Final Summary on Young Careerists: Last week, we talked about a pension perspective from the viewpoint of a young careerist, perhaps 25-30 years old, in the workforce, really getting into the swing of things, and with a focus that is understandably far more oriented to getting ahead. In order to provide some real incentive to nurture your pension carefully through the years, here are the results of the following assumptions for a 40 years working career.

Age of first employment ? 25

Starting in year 2000 ? annual salary $30,000 increasing over 20 years to BMD $100,000

Asset allocation ? relatively conservative with average long-term rate of 6 percent.

Assumes starting with two percent total contribution and ending with ten percent.

Estimated value of this pension at age 65 - $952,800

Note that the starting compensation numbers used as examples are on the low side, on purpose for conservatism. We don?t all start out with a nifty new job at a nifty high salary. I also assume that this person obtains a university degree and works aggressively to climb the corporate ladder. Imagine, just imagine that you grow your salary even more than these projections. With diligence, your pension could be your largest asset in value by far at retirement, even outpacing real estate values! Yet the amount placed for investment in your starting year 2000 was a mere $600.

Fast Forward: You?ve flown through age 35, 40, 45, in a fairly conventional sense for some, marriage, children, education, university, mortgages, eldercare.

Now, you are 50 and just a tiny bit worried. That pension does not look that big; work stretches on endlessly; and you?ve hit a slump. It is hard to get motivated. You have become a ?do for?, as in, you?ve done for everyone else. You are not sure you have the energy to do for yourself!

The age 50 is old in Europe, no one wants to hire you, at least in Northern Germany as reported by one of my close relatives. If you are lucky to still have a job at that age, you will guard it very, very carefully. Many workers retire soon after that with a fairly generous government pension. It is probably true that most are happy to do that, but I am uncomfortable with the whole process for a number of reasons.

That pension may be generous now, but it is entirely dependent upon government largesse. Faced with ever increasing old age pensioners and less youngsters to foot the bill, will these remittances be reduced over time?

How on earth are they going to live on a fixed income for forty years?

l There is more loss of control over one?s finances than most of real independent types would like.

Will you turn into a mental midget down the road? For most of us, not our cup of tea.

Older intellectual capital is prized in Bermuda. We have the experience, the work ethic, the can-do attitude, honed from years and years of maturing genes. At least, I hope we all are because at 50 you are in your best earnings years ever. If you are worried about retirement, fretting that you might not have enough, you still have time to lay out a plan that will sock away a sufficient pile of liquidity.

You may want to retire early, have your thought carefully about intellectual stimulation after a year of travel and golf and shopping. If any of the polls that I have seen (AARP ? American Association of Retired Persons) hold the least bit true most of us are not going to want to simply sit in a heap somewhere, sipping marguerites. You will still want to contribute. Why not plan for a second or third or fourth career?

The longer that you work outside of the home, the greater your chances of accumulating additional appreciation in your portfolio, and the longer you will be able to leave it to grow without hitting the capital.

Parallel Asset Allocations. Should your Asset Allocation be the same? Change your pension asset allocation slightly by increasing your fixed income component and reducing the equity exposure. Remember though that you still have 15 years to go ? that can represent three full business cycles. See chart with a 55 equity/30 bond/15 alternative class.

At this stage, you will have savings accumulated outside of your pension portfolio. You may consider broadening this allocation out even further, and keep it a bit more conservative than your pension allocation. You may need a tranche of these investments from time to time and never want to be forced to sell in a bear market.

If you are still worried about reaching a solvent retirement, consider dramatically changing your lifestyle now. Live simply. Go for the experience instead of the excess (goodies, diamonds, clothes, cars, etc). Tuck away as much cash as you can. Try to put away at least another five percent on top of the ten percent pension requirement. And don?t give up hope. Here is another estimated example of where you can be at age 65, even if you only have about 100,000 saved at age 50.

Assumptions:

Lump sum ? $100,000

Estimated return ? 6%

Salary ? $60,000 per year increasing to $80,000 in the next ten to twelve years

Savings amount 15% ? a year

Estimated Total pension amount in 2021 ? $520,000

You can do it.

The above examples and suggestions for asset allocation are all hypothetical in nature and cannot be considered to be specific individual investment advice. Before making any investment decisions specific to your financial situation, you should consider consulting with a qualified experienced licensed investment professional such as a CFP? practitioner, ChFC Charterd Financial Consultant, or CFA charterholder.

How long will my money last in retirement? Next week, a simply calculator to figure out drawdown risk and understanding distribution options.

Readers, we are more than halfway through the 14 week financial literacy programme. Save those articles. The quiz will be featured during the week of September 16!

Martha Harris Myron CPA CFP? is a Senior Relationship Manager at Argus Financial Limited. She specialises in planning for lifestyle transitions and rewarding retirements for executives and senior career professionals. DirectLine: 294-5709 Confidential email can be directed to mmyron@argusfinancial.bm.

The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell any investment product.