One Leisure Expense Boomers May Want To Rethink in Retirement
Retirement is often portrayed as the time to finally splurge on the things you've been putting off for decades — travel, hobbies or even that dream RV or boat.
But financial experts say one popular retirement purchase deserves a closer look because its true cost often extends far beyond the sticker price. Before making a major leisure investment, here's what to consider.
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Why RVs and Boats Can Become Retirement Budget Busters
Many retirees dream of buying an RV, camper or boat once work is behind them. While these purchases can absolutely enhance retirement, experts say they're also among the easiest ways to quietly drain a nest egg because ownership comes with ongoing expenses that don't stop after the initial purchase.
Michael Dunlop, a certified financial planner (CFP) and cofounder of Ignite Financial, said these items, while fun and exciting, have ongoing expenses well beyond their initial purchase prices or downpayments.
“You're going to have storage, insurance, maintenance, winterizing and depreciation's a big one," Dunlop said. "All those things keep going whether you use it two weekends a year or 20 weeks a year."
These kinds of vehicles can work against retirement savings, added Kirk Kinder, a CFP and director of financial planning at Bastion Fiduciary. He said, “Once retired, the retiree is pulling from their savings bucket to fund these purchases."
Retirement Changes the True Cost of Leisure Purchases
A monthly payment may have felt manageable while working. In retirement, however, every withdrawal can reduce the portfolio that's expected to last decades.
“Once you hit retirement, every dollar comes out of the portfolio or the pension and that's got to last maybe 30 years,” Dunlop said. So now that $700 a month toy “is more like $8,400 a year withdrawing,” he added.
Many retirees also hold onto these vehicles “to their later ages when they can't maintain them and rarely use them,” Kinder said, leading to a drop in resale value from lack of maintenance.
Renting Before Buying Could Save Thousands
For retirees who aren't sure how much they'll actually use an RV or boat, renting first can offer many of the same experiences at a fraction of the cost, Kinder said.
“These costs are a fraction of ownership. If the owner doesn't want to sell the RV or boat, yet finds they don't use the vehicle that often, the retiree can rent those out to others," he added.
The same can be true of any big potential purchase in retirement, Dunlop said.
"You get a little bit of experience under your belt and find out what you like," he explained. "Once you figure out what you like and what your budget will handle, then at that point you can go ahead and buy."
Don't Cut the Fun — Make Sure It Fits Your Retirement Plan
The experts aren't suggesting retirees skip the experiences they've worked toward but be thoughtful in planning.
“You should absolutely buy that boat, or that toy, or that RV, whatever it is, but stay within the bounds of your plan that you've created for your income,” Dunlop said. “We're not fun-haters as financial advisors.”
Kinder said that if retirees travel frequently with the RV “or jump on the boat a couple times a week, then these can make sense,” but it’s all about being honest with yourself, and taking health and other costs into consideration first.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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