Forbes Finance Council: Financing Vehicles in Retirement
In a recent article for Forbes Finance Council, Covisum Founder and President Joe Elsasser, CFP®, outlined some of the unexpected expenses retirees can encounter when buying an automobile and stressed the importance of talking with financial advisor about tax-efficient planning before financing a vehicle in retirement.
There are two key areas in which a financial advisor can offer important expertise to keep you on track to make your purchase and still reach your retirement goals: investment spread and tax impact. You will pay interest if you borrow money for the vehicle. Which means that your investments would need to outperform whatever you’re paying on the interest, and you’re only going to get the spread over the interest. Additionally, it's critical to consider the taxes on the new vehicle.
"If you’re financing and planning to keep the car for eight years or more, consider continuing to add the car payment into a non-qualified account even after you’ve paid off the loan. Then when you’re ready to buy your next car, you will have low tax-impact cash to do so. This can be a better option instead of buying a new car every four or five years."
As with any large purchase, buying a new vehicle can be overwhelming. However, you can alleviate a lot of the headache and hassle when it comes to financing your new purchase by contacting your financial advisor in advance. A good financial advisor can offer expert guidance and help you with your tax-efficient planning to make the best choices for your situation.
You can read the article in its entirety in Forbes.
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