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A Fin24 reader writes:
Is it a good option to use my pension fund to pay of all my debts?
Gregg Sneddon from Cape-based financial planning firm The Financial Coach responds:
As a rule, no!
Taking money out of your pension fund will mean that you pay tax – unnecessarily - on the funds.
Experience has shown that you are unlikely to ever recoup that - and are also unlikely to replace your pension fund (most people are not disciplined enough).
However, there are always exceptions and each situation should be reviewed on its own merits.
Having said this, too many people see their pension fund as a quick fix to their debt problem; they might pay off the debt, but they don't fix the reason for it and then end up in debt again - but this time with no quick fix.
The reason why you have debt should be closely looked at and addressed before any decisions are made.
- Fin24
Is it a good option to use my pension fund to pay of all my debts?
Gregg Sneddon from Cape-based financial planning firm The Financial Coach responds:
As a rule, no!
Taking money out of your pension fund will mean that you pay tax – unnecessarily - on the funds.
Experience has shown that you are unlikely to ever recoup that - and are also unlikely to replace your pension fund (most people are not disciplined enough).
However, there are always exceptions and each situation should be reviewed on its own merits.
Having said this, too many people see their pension fund as a quick fix to their debt problem; they might pay off the debt, but they don't fix the reason for it and then end up in debt again - but this time with no quick fix.
The reason why you have debt should be closely looked at and addressed before any decisions are made.
- Fin24
