Page 52 - TODAY magazine Issue 1 2021

Q&A
What do I do about debt in
RETIREMENT?
Loans, home loans, vehicle financing... Your debts won’t magically disappear when you retire, so what’s the best way to manage them? Paul Slot of debt-counselling service Octogen, has some advice.
I am retiring in the next five years and still have debt. What advice do you have for me? ‘It is always a good idea to have a practical plan for paying off your debt, more so when you are getting close to retirement. Ideally, you should not start retirement with debt. If you’re still paying off your bond, for instance, consider working a bit longer so that you have more time to clear your debt before you stop earning a salary.’
How do I decide which debt to pay off first?
‘To get into the discipline of repaying debt, it helps to pay off the smallest debt first. The pleasure of paying it off and closing the account will motivate you to repeat the process with the next smallest debt.
‘If you need help to get a full overview of your debt, Old Mutual’s Budget Repair service could help. It entails working with a financial adviser to analyse your budget and spending habits to get the full picture with regard to your income and debt, and possible areas where you could cut back to free up cash to repay your debt quicker. It is not the same as debt review, which is a binding legal process.’
PAUL SLOT has been a registered debt counsellor since 2007, and is currently a director at debt counselling service Octogen. As former President of the Debt Counsellors
Association of South Africa, and a former member of the National Credit Regulator Task Team, he has a wealth of experience in debt review.
NEED ADVICE?
To find a financial adviser near you, call Old Mutual on 0860 60 60 60 or click here.
What are the typical debts a pensioner should avoid?
‘In some cases, someone might still be paying off a home loan and is able to afford it in retirement. But in reality, it is better to be debt-free by the time you retire. It would mean that you are not at risk of having to give up your home or car, should something unforeseen happen. Not having to worry about that relieves a lot of stress.’
With the huge drop in income after retirement, what should I not cut back on?
‘Your income will ususally drop when you retire, but so will some of your expenses. The most important things to have in place are somewhere to live, medical aid and short-term insurance. It is a fact of life that medical expenses increase as we get older. On the upside, short-term insurance costs may decrease. After this has been paid, the money that is left in your monthly budget can be used for your day-to-day living expenses. If you have debt, it too will have to be paid from your “spending” money. This is why it is important to pay off debt before you retire.’
// 50 // ISSUE ONE 2021
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