A reader who read our retirement series of articles has sent the following question:

After reading your investment article in The Royal Gazette of March 9, it inspired me to review my retirement pension.

I am an enthusiastic, determined individual, almost 70 years old, and still working. I love my job, am very good at what I do and want to stay employed for as long as possible. Luckily, my employer and I started with the Bermuda National Pension scheme since its inception; plus, my salary still triggers a 10 per cent pension contribution.

Age has become so relative, lately. I have to plan my finances carefully. I’ve always been an aggressive investor. My pension allocations have been (and still are) capital growth: 75 per cent equities, 10 to 15 per cent fixed income, 10 to 15 per cent real estate/alternative class.

Should I consider reallocating to the more traditional balanced fund: 60 per cent equities, 30 per cent fixed income, 10 per cent real estate/cash?

Readers, what are your thoughts. Too aggressive? Maybe, maybe not?

Research of similar capital growth portfolios for the last ten years, returned from 7 per cent to 9.5 per cent on average, while balanced portfolios, more risk-averse, returned 5 to-8 per cent.

We surmise that this reader went through the 2008 global market crash and since still invested, can tolerate volatility. However, 58 is much younger in a work career than ten years on — at 69 years old. Professional advisers also know that as retirement approaches, individuals become less tolerant to risks (or loss of any kind) knowing full well that once that steady paycheque stops, the chances of recouping market value degrade significantly.

There is no quick-fix answer. Almost everyone’s retirement planning strategy depends upon a number of other financial factors. Our reader provided no additional information. We will use part of my retirement readiness checklist:

• How secure is our reader’s job? In today’s marketplace, any job can disappear at any time. Whole industries can experience profit setbacks at the flash of a Twitter message, poor industry performance, executive turnover, security violations, social media stigmatisation, changing consumer trends, severe industrial accidents, natural disasters, and other dynamics.

• Is there a mortgage? Could our reader pay it down without a paycheque?

• Are there other debts, e.g. credit cards, vehicle loans? Same paydown question?

• Any other savings. How long can savings last without touching pension sources?

• Any other sources of income: rents, dividends, an inheritance, part-time job? How much, if any, is our reader’s monthly Bermuda Government pension given eligibility at 65, even if still working?

• How healthy is our reader? Can this individual afford a minimal health insurance plan in retirement?

• Any longevity in the family? Bermudians are living to 100 years plus. If so, our reader should plan on 20 years in full retirement.

• Any family member (nursing home costs, disabled child) depending upon support from our reader? I’ve had several retired clients supporting their parents’ nursing home care.

• Will our reader (eventually) annuitise their pension or choose a drawdown account? Once annuitised, the pension value will not appreciate, but neither will it lose value — as not in investment markets.

What do these questions have to do with a pension investment allocation? Plenty.

My retirement planning philosophy revolves around cash (or assets readily convertible to cash) buckets, three to four of them. As each bucket is slowly depleted, the next bucket in line is available — meaning that a growth pension portfolio may not necessarily need to be conservatively reallocated — until a much later time frame.

It also stresses eventual complete debt elimination. Retirement planning should focus first on how to achieve a minimally satisfactory stress-free lifestyle; any financial successes above that line in the sand are pure gold. Individuals carrying significant debt while facing a reduction in monthly income are disadvantaged immediately at retirement.

Bucket One:

• wages

• rents

• part-time work

• other income sources, government pension, dividends, etc.

This is mainly renewable cash on a monthly basis.

Bucket Two

• significant cash savings, enough for at least, two — three years of living expenses

• other investments, e.g. treasury bonds, unfortunately, Bermuda bonds not available to local small investors; local shares with dividends; short-term money market funds; mutual funds — more conservative than pension allocations — and the like.

Bucket Three

• Long term investments

• Bermuda National Pension Scheme

• Other pension-type assets

• Real Property

Bucket Four

• Inheritance, but not real until received.

Basic steps and must do’s. Individuals may need more or less of them, but this is a start.

• Review debt amounts and the anxiety to you. Get rid of it all as quickly as you can.

• Not enough bucket cash — sock away as much as you can going forward.

• Calculate mercilessly the minimum amount needed to survive going forward without a paycheque.

Final thoughts.

If you have any or all of the following situations: a mortgage and other debts, job uncertainty, small current savings, health issues, or might be responsible in supporting a family member, then you need to protect the value of your pension portfolio.

Consider moving your pension allocations to a conservative portfolio or possibly a guaranteed income fund until you do retire.

If, on the other hand,

• you’ve socked away cash and continue to fiercely save;

• have no debt;

• may have another future — or same job on a part-time basis for your retirement years;

• can manage a minimal lifestyle, with an occasional treat;

• are relocating to a cost-effective jurisdiction, and

• if the individual is completely solvent in all other personal financial areas, then, the pension may not be necessary for another ten years or longer.

PS: space does not permit any conjecture or planning as to whether our reader has multinational citizenship connections and issues.

These are your decisions, dear reader. Best of luck with your financial planning.

Disclosure. Readers are reminded that this information is general in nature and cannot be used, nor is it intended to be used, for any personal financial planning, tax, immigration, legal, or other specific personal advice. Hire a qualified financial planning professional.

• Martha Harris Myron CPA CFP JSM: Masters of Law — international tax and financial services. Dual citizen: Bermudian/US. Pondstraddler Life, financial perspectives for Bermuda islanders and their globally mobile connections on the Great Atlantic Pond. Finance columnist to The Royal Gazette, Bermuda. All proceeds earned from this column go to The Reading Clinic. Contact: martha.myron@gmail.com