Adding Expenses in Retirement: 6 Reasons It’s Worth It To Buy Your Dream Car Now
Although most financial experts advise finding ways to cut down on costs once you retire, this advice doesn’t apply to everyone all the time. If you were frugal during your earning years and have the means, you should be able to enjoy your hard-earned money once you retire. Part of that might even mean rewarding yourself by buying that car you always dreamed of getting but constantly put off for other things.
Here are six reasons why it’s worth getting your dream car in your later years.
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It Makes Your Hard Work Tangible
Purchasing your dream car after you retire gives you tangible proof that your hard work paid off. As long as you can comfortably afford the vehicle — and any costs that come with it — you should be able to reward yourself with it.
Chris Urban, CFP, RICP, founder at Discovery Wealth Planning, suggested coming up with a spending capacity based on your assets and income sources to determine what you can afford.
“This is a monthly dollar amount that enables clients to spend with confidence,” he said. “Of course, this amount will change over time as investment portfolio values and/or income(s) change, so it is important to monitor and update regularly.”
Once you come up with that spending capacity, something you can do alone or with a financial advisor, you can spend it on whatever you want — including a dream car. Not only can this feel incredibly rewarding, but you can also spend with confidence knowing you’re OK financially.
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It Won’t Hurt Your Financial Security
Being able to afford a luxury purchase — which your dream car may very well be — can be tricky during your working years, especially if you have other bills and financial goals to contend with. But if you’ve finally reached a point where you can buy what you’ve always wanted without hurting yourself financially, then why not?
“Retirees who’ve been careful with their pennies often ask me about finally buying that car they’ve daydreamed about for years,” said Veronica Fernandez, founder and CEO of Secure Senior Benefits. “If it’s something they can swing without upending their financial apple cart, I’m all for helping them turn that dream into a driveway reality.”
Just make sure it’s truly within your budget and won’t hinder any other plans you might have.
“It’s all about knowing you’ve got enough cushion for the essentials and those just-in-case moments. Then there’s financing — no need to drain the savings if you can get a good loan rate,” said Fernandez. “That way, they can keep their investments cooking and still cruise in style.”
It Won’t Negatively Affect Your Lifestyle
Financial security is important, but so is having the lifestyle you’ve always dreamed about. And if you can manage both at the same time, then getting your dream car after you retire could very well be worth it.
“If a financial plan shows a household has more resources than they are likely to ever need, which does happen for some, then certainly they can and should buy their dream car,” said Brian Kuhn, CFP, SVP financial advisor at Wealth Enhancement Group. “What’s key is planning to make sure [you] can afford to buy it without sacrificing [your] existing standard of living.”
You might also want to buy your dream vehicle as it’s a chance to try something new — and even add more vibrance to your retirement lifestyle.
“This car wouldn’t just be a treat; it’s a high-five for all those years of work, a chance to make new memories or maybe even leave behind something special,” said Fernandez. “Some folks find joy in every purr of the engine or gleam in the paint — and if the numbers line up, I’m here to cheer them on.”
You Can Get a Great Deal
By waiting to get your dream car until later in life, you might even get a better deal — especially if you buy it with cash.
“If you have the cash to buy your dream car without taking out a loan, you put yourself in the position to get a good deal. Dealers and sellers love a cash offer. It’s less paperwork for everyone, and it’s a sure thing,” said Melanie Musson, retirement finance expert at Clearsurance. “Before you shop, know the market. Know fair prices so you can recognize overpriced models and good deals.”
Musson added that you might have to take your time shopping and traveling around until you find the vehicle you want at the right price.
“If you have a very specific vehicle in mind, you may need to travel to get there. Be leery of deals that look too good. You don’t want to spend the money to travel somewhere only to discover it’s a scam,” she said.
While you’re at it, compare car insurance quotes, as you’re bound to find very different rates across companies. Even if you have to ditch the company you’ve been with for decades and switch to a new one, it could be worth the savings.
Your Tax Rate Should Be Lower
Taxes are a major consideration for everyone, retired or not. But once you retire, you might find that you’re in a position to take advantage of a lower tax rate and buy that dream car.
“During retirement, your tax burden is much lower. Not only is your standard deduction higher, because you’re earning less income — some of which is nontaxable, such as Social Security — you’ll be subject to lower tax rates,” said Christian Putnam, managing director at Augur CPA. “This will allow you to take money out of a 401(k), IRA or pension to pay for the dream car and have a lower tax impact.”
That Dream Car Will Last
Buying your dream car after you retire means you’re likely to get something that’ll last for the rest of your life — or at least the remainder of your driving years. Even if the car comes with a hefty price tag, that means you won’t have to worry about replacing it in the future.
“Retirees often put fewer miles on their vehicles each year than they did when they were working full-time. So, a dream car will likely last you longer when you’re older than it would have in your younger years,” said Musson.
Plus, when you do take out your vehicle, it won’t have to be to work or the many other obligations you likely had during your younger years. You can use it for things you actually enjoy and to visit places you want to see.
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This article originally appeared on GOBankingRates.com: Adding Expenses in Retirement: 6 Reasons It’s Worth It To Buy Your Dream Car Now
