I've been doing a lot of work on retirement recently at a personal level, a corporate level, and a broader, global level. As a result, I've come to a sobering conclusion: thinking about retirement is a bit like thinking about losing weight. Diets don't work when the mind is not ready for a lifestyle change, nor does wishful thinking when it comes to financial health in retirement. Until the mind is ready and receptive we will continue to ignore the need for some very serious change, and this applies to us as individuals and as a country.

As change begins with self, let's think about retirement at the individual, personal level. The standard benchmark used by financial advisers is that we should plan to have at least 70 or 80 percent of our last year's working income for our yearly retirement income. For those who have spent a lifetime contributing to their pension fund and who qualify for social insurance, they might just about have this amount of income on retirement. That's the good news.

Unfortunately, there is some bad news. As individuals, in order to live on 80 percent of current income while costs go up, we will have to radically change our retirement dreams and lifestyle.

Let's put this financial benchmark another way. How would you manage if your income now, before retirement, was suddenly cut by 20 percent? Would you be able to maintain your current standard of living? Where would you cut expenses to balance your cheque book? There are three main expense items that we all simply cannot do without – food, housing, and health care – if we want a healthy and active retirement, and it would be very difficult to reduce costs in these areas.

Take food, for example. Will we suddenly eat less when we retire? Do we expect the cost of food production to drop, or our grocery store owners to reduce their profit margins? I don't think so. So let's assume that our grocery bill will initially stay the same and then increase with inflation over the 20 to 40 retirement years.

If you are a homeowner, hopefully your mortgage will be paid off by the time you retire but you will still have maintenance expenses. The reality is that the older we get, the less likely we are to do our own maintenance. As a result, overall home maintenance costs will no doubt go up. If you are renting, it is reasonable to expect rents will rise with inflation once this current downturn comes to an end.

The third big issue is health care, and it is a worry for us all as premiums rise and deductibles (or co-payments) increase, and that is assuming you can afford health insurance. Countries that have national health plans, such as Canada and the UK, are struggling to maintain quality and benefits as health care expenses rise exponentially. The problem is that their citizens pay for health care through their taxes and voters do not like tax increases.

The US and Bermuda are just beginning their journeys toward national health care and any notion that this will not impact the tax burden is questionable at best. An economist once told me: "Costs are constant, it's just a matter of who pays." As a result, it is reasonable to expect taxes will increase as national health care is introduced. And the more Governments borrow to fund health care, the greater the tax burden on our children and grandchildren.

We all want to stay active and healthy in our retirement, and doing so requires planning – lots and lots of planning. Given today's economic environment and the length of time we will live in retirement, part of the plan should be to keep working as long as possible. Just as weight loss begins in the head and not the stomach, careful thought and planning should go into retirement well before leaving paid employment.

For individuals, corporations and governments, expenses should not exceed income, and any debt should be repaid within a reasonable, defined amount of time. Passing on debt to future generations is unacceptable. The economic downturn, the rising cost of just about everything, and living longer make a powerful combination of forces that must change the way we think about retirement and financial planning.

Marian Sherratt is President of SORCOS, a social research and consulting firm. She writes on issues concerning our ageing population each month in The Royal Gazette. Send e-mail responses to m.sherratt@sorcos.com">m.sherratt@sorcos.com