This is the second in a series on pensions.

The Bermuda National Pension Scheme was legislated for many concerned reasons by determined and farsighted professionals, citizens, and politicians. Thank goodness, it came into being.

Not many countries as tiny as ours have a government mandated forced savings plan for almost 100 percent of the employed population, along with an Old Age Contributory Pension.

In the US, for instance, defined contribution plan (DCs) participation is estimated at only 36 percent, while defined benefit plans are offered to between 16 percent and 25 percent of employees. That means between 50 and 60 percent of people are covered; a feeble comparison.

But then, the big difference is that US pension plans, generally, are elective, not mandatory. Defined benefit plans are being jettisoned as fast as is discreetly possible (see differences discussed in last week?s article) by corporations who can no longer afford them. Even solid IBM has frozen their Defined Benefit in favour of a less costly cash balance plan ? just too many older workers looking for the rainbow promised to them many years ago.

Your pension asset allocation is an integral part of your entire portfolio strategy. Yet so many of us do not find the time to give these long-term increasing sums the attention and the respect that they deserve.

Perhaps, it is because the money is unreachable; untouchable; and not readily available for so very, very long, that sometimes, we tend to be a tiny bit indifferent. Having said that as employees get older and closer to the golden handshake, pension accumulations are indeed scrutinised. Sometimes too much, i.e. if I just make this a bit more aggressive for the next couple of years, I will have the amount that I am counting on for the big day.

It doesn?t always work that way.

If you are lucky and the investment gods are with you, you may cash out a huge winner; but in the short term, you have a random chance that the market could stall out just around that happy lifestyle change. Even if the investment market is kind, you could have a lovely sum to retire on, only to realise that interest rates are down. Low interest rates affect the annuitisation formula and distributions returns for the rest of your life. Life is unpredictable; that?s why it helps to plan for all situations, if you can.

So what are you supposed to do? No matter your age whether 22 or 62 now, put your total financial plan together:

One ? in monetary and emotional terms, define your goals, five, ten, 15, 20 and further out if you can really stretch your imagination.

Two ? consider your entire financial picture. Remember that every financial decision you make, or ignore making, affects the rest of your finances. Maybe not now, but ultimately it will.

Three ? Count your assets: what do you have, what have you saved, what do you owe, what do you think your earnings potential will be?

Four ? assume only good debt, responsible debt, debt that will allow you to become financially independent. Credit card debt may buy you what you want to make you feel good momentarily, but it will never make you rich.

Five ? review your job and employee benefits. Look for opportunities to increase your skills and your compensation.

Six ? start tracking what you are spending, then lay out a consistent savings plan for your outside cash, keeping in mind how much risk you want to take on to make this cash grow.

Should you be invested in the same manner as your pension, it depends?

Seven ? review the asset allocation for your pension.

As individuals, each working age group has different needs, is in different life stages, has different conflicts and stresses getting along in this world. Starting with young careerists (22-35), the demands of everyday life are diametrically devoted to the present. Middle to old age might as well be a remote wilderness when one is young. Young careerists can afford to be more aggressive with their portfolio; older workers who have scrimped and saved have to think about preserving their capital.

With 40 years to go, if you are 24 years old chances are you won?t be too impressed with your pension savings so far, particularly if you have recently entered the workforce. But wait a bit and that 5 percent contribution of ?free money? from your employer will really start to add up. It is probable that most young employees won?t read an article such as this at all, but just in case you happen to pick up the paper, this section is for you.

How should you allocate your pension dollars? Not sure? This is a hint to encourage you to learn all you can about investments. Try www.smartmoneyuniversity.com, and www.investpedia.com, both of which are excellent teaching websites for the beginning investor.

Why should you invest at all? Why not just put your money in the GIC choice. That?s fine if you are extremely conservative. But consider this. If you cannot access your pension for 40 years wouldn?t you like to see it grow faster than the rate of inflation over that time frame? Cash and near cash for the most part will not outperform inflation and keep pace with your purchasing power.

The old adage still exists. Stocks outperform bonds; bonds outperform cash. The long-term return for capital equity markets has ranged from 8-11 percent, generally. While you cannot predict the future, however, you can consider large corporation performance profits over time. How many global companies do you buy goods and services from every day? How many have been in business for years and years? Your purchases keep them growing, why not include that performance in your pension allocation by focusing on a primarily global stock allocation.

A fairly aggressive asset allocation for a 24-year-old would be about 70 percent allocated to stocks, 20 percent allocated to bonds and ten percent to alternative class. If you feel comfortable with that as the years progress, then consider stepping down slightly to the next level of asset allocation for your outside savings, being sure that you have already set up your contingency fund.

There are a few more reasons that you simply must frequently monitor your pension. There may not be the amount or kind of government support that retirees enjoy now. It is simple population equation ? there are more of us than there are of you. Young ladies, if longevity genes run in your family, you can expect to live to 100 or beyond. Your future financial security depends first and foremost on you! Put yourself and your financial needs on overdrive and start now, to have a quality lifestyle throughout your long, long life.

Next week some significant numbers ? 40 years later, and the count down continues toward retirement with a discussion of drawdown risk and distribution structures.

@EDITRULE:

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