This Is The Best Kept Secret In Retirement Planning & It’s About To Make Retirement More Expensive & Complicated
Looking past the gas pump to me on the other side, a 60-something year old woman states, “I waited a long time for this.”
Jiggling the nozzle out from my tank, “What’s that?” I ask.
She replies blandly, “Retirement.” Continuing, as if speaking to a larger invisible audience, she points up to the pump price sign and shakes her head saying, “With these prices, I just don’t know.”
Fuel prices, and transportation costs generally, are on the rise for all of us. However, it may be retirees that will see the shock first. Not just the price shock but what the shock may mean to their best made retirement plans.
When planning for retirement few of us sit around the kitchen table, in our employer’s 401(k) retirement seminar, or at a financial advisor’s desk factoring in transportation as a major cost of retirement. We just bake it in. It is assumed. In effect, transportation is a hidden cost of retirement.
It may be hidden, but one of the best kept secrets in retirement planning is that transportation is the second largest expenditure in retirement after housing.
How can that be, you ask? What about healthcare?
No, not healthcare. According to the Bureau of Labor Statistics (2019) healthcare costs are the third largest expenditure for consumers 65-years old and older.
With gas prices on the rise, supply chain costs increasing globally, the push to purchase new electric vehicles, combined with the impact of rising transportation costs in nearly everything we buy, or experience, transportation must now come out from the shadows of retirement planning and be factored into the budgets and the lifestyle choices of later life.
Here are five considerations:
Where To Live?
The vast majority (an estimated 70%) of Americans over 50-years old live in suburban or rural areas. Public transportation is either not a practical option or, for many, it is non-existent. While many may want to age-in-place, the cost of transportation may be a real consideration on the ability to stay where you live today. Downsizing, right sizing, moving to that favorite vacation destination? Affordable access to the places and people you need and love should be a factor in choosing where you might want to live tomorrow.
Part-Time Work & Volunteering?
Work is often part of retirement. Part-time work to make a little extra cash is commonplace. For many, working or volunteering, is also a reason to get out, to meet new people, and to break up the day. How the added costs of transportation will factor into working in retirement is uncertain. Will the little extra cash end up in your tank instead of in your pocket? Will the rewards of volunteering become an expense that goes well beyond your time?
What To Buy?
Purchasing a new car is a popular retirement ritual. A reward of sorts for years of work. Older consumers are the largest share of the luxury car market. In addition to comfort, the cost of operating the vehicle should be a major consideration. Perhaps a hybrid make sense? Electric? What might be the costs to retrofitting the home garage, maintenance, charging? According to Home Advisor, the cost of installing a home charging station for an electric vehicle ranges between $483 and $1,172 with an average cost of $800 depending upon the location and type of station needed. (costs reported by Home Advisor as of February 17, 2022). Charging will also add to home electric costs. Investopedia estimates an additional $30 to $60 should be factored into your monthly bill. Of course, these costs should be assessed in the context of fewer trips, if any, to the gas station.
Got Travel Plans?
While daily trips to grocery stores, restaurants, friends, shopping, and medical trips are a routine cost, travel generally is a major part of retirement. How will rising transportation costs affect your retirement travel plans?
The most popular response to the question – “What do you want to do in retirement?” – is travel. Suddenly travel is more expensive. Visits to grandchildren, overdue drop-ins on out-of-state friends, or simply revisiting the old fashion weekend road trip may become a financial decision, not just a scheduling consideration.
Thinking about leisure travel beyond driving range? According to the Federal Aviation Administration, the greatest variable cost to an airline, passed along to passengers, is the cost of fuel. Suddenly living out the Beatles lyrics, “you got a ticket to ride,” just got more expensive.
Staying home is not a healthy option. Countless studies have demonstrated that those with restricted transportation are likely to experience higher emotional and physical health conditions. The pandemic highlighted the negative impact of social isolation on both young and old. Moreover, even if you could stay home and have all of life’s needs delivered by app, the hidden cost of transportation is baked into everything you buy.
Everyone is facing and feeling the bite of higher transportation costs. However, those with lower, and those with fixed, incomes may feel the price hikes first and hardest. The best kept secret in retirement planning just got told.