Budgeting for retirement isn’t always easy. Before you leave the office for the last time, you are supported by an active income that you can rely on. But after you have left the workforce, you will have to budget your savings, Social Security income and any investments and pension plans you have. Perhaps your current lifestyle can be supported by your income streams in retirement, but oftentimes, this isn’t the case.
According to a survey by GOBankingRates, about one-third of Americans haven’t saved a single cent for retirement, and 23 percent have saved between $0 and $10,000. What’s even more serious is that this percentage only goes down slightly when isolating the group of people nearing retirement. Of the 1,504 survey respondents who were age 55 or older, 28 percent don’t have any retirement savings and an additional 17.3 percent have less than $10,000 saved.
With so little saved, Baby Boomers may have to stay in the workforce longer, rely heavily on Social Security income, and likely learn how to downsize and budget carefully.
With this in mind, retirees and those nearing retirement should think carefully about making major purchases. For instance, a new car will come with several years of loan payments. If buying a car is crucial, it’s important to consider the financial impact the purchase will make on your future.
According to Experian’s State of the Automotive Finance Market for the first quarter of 2016, the average loan amount for a new car was $30,032. This is an increase from the same time last year, when the average amount was $28,711. The average payment on these new cars is $503.
“By choosing to go with a used car, a buyer could save more than $100 per month.”
These prices are steep, especially compared to used car payments. In the first quarter of 2016, the average loan amount for a used car was $20,723 for a loan originating from a franchise or $16,124 for one originating from an independent lender. The average payment for a used car was $376 for loans from a franchise and $351 for those from independent lenders.
Given this information, buying a used car rather than a new one is a smart financial decision. By choosing to go with a used car, a buyer would save $127 or $152, depending on where the buyer chooses to get a loan. Over the course of five years, this amounts to a savings of over $7,000 or $9,000. This money could go toward important home repairs and renovations, medical expenses or toward new interests or hobbies developed during retirement.
Reliable, Safe and Smart
While saving money for retirement is a perfectly convincing reason to buy a used car instead of a new one, there are additional benefits to buying used cars as well. The New York Daily News pointed out that modern cars are incredibly long-lasting. Last summer, the average age of vehicles on the road was 11.5 years old, and the number of 12-year-old cars is expected to increase 15 percent over the next few years.
With this in mind, it is entirely possible that a used car can be depended on throughout your retirement years.
Additionally, today’s cars come packed with new gadgets and features. While these can be helpful, they can also be expensive. Adding these features to a new car purchase hikes the price up significantly, but when you find a used car with them already installed, you pay far less than the original owner did, explained Money Crashers. These features can provide greater convenience and safety. For instance, a back-up camera can help when parking in an unfamiliar area, and a GPS system can help navigate around a new town.
It’s important to carefully consider the financial impact of your purchase before you make it. Budgeting for retirement isn’t always easy, but cutting down on the amount you pay in loans every month is never a bad idea.