Are you nearing pension age and still worrying about repaying debt? You are not alone.
Research from South Africa Reserve Bank and Stats SA shows that South Africans are spending 75% of their take-home pay on refinancing debt, and are likely to continue paying debt on pension income without a proper retirement and debt management plan.
If you do not want to be a pensioner still with lots of debt, consider the benefits of heading into retirement debt-free. Then start planning for retirement by focusing on reducing debt before reaching pension age.
Increase savings for retirement needs
A debt-free retirement means more savings into your account, not just enough money for daily expenses. Even in retirement, a growing savings fund can be a life-saver on a rainy day. Without debt repayments to think about, you can save regularly for an emergency fund or towards future unexpected medical bills (especially if you don’t have medical aid).
Boost investments and earnings
It’s easier to save and invest for future income if you enjoy a debt-free lifestyle. More savings allows you to put more money towards investments and continue to accumulate assets after retirement. Instead of servicing past debt, you are free to channel your disposable income and savings into income-generating assets or start a business should you wish to earn more and increase your financial safety net.
Improve financial security after retirement
Having no debt comes with the added advantage of a lower debt-to-income ratio (DTI), higher credit score and other positive financial indicators. Reducing debt before retirement is helpful to your financial health and prospects. It can assist in qualifying your application for a new rent deal, seek better mortgage rates in purchasing a property, or secure a business loan if needed. Overall, you stand a better chance to borrow via secured loans, should you need it, in order to build your asset portfolio.
Enjoy spending your income as you see fit
A pensioner with debt has to forfeit a portion of his income after retirement to pay back those debts, reducing the monthly disposable income. With no debt obligations, you can spend the money that would otherwise go towards debt repayments on fun things that matter to you and bring joy, such as travel, hobbies or family get-togethers.
Get relief from debt anxiety and stress
Life is ultimately about enjoyment and funding your dreams. Sadly, mounting bills, large credit card expenses, a high mortgage and tight budgets rob many South Africans of a happy life without debt.
Escalating debt repayments are unsettling and add to the existing financial stress of making ends meet. As a debt-free pensioner, you won’t have to worry about making debt repayment on a pension income that is often much lower than your working salary.
Have the freedom of choice to build a better future
Finally, a debt-free retirement puts you at ease with money and lets you choose what you desire for your future and your family’s well-being. Once your financial security is improved, you can start planning your estate and leaving a lasting legacy for your descendants.
A debt-free retirement means that you can be more generous with family members and friends. Giving back consistently through charity may become a new life goal. Ultimately, without the burden of debt, retirement can be the most enjoyable and rewarding time of your life.
Need help with paying off debt before retirement? ezDebt counsellors assist with the repayment management of various types of debt. Consult an ezDebt counsellor today.
Our professional ezDebt advisers can help you stay on track with debt repayments through quick and affordable debt counselling. All our debt counsellors are registered with the National Credit Regulator (NCR). Get in touch at www.ezdebt.co.za.