The Bermuda Retirement Primer — part 2A: managing for a comfortable retirement

The number one documented concern for retirees the world over is outliving retirement savings. The reason: the income from jobs they have relied upon all of their working lives will cease to exist.

Their lives will progress from opportunities to save some of every monthly paycheque each year, to now managing their fixed financial resources to avoid depletion.

Yes, investments and savings may play a role, but overall, retirees, many for the first time in their lives without the protective hand of Mother or Father Employer, must now rely upon themselves to manage their cost-of-living, stay healthy, while still leading a productive life. It is an abrupt change that many individuals have not had the time, emotional energy, or resources to adequately prepare for.

Bermuda is no different. In short, or in long, Bermuda has become a very expensive place to live in retirement. This is not a random statement. Feedback from readers and other individuals for years emphasise that just getting by in Bermuda has become a tough challenge. Individuals faced with living an extensive period of time in an uncertain environment, find thoughts of leaving here to a faraway, promising place a necessary choice.

Financial worries are a serious concern issue for most people (aged 50 and above) employed in the Bermuda private sector:

• Gradual pension erosion where job restructuring may not even entitle you to a pension.

• Additional retirement savings must be generated by you personally, and is often inadequate.

• Interest rates on decent retirement accounts have been so low for so long that those who remember the old Bermuda 7 per cent term deposits feel they were dreaming. With little to no interest on savings, essentially, a deposit holder is paying the bank to hold his/her money — along with those monthly service fees.

• We are getting older, but living so much longer. More than ten years on average than our parents and grandparents. Remember social media touting 60 years older being the new 40? Bermudians fit that longevity profile. I have personally consulted in numerous financial situations where retirees in their 70s were supporting parents aged over 90 and 100!

• Health insurance costs will never go down. Our neighbour, the US, has not been able to control medical cost increases to less than 10 per cent for more than 20 years, nor can our tiny island economy.

• The mandatory Bermuda retirement age has not been elevated sufficiently in tandem with longevity, to retain skilled employees in the workplace, thereby allowing them (us) additional years to accumulate retirement savings.

• Part-time work positions — used to augment retirement — in the Bermuda environment are highly competitive in today’s dragging economy or have evaporated entirely.

• Our Bermuda Government is under enormous financial pressure for retirement benefits payments to increasing numbers of senior residents, civil servants, and ministers. Only a matter of time (and no money) before these benefits are reduced.

Should you stay or should you go? Where can you go for that idyllic low-cost retirement that you were promised, at least, in those maddening media retirement ads for annuities, investments, certain medical aids, and travel opportunities? My most intensely disliked ad are the two-people-in-the-bathtub smiling perkily at the golden sunset. Right, don’t we all have two bathtubs on our back lawn? Again, the media loves to romanticise life for product-selling purposes, but there is much wrong with this picture.

You can get there, but can you stay? Every border crossing has a consequence. The golden wish to just get up and go. There are legal, tax, and immigration constraints to staying in a new country, just as there are in our country of Bermuda — as we are all well aware after the events of this week. You cannot just go and set up your household in another country because you want to, yet anecdotal evidence exists of individuals and families doing just that — with little thought to the consequences.

Yet, a common composite case that I see frequently, goes like this: “We were travelling in x country and we just loved the area. Or, I originally came from y country. You would not believe how much cheaper food, utilities, gas, shopping, property and land taxes are compared to Bermuda. So, my spouse, I and the whole family bought the cutest little place, just perfect for retirement.

“We can work part-time, a little extra cash. You know, we just can’t afford Bermuda any more, our outgo is so much higher than our income. So now our action plan is to move there permanently. We are leaving in a month. We understand they have income taxes there, so we will keep all our Bermuda stuff in Bermuda. Is there anything else we should be planning for?”

Oh, Lordy — this all sounds so great, the perfect solution. But, could there be a problem?

You know you can get there, but how are you going to stay there?

Are you connected in any way to: the US, Canada, the West Indies, Britain, Costa Rica, West Indies, Europe, Brazil, Mexico, Panama, Australia? These are all possibilities where Bermudians have resettled.

Larger concerns encompass:

• Is the cost of living really less?

• Is healthcare adequate?

• What are the tax regimes and rates?

However, even more simple needs can become complex hurdles.

• How do you open a bank account as a resident?

• Can you obtain a country driving licence?

• Can you negotiate the culture and language?

• What to do about health insurance in Bermuda?

• Can you have your Bermuda pension deposited in another country’s banking system?

• How do you restructure your estate, wills, trust, etc?

• Will your Bermuda life insurance pay out in another country?

• What will your tax responsibilities be in your new country — make no mistake, you will be taxed if you take up permanent residence!

• The path to permanent residency: but it all comes back to whether you will have the right to permanent residency in your new country.

More on this topic to come.

Readers, I am looking for feedback stories from those who have relocated successfully to other countries. Please feel free to write to me, confidentially, of course.

April 2, 2016 — Announcing the launch of the Pondstraddler Life Financial Perspectives Blog for Bermuda Island Residents with Multinational Families and International Connections.

• Martha Harris Myron CPA CFP JSM: Masters of Law — International Tax and Financial Services. Pondstraddler Life™ Financial Perspectives for Bermuda Residents with Multinational Families and International Connections on the Great Atlantic Pond. Appointed to the Professional Tax Advisory Council, American Citizens Abroad — The Voice of Americans Overseas: Geneva and Washington DC https://americansabroad.org/. Contact: martha@pondstraddler.com