If you still want to retire at a reasonable age, you are looking for ways to stretch the retirement income that is available to you. One future cost-cutting strategy I have been contemplating is becoming a single vehicle household. Before thinking “that’s impossible for us”, consider all of the angles.
At present, I have a car, my wife has a small SUV, and we have a large SUV for hauling boats and horses. All were bought with cash and are at least ten years old. We have already decided that when the large SUV fails, we won’t replace it with another third vehicle. Instead, we will likely replace it and either my wife’s SUV or my car with a single vehicle that can do it all. That is an obvious approach.
The bigger question is if we can manage things with a single vehicle when I retire.
Let’s first consider the cost savings from single vehicle life:
1. Fuel. With only one vehicle available, we will have to be more careful and efficient in our driving. We can’t cut fuel costs in half but we should experience some savings. The problem in our circumstance is that a single vehicle will have to be large enough to haul our boat and horse trailers. That diminishes the fuel savings we could obtain.
2. Insurance. Downsizing to a single vehicle should cut insurance costs in half.
3. Maintenance costs. Another easy 50% cost savings category.
4. Depreciation. This is the biggie. We don’t ever plan on having a car loan payment. On the other hand, no vehicle lasts forever so we will need to budget for replacement costs. That will probably work out to a depreciation cost in the range of $250-$350 per month. For two vehicles, you can double that amount. I can think of many things I would rather spend that kind of money on.
Here is one blogger who stepped down to one car in 2006. They estimated monthly savings of $608, or $7,296 in annual after-tax income. For baby boomers, that’s like eliminating a need for $9,000-$12,000 in pre-tax retirement income. (I also recommend that you read the comments to that post.)
What is interesting about this topic is that being a one car family used to be the norm. Some families are reverting to single vehicle status as a response to our current recession. If young families can do it, why can’t baby boomers do the same thing to save money in retirement (or for retirement)?
Here is the bottom line for many of us staring retirement in the face: Eliminating $10,000 in yearly vehicle expenses is equivalent to adding $250,000 to your retirement portfolio (assuming a 4% annual withdrawal rate). That can take much of the sting out of the market losses of 2008.
Doesn’t that make a one-car boomer lifestyle worth considering?