1. Mortgage: When interest rates are low, it will be better to make extra deposits into your retirement investment account that has asset classes skewed towards bonds and stocks. This gives room for a growth in the investment which benefits you at the end. Using your Tier 2 and Tier 3 pension contributions to pay off your mortgage will be a bad idea if you are not in the last 5years (age 55 and above) prior to your retirement. On the other hand you could still allow these funds to stay a little longer in your investment account if you earn a higher rate of return than the prevailing interest rate on your mortgage.

2. Student loans: It is sometimes shocking to know that a lot of people nearing retirement have still not fulfilled their obligations in terms of their student loans they took decades ago. Others also still apply for student loans from various financial institutions for their wards and themselves very close to their retirement age of 60 years. This means that a large chunk of your pension contributions will be used to offset that debt. And remember most student loans use compound interest. If you have an investment account set up to offset that cost, it will be in order to make withdrawals to that effect. If not, you will need to think carefully and evaluate your retirement needs before making lump sum payment to offset the debt if you are in the last 5 years prior to your retirement. One other thing you can do, is to regularly and consistently use some portions of your current income to make extra payments on your student loan.
Other debts
Other types of debts that you are likley to take into retirement include: personal loans, car or auto loans etc. these debts often have higher interest rates and there is the need to consciously retire them before you retire in order that they don’t reduce your standard of living during retirement. Assuming you have to make monthly payments of 200gh and 500gh towards your personal loan and auto loan respectively, you will be able to spend 700gh less than another retiree without these debts …(to be continued)