When people imagine their retirement expenses, they typically think about health care, housing and groceries. It may be easy to overlook the impact of some other expenses when you imagine a chapter in your life that you haven't yet experienced. One of these surprisingly high expenses is the cost of transportation.
The United States Bureau of Labor Statistics reported that transportation is the second largest expense for the average person of retirement age, and costs even more than health care. Here's some more information on the average transportation cost for retirees, as well as ways you can prepare now.
Transportation in Retirement
Once you retire, there's a reasonable chance you'll make less frequent use of transportation than when you were working. Not having to commute each day tends to reduce your mileage. But that doesn't mean you'll stop driving altogether.
You may need to run errands, go to doctor's appointments, visit your family and friends, or help drive your grandchildren to school. Even though you might not have a long commute, you could end up spending close to the same amount of time on the road when you add up all these small trips.
Another point to consider is that as we get older, our mobility begins to decrease. While you may be able to walk and take public transportation at the start of retirement, it might eventually become easier to drive more frequently, which can be more expensive. And if you have trouble driving, you may need to switch to calling taxis or ride shares.
When you consider these factors, you can start to see how transportation could still end up as a sizable expense in your retirement budget.
Potential Transportation Costs
According to the previously mentioned Bureau of Labor Statistics report, the average transportation cost for those who were 65 and older in 2017 was about $626 per month, which was greater than any other expense except housing — health care was about $552 per month on average. These costs include:
- Car payments
- Repairs and maintenance
- Public transportation passes
- Taxis and ride shares
Reducing Retirement Expenses
There are a few strategies you could consider in order to help lower your retirement expenses for transportation. For instance, if you have multiple cars, could you potentially get by with just one? Getting rid of a vehicle could mean that you save on car payments, insurance, maintenance and repairs. Then you could use the occasional ride share or rental car to make up for any conflicting transportation needs.
You could also review public transportation options in your area. If your current home doesn't have great access to public transportation and isn't within walking distance to the places you need to go, this might be something to consider if you ever move. Downsizing to a smaller home that's close to public transportation could help you save on both housing and transportation.
Finally, see what kind of driver assistance programs for retirees are available in your area. There may be volunteer or government agencies in your area that help drive seniors who are unable to transport themselves.
Planning Ahead for Transportation in Retirement
At the end of the day, even if you manage to reduce costs, you will most likely need to spend some amount of money to get around. If you're still working, you may want to consider saving more for retirement to help prepare for this upcoming expense.
One way you might consider setting money aside is through an Individual Retirement Account (IRA). These plans aren't connected to your job, so you don't need your employer to set one up for you. Like a 401(k) or similar retirement plan, you can choose a Roth IRA, and pay taxes on your contributions now, or a traditional account and pay taxes on your withdrawals later.
In 2019, you can save up to $6,000 per year through an IRA when you are younger than 50. Once you turn 50, you can save even more and put aside $7,000 per year — nearly the annual cost of transportation in retirement. This higher limit could possibly be beneficial if you initially underestimated your potential expenses and would like to put more aside.
As with other retirement plans, an IRA is a way of investing your money. As such, it cannot guarantee growth, and may instead lose value over time. Past performance also cannot guarantee future results.
As you go about estimating retirement expenses, you may want to consider future transportation costs. By taking advantage of these planning tips, you may be able to save the money you need in order to get wherever you need to go.