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Retiring Soon But Still In Debt?

Many Singaporeans are concerned that they are not able to retire comfortably. According to a survey of 1,000 Singaporeans aged 25 to 60, about 71% of respondents think they are not able to retire comfortably (The Business Times, 9 March 2021). 

What are the most pressing concerns over retirement? Many may think about how they can maximise returns on their money. Some may be concerned about the impact of inflation on their retirement savings and the rising costs of living. These are valid concerns – speaking with a financial adviser or professional can help you make informed choices regarding saving and investing your money for retirement.

From Credit Counselling Singapore (CCS) experience in assisting distressed borrower address problem debts, one must also manage their liabilities and clear all outstanding debts before deciding to retire.

Debt can become a heavy burden, and may lead to having emotional stress, straining family relationships, and affecting one’s mental and overall well-being. Unsecured debts such as credit card balances can snowball into large, unmanageable amounts. If not managed well, your overall financial position could be in a deteriorating state, slowly draining away your hard-earned nest egg.

According to Credit Bureau Singapore (CBS) Consumer Credit Index (CCI) report (CBS, June 2021), borrowers above 54 years old still owe an average of about $320,000 in personal loans, $305,000 in mortgage loans and $41,000 in motor vehicle loans.

If you are already in your 50s and hope to retire at age 65, you have at most 15 years to pay off all your debts.


What you can start doing today

1.   Practise good cashflow management.

At the core of good cashflow management, is a budget. It is your plan to help you save, prioritise spending and meet monthly loan servicing obligations.

If you find it difficult to save because there are so many things to pay for, then you may have to review your budget and find ways to reduce expenses in order to free up money for savings.

Once you have decided how much to save, make sure you set aside the amount the moment you receive your pay. This “pay-yourself-first” approach ensures you save regularly and consistently.

Remember to monitor your spending by recording your actual expenses and comparing it with your budget.

Practising cashflow management using a budget will help ensure that you meet your basic living expenses, live within your means, and save regularly to reach your financial goals, such as retirement.

You have a sense of control over your money as you decide and know where your money is going.


2.   Keep unsecured borrowings low.

To help manage debt among Singaporeans, the Monetary Authority of Singapore (MAS) has set a limit of the amount of unsecured debt a borrower can owe to 12 times the borrower’s monthly income (MAS, 30 May 2017).

This does not mean that you should maximise credit use and borrowing to the limit. Rather, you should exercise prudence and limit monthly loan repayments (excluding mortgage payments) to within 35% of disposable take-home income. While this serves as a general guide to managing debt, you should always spend within your means and not borrow just to “keep up with appearances”.

If a large proportion of your income is going towards paying off debts, you may not be saving adequately for the future and compromising your retirement.

If you have already accumulated an outstanding balance in your credit card accounts, you should stop using your cards to avoid adding on new debt. Pay down as much as you can afford to so you can pay down the balance quickly – do not just pay the minimum amount.


Something To Think About

I’m sure many of us want to retire comfortably, but how many can define “comfortable” in objective terms. Does it mean being able to maintain a quality of life that we have been accustomed with? How much do I need a month as my retirement income?

If you are already in your 50s and still wondering about your retirement, you may want to attend our “Retirement – Are You Financially Ready” course to get a snapshot of where you stand financially in regards to your retirement. Click here to find out more.

If you need more help in managing your debts, attend any of our weekly debt management webinars.

Those facing a debt issue and want to seek help from CCS, should first attend our weekly Debt Management Webinars, where you will learn more about what to do when faced with a debt problem, how to communicate with creditors, what are the common collection actions creditors can take, what are the various debt settlement options are and what is the CCS Debt Management Programme. Click here for schedule.

Borrowers who require further assistance can submit a request for one-to-one financial counselling. Details on the counselling session and instructions on how to arrange for an appointment will be explained during the webinar.

Published 3 October 2021