Carrying any kind of debt into retirement is a decision that you have to be very thoughtful about, especially for Santa Clarita retirees.

A monthly car payment is often a type of debt that can keep coming back for years. The very purpose of a car is to be used over a period of time. Sometimes we are not able to control the best time to buy a car, for example, if you experience a car accident or your vehicle being stolen.

If you didn’t plan properly then here comes debt again, which could affect your retirement.

Practice run equals down payment

When preparing for retirement, consider a practice run. Before the car is purchased, take the payment and set it aside in a regular savings account.

This allows you to see what it is like to not have this money in your monthly budget. If you did not have to change the way you live, or go into debt to live the same lifestyle, then adding the new expense is fine. At the very least, this should help you have a healthy down payment at the end of your trial period.

It is a common thing to see Santa Clarita residents buying a new car every 5-10 years. Whether the replacement comes from a true need or simply the desire to “keep up with the Joneses”, the expense must be paid in cash, financed, or leased.

Whichever the case, for most people it is after tax income that has to pay for the car.  For example, a car payment of $400 per month might mean you will have to pull somewhere around $600 from your retirement savings.

And remember, once you pull that money out of a retirement account to pay for an expense, it is no longer there to earn interest for you.

Things can change

Remember, things can change, especially in retirement.The car you buy at the beginning of retirement may not fit your needs 10 years later. If you retired at 65 years old, and you are now 75, you probably move a little slower.

Bad hips and knees keep us from getting up to a higher profile SUV or a lower profile sports car. Adapting to this change may cause you to have to buy that new car on credit. At the same time, you may have higher medical bills, and your lifestyle could be negatively impacted as well.

If you are buying in the moment, you may think you need a certain type of vehicle to accommodate for road trips, outdoor activities, hobbies you begin, or grandchildren. But aging, change of interests, family growth or moving, tends to lead us away from our anticipated lifestyle, leaving us with the payment on a vehicle we may not need for very long.

Beyond the Money

Thinking beyond the money aspect of retirement and putting as much thought as you can into what your golden years might look like can give your more choices, which makes all the difference in enjoying a healthy and prosperous financial life.