Three recent articles in local papers and a US national magazine arriving on my doorstep have prompted me to revisit the impact of health costs on retirement.

The first article announced another double digit increase (16 percent to 22 percent) in cost of health insurance in Bermuda. The second was a reference in AARP magazine (American Association of Retired Persons) called ?Beyond 50: A Report to the Nation on Trends in Health Security?, May 2002. The third was a recent article written by a successful local realtor regarding interest of clients in moving off island while renting a personal residence, and the fourth was the recently released report on taxation in Bermuda.

Each article, while written for different reasons, for different people in different locations, comes to basically the same conclusions. Some retirees (as well as other citizens) are feeling the pinch, and governmental coffers are straining to meet the needs of families who can no longer afford to basic medical care.

While rising health costs cannot be attributed to any one single factor, it is a fact that there are more of us growing older than those replacing us. We are living longer, even healthier than our ancestors; however, older people still use more health benefits at a faster rate than others. Gerontology specialists know that the numbers of active elderly have increased dramatically with Bermudian families having real predisposition to longevity. At the website www.livingto100.com, this columnist consistently scored in the 100-year old range, while being provided with healthful hints on how to live even longer. Imagine our pre-schoolers of today surviving into the 22nd century.

It has often been stated that Baby Boomers ? some 76 million in the United States alone ? are on the edge of receiving the greatest transfer of family wealth in history ? it may be surmised that is true here as well. Family fortunes, often completely tied up in illiquid real estate, represent large sums of security, or so we all would like to think. Investment strategists understand the significance of these demographic opportunities. Their objective is to gather these clients ? and their potential future assets into welcoming arms. This is a not a bad thing, since many close-to-retirement workers do need help investing for succeed in lifestyle change goals.

The financial planning world is also very much attuned to the deep concerns of these same baby boomers. Professional planning for retirement services in some areas are outpacing all other planning requests. If these purported inheritances will provide more than an adequate quality of life to so many, why then are these soon-to-be-rocking chair candidates so focused on accumulating assets?

One reason is that not everyone is born originally advantaged (the proverbial silver spoon), so it has fallen to them to figure out how to be financially successful, so very hard to do when life is so all consuming. Aside from personal real estate, which also may still be leveraged close to retirement age, the individual savings rate per capita simply has not increased to keep pace with projected living needs, including health care.

Even for those diligent asset accumulators, the continued low interest rate market has been a setback, requiring education in understanding new investment products. Life has become a constant learning curve.

While the health insurance increase here was a shock for many, as a country, we are not alone in trying to control health care costs. According to the AARP study, the average total health-care spending (excluding nursing home costs) among Americans 50 and older rose 310 percent over the last 20 years ? that?s an average of 15.5 percent per year. In financial planning projections, I have been using a 16 percent health insurance inflation factor for the last several years.

Clients have not always agreed with me feeling that I was a bit too conservative. Perhaps I was, but then again with the release of these statistics, perhaps not. My profession deals on a daily basis with presenting all realistic probabilities, and realistically, we always watch health care and other trends that may affect our clients.

A 15.5 percent average rate of increase seems like a conservative number when reports from the US indicate that health insurance cost is up 48 percent for some individuals last year alone, with more than 40 million uninsured.

Statistics for those unable to afford health insurance in Bermuda are not known, although it is worth noting that Government does pick up much of the expense for hospitalisation.

Whether the annual cost of living in retirement in today?s dollars (net of health related expenses) denotes a gracious existence, or one that is minimally acceptable, annual health costs continuing to increase at today?s rates may outpace individual total living expenses (with a four percent inflation factor). See the chart enclosed.

What can you do?

Save more;

Resolve to undergo an investment education process that will enable you to appreciate your existing assets over the long-term faster than inflation;

Implement lifestyle changes; live simply (or consider a downsizing move to an area where you can), yes this may be far easier said than done.

Work on improving your mental (and physical) health by cutting back on all items that negatively impact your well being;

Increase your physical activities, not only will you feel better, but you will look and perform better at a higher level of excellence.

Research all competitive insurance policies. If you can afford to and it is available, consider carrying only catastrophic insurance with a high deductible.

Plan now, your quality of life will be better for it.

@EDITRULE:

Martha Harris Myron CPA/PFS CFP? (US licences) is a Bermudian and VP, Investment Centre, Bank of Bermuda Member HSBC Group. She formerly owned a US financial services practice meeting the needs of 400 individual and corporate clients. She can be reached at 299-5578, or confidential e-mail can be directed to marthamyronnorthrock.bm

@EDITRULE:

The article expresses the opinion of the author alone, and not necessarily that of Bank of Bermuda. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy or sell investment products, nor as a promotion for financial plans.

The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.