This is Part Three of a pension/retirement series based upon two hypothetical gentlemen (John Contribore and George Benefine), both aged sixty and ready to retire. For background, see Part One, Defined Contributions versus defined benefits plans in the Royal Gazette published on December 3, 2011 and Part Two, Annuity or Drawdown - Distribution choices for your Pension on December 17, 2011.Part Two of the series covered the general calculations along with the decisions that John C needs to make regarding his plan to convert his lump sum pension accumulation into an annuity. He has worked many years to reach this point in his career, up to and, including the implementation of the 2000 Bermuda National Pension Scheme. He has always understood that the responsibility for his retirement savings rested entirely on his shoulders. He feels that he has accumulated a decent nest egg from his Pension that added to his other savings should provide a gateway to his golden years.Does he have enough?John’s projected annuity amount is approximately $800 per month for the rest of his life (if he chooses that option see December 17, 2011 for details). You can imagine his concern when realises that the amount he will receive on a monthly basis from this pension is not enough even with his Old Age Contributory pension added in nowhere near enough for someone who has been in the workforce for more than 35 years. This annuity won’t even take care of his monthly health insurance bill.George is also making his retirement plans, meeting with his human resource administrator. He, too, is anxious about his final retirement numbers that will be calculated under the Superannuation formula rules. There are a number of differences between his defined benefit retirement package and John’s Defined Contribution package as we can see from the Chart.The biggest difference, by far, is that George never had to worry about how he much he was accumulating in his pension, or how his pension investment manager performed. Those commitments were (and are) handled by his employer, the Bermuda Government. He simply had to perform at consistently high professional working standards in order to progress through Government employee salary ranks.What will George’s pension choices look like?George will have, on average, an ending salary of $80,000, which is used to calculate a service factor percentage for his annual basic pension. He served uninterrupted thirty years in Government giving him a pension factor of estimated 45 percent of his annual salary equating to $3,100 per month ($37,000 annually) in retirement for the rest of his natural life.George also has another very interesting option not available to employees outside of Government and its agencies. He can take the full final monthly pension amount as stated, or he can take from a five percent to a 25 percent lump sum distribution at retirement and accept a lower monthly pension benefit.George is also eligible for the Old Age Contributory pension, and a very competitive low health insurance rate under the GEHI plan (Government Employees Health Insurance.Summary of choices for George:1. Pension distribution of $3,100 for his natural life increasing with inflation, or2. Lump sum distribution at retirement estimated at $107,000 and a monthly benefit of $2,300 increasing with inflation *Note for simplicity, all numbers have been rounded down.3. Old Age contributory pension4. Reduced rate GEHI health insurance for himself and his spouse.Summary of choices for John:1. Pension distribution of $800 for his natural life. If he chooses another term certain annuity option, he could run out of money2. No lump distribution option3. Old Age contributory pension4. John must self fund his health insurance on an individual more costly basis.John has primary responsibility for funding his retirement.If he runs out of money, it is his problem. John won’t be retiring anytime soon.George has far fewer concerns for funding his retirement.He will never run completely out of money. The entire responsibility for maintaining his retirement benefit is laid squarely on the Bermuda Government.One guess as to who is responsible for funding Government salaries?Citizens International Cross Border Caution.These composite cases and scenarios do not take into consideration the tax liability complexities, filing and compliance reporting obligations for United States citizens and green card holders residing abroad in Bermuda (or elsewhere), dual nationals of Bermuda and the United States, Bermudian (and other foreign nationals) who are classified as US residents for income tax purposes due to connections with the United States. All of these individuals and their families who have exposure situations to foreign pensions, foreign annuities, foreign life insurance, foreign trusts, foreign partnerships, foreign companies as well as foreign financial accounts and financial interests must undergo additional financial evaluations to ascertain tax, immigration, legal and regulatory impacts on their final decisions.Also, the retirement planning scenarios above, while based upon actual mathematical facts, assumptions and calculations, are hypothetical in nature, and are expressly not to be used as personal individual retirement planning advice. If you do not understand your retirement plan options, you are particularly advised to seek the counsel of independent qualified international tax and finance professionals.For the reader “pebblebeach” in the commentary December 19, 2011, who was very concerned that if he/she passed prematurely the insurance company would keep the residual balance, please understand that an annuity is a contract that can be confusing and complex.The Bermuda National Pension Scheme annuity options are different than generic annuity contracts.Once the contract is executed between you and your insurance provider (after the grace period to rescind has passed), it is legally binding and cannot be changed.Therefore, if you do not understand your options fully (including what happens to your undistributed retirement fund balance in the event of your premature death) it is in your best interest to seek independent unbiased third party financial advice prior to entering into any annuity agreement.Investment drawdown options will be discussed in next article. All articles uploaded to www.marthamyron.com.Disclosure: I am one of a number of independent qualified international tax and finance professionals in Bermuda who are not affiliated with any investment, insurance, or pension service provider, and does not sell investment, insurance, or pension products. Martha Myron, CPA CFP(US) TEP JP www.marthamyron.com provides Financial Counsel for Cross Border Living™ on international tax, estate, and retirement strategies for Bermuda residents with US connections, and US citizens living and working abroad. Member of AICPA and the American Citizens Abroad Tax Advisory Council. www.americansabroad.org Contact mmyron[AT]patterson-partners.com or 296 3528 at Patterson