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Time for financial backstop programmes

Last week, readers responded in great sympathy to the account of the grandmother who spent her lump sum retirement pension to care for her dying daughter.

To lose a child that you have born, cared for, loved with all your being since conception is simply unimaginable grief to those of us who have been lucky to sail through life — so far. Now, she has been unsuccessful in finding a job while her financial resources are almost fully depleted.

Unfortunately, her dire situation is not exclusive to Bermuda. She is too young for traditional government old-age retirement benefits, as emphasised in The Royal Gazette article, and appearing too old to meet the dynamics of jobs she's applied for. It certainly can be no comfort to her to realise that thousands (possibly millions) of older individuals, on a global basis, are in the same predicament.

What do you say in such sad circumstances? There is no good answer, although we'd certainly reject generic media pap such as “Five Tips to a Comfortable Retirement.” Our RG reader commentators, for the most part, were so kind, doing their very best to present positive suggestions to help this grieving lady get back on her feet financially, even though a few, yes, had the gall to politicise her appalling situation.

All suggestions were very credible: rent the home, rent rooms, sell the home, try for a reverse mortgage, start a tourist AirBNB, open a daycare business, home-school children, keep pushing for a job.

But, too, there are missing criteria and assumptions that may not necessarily support these ideas. The individual's skill-set level, total experience are not disclosed, understandably in order to protect the individual's privacy.

Readers, too, in suggesting income sources made the general assumptions that there are plenty of people who want to rent a house, buy a home, refer friends to a BNB, or assuming that this individual's skill set and finances are sufficient to be a home-school teacher or operate a daycare business.

It has been statistically revealed numerous times that a huge number of work permits (estimated in excess of 6,000 holders and employers) have left the island.

Are we still stuck in the good-old-days economic thought process that there are lots of jobs, lots of businesses hiring, and lots of people wanting ancillary services.

Am I wrong? Are there? And if this is the case now that our economic future is moving slowly upward, truly, why isn't every single Bermudian employed, filling all of those jobs?

I think the actual economic reality is that every business is still in conservative, belt-tightening mode while government relief will only provide a stopgap in her current tough predicament.

So what is the bottom line here, what can we suggest to bring about hope for the future?

Our current economic climate

Why doesn't government do something? One commentator stated “all of the money paid in to government for payroll taxes, old age pension, and other taxes over the years. That should count for something.”

Well, yes, it should. And a fiscally conservative government should have been laying off surplus monies just for this economic downturn. But it didn't happen, did it? Face it, the capital reserve surplus is not there.

Yes, even so our government is the hope of last resort, isn't it always? We look to government to solve all of our problems, something that is impossible for them to do.

Government benefits are there to provide minimal benefits, augmenting what we have put aside on our own initiative. Unfortunately, numbers of individuals in the populations needing assistance have increased dramatically while the benefit pot has not. All governments, globally, are grappling with huge current pension deficits while longevity statisticians continue to predict that the elders among us will soon be the largest population pool in the world.

At time of press, this lady indicated that she had not been able to find another employment position, her resources were close to exhaustion — meaning that she could not meet her mortgage payments — and was in imminent danger of home foreclosure.

Our homes are our biggest asset. This lady cannot lose her home. It may be the end of hope for a decent future.

Foreclosures are just awful. What happens to those dispossessed families?

Banks don't want to be property owners. Banks sure don't want to be in the financially and emotionally messy position of evicting families from their homes. However, banks cannot be benefactors, they are profit-makers. Remember, profits employ people; profits create financial success; profits build businesses. Without them, companies (even banks) can default on their own debts and go out of business. A lose-lose proposition for everyone.

This is the real and the now. We have to deal with it.

As only one person in a long list with ideas, but not the resources to create change, I can't come up with answers for providing jobs to mitigate the real economic crisis that Bermuda families who are unemployed are facing. In fact, readers themselves provided almost as many thoughtful helpful suggestions as just about any retirement specialist. Cheers for that positive reinforcement.

We can, however, propose an idea to help prevent families from defaulting on their mortgages. Losing your home because you cannot find a job or earn enough to pay the mortgage helps no one. Foreclosed homes devastate families, hurt property values, and damage economic activity.

Should government be a last-resort lender backstop? After stating that government has no resources to do any more, I truly think that a combination reverse mortgage programme, and / or a lifeline mortgage assistance programme needs to be instituted, and soon, in Bermuda.

In theory, it might be successful as this: government becomes an owner with the homeowner. Individual mortgage payments could be deferred (or minimised) and applied against future pension benefits. This would mean, however, that the homeowner would have to be doubly assured that they save enough on their own to fill the gap, knowing fully well that down the road, the pension will be smaller.

And the final analysis is this: when people are employed, have some certainty in their life and feel more confident in their future, they will keep an economy not only merely functioning but growing.

More detail on a lifeline mortgage assistance programme to follow.

Martha Harris Myron CPA PFS JSM: Masters of Law — international tax and financial Services. Pondstraddler Life, financial perspectives for Bermuda islanders with multinational families and international connections on the Great Atlantic Pond. Contact: martha@pondstraddler.com

Planning ahead: using retirement savings ahead of time presents a precarious situation. Reverse mortgages and lifeline mortgages may be possible solutions for some, writes Martha Harris Myron

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Published August 27, 2016 at 9:00 am (Updated August 26, 2016 at 10:46 pm)

Time for financial backstop programmes

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