail.com

Issues

Retirement financial worries are a universal issue for the over-50s these days, what with total absence in most societies of guaranteed pensions (except for government civil service workers, politicians, bureaucrats, and the like).

Real “moving on to the golden age” concerns are compounded by the following facts:

• Having enough to make ends meet for your golden age. Retirement pensions are not what they used to be — if indeed you were lucky enough to have one in the first place.

• Affordable healthcare — the number two worry for older workers.

• Understanding your pension investments — for many, this could be your biggest asset after your home, but soon-to-be retirees tend to push the risk envelope, inadvertently torpedoing long-term gains.

• Employment opportunities. As you get older jobs may be less remunerative or available in a poor economy.

• Mortgages have not been paid off even though close to retirement. We tend to be lulled by a sense of complacency that “everything is all right.” If you own your home outright, you can get by. If you do not, you are subject to island economic drag.

• Divorce rates in older couples is trending upwards. Home economics may mean selling a home while facing an uncertain less substantially comfortable future. An older divorced single person of either gender can see a 50 per cent drop or more in a retirement lifestyle, and increased medical costs.

• Unanticipated death of a partner/spouse. It is still well known that two can live cheaper than one. All of the divorce issues above apply along with the longevity factor. Widows bear the brunt of decreased assets since statistically, they live at least five years longer than men, or in the case of my own granny, more than 45 years longer than her husband.

Retirement Planning

It used to be that if one was lucky enough to have the right kind of job for one’s whole life, there was a guaranteed monthly retirement paycheque after you left the workforce. Sometimes, you might have been given a gold trophy watch — if not plated — which might be worth a few bits on gold exchanges today.

Millennials and Gen-Xers have no concept of what this all means — retirement is so far away. It is completely conceivable, too, by the time these young people reach the golden age the word retirement will have been obliterated from global languages.

Regrettably, we won’t be around to experience the new age — well, maybe, a few might actually still be here, bionic body parts and all.

Back then, a retirement paycheque had the legally obtuse name of the defined benefit plan, that is a type of pension plan in which an employer/sponsor promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee’s earnings history, tenure of service and age, rather than depending directly on individual investment returns.

Your employer pension and your old age government “generically-called” social security insurance were generally enough to sustain a minimally satisfactory lifestyle, not flashy, but enough to get by. Then, if you could maintain your job, consult, work part-time and so on — drawing on a bit of savings from time to time for the odd vacation, you were “set” for your remaining years.

The defined benefit plans ultimately became completely unaffordable for the private business sector, and few remain — with the exception of governments, such as Bermuda. Even on a global basis, countries are planning to discontinue these comprehensive programmes, finding them increasingly untenable as their governments struggle with lower capital reserves, significantly increasing pension liabilities, more older retirees, waves of the unemployed and new immigrants needing immediate benefits, and flattening economies.

Defined contribution plan is a type of retirement plan in which the employer, employee or both make contributions on a regular basis. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts plus any investment earnings on the money in the account.

Enter The National Pension Scheme (Occupational Pensions) Act 1998 as amended that became operative on January 1, 2000.

This new Bermuda defined contribution pension, in place for private Bermuda businesses, was for many the only pension besides the Bermuda Government old age meagre stipend. This DCP pension is not guaranteed during a working life. It is subject to investment market forces; the accumulation in the pension is contingent on maintaining employer/employee contributions as well as continued employment. The defined contribution cannot accumulate without an employment position. A serious redundancy can affect the DCP outcome.

These two pensions structures, one provided by private employers and the other by government have their own set of rules that apply to retirees.

Each of these items below, that are encapsulated within these pension plans, are viewed differently:

• The pension legislation

• Anticipated economic inflation benefit

• Cash distributions

• Investment decisions

• Mandatory lockups

• Mortgage relief

• Final accumulated individual pension valuations

• Annuity terms

• Medical benefits

• Hardship requests

In this series of articles we will review and compare the pension legislation for both plans to see if you feel they reflect the challenging current pensioner environment, current interest rate slippage (heading to negative rates), and are flexible enough to allow pensioners to control their money at retirement.

Many individuals who are close-to or already retired will face difficult financial choices for the remainder of their days on God’s earth. I hope this Bermuda retirement series will help with their retirement planning.

Martha Harris Myron CPA PFS JSM, Masters of Law: International Tax and Financial Services. Appointed to the Professional Tax Advisory Council, American Citizens Abroad, https://americansabroad.org/. The Pondstraddler* Life™ Consultancy providing financial planning, publications, presentations for Bermuda residents, their multinational families and connections. Contact: martha@pondstraddler.com