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Old 12-12-2011, 08:03 PM   #21
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A big ticket item like cars does not belong in my living expense budget.
When I retire next year, I will have 3 vehicles fully paid for with low miles.
(A Ford F150 truck, a Honda Accord Coupe and Nissan Altima), relatively new.
I intend to use them for 8 years(I will be 70 yrs then). I will use them for the intended long road trips in my active part of retirement.
As they become older I wil downsize to two vehicles and prob. will not take long road trips and cheaper smaller cars will work.
If the stock market or other investment goes up, I may be tempted to trade in but it's purely waste of money.
If the market is not doing well I"ll used the cars until the wheel falls off.
There are 3 to rotate around.
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Old 12-12-2011, 09:36 PM   #22
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Although buying my most recent car (a 2007 Corolla) did not depend on whether I was working or ERed, I was glad to have bought it before I stopped working in 2008. This way, I would not have to worry about how I would figure out where to get the money from (i.e. which mutual fund) to pay for it.

I drive very little, maybe 3,000 miles per year, so I expect this car to last me as long as its predecessor (15 years). It would be nice if it can last me until I can take unfettered withdrawals from my IRA which I can access in 2023 (the car will be 16 years old). But if I have to replace it sooner than that, I can tap into one or more of my mutual funds (i.e. "slush funds)") whose investment income I do not depend on to cover my current expenses.
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Old 12-12-2011, 10:27 PM   #23
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I have a 25% buffer in my budget. Two years of buff will buy a new car with our trade in. When we buy a new car, I'll enter the expense in the year of purchase.

I had to touch a tad of buff this year...
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Old 12-12-2011, 11:26 PM   #24
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I bought a new car and financed it through Pentagon Federal CU at their low low rates. Currently 1.99% for 48 months. That's close enough to consider it amortized over the lifetime of the car. And, heck, it's easy to earn more than 1.99% on the money I'd have to withdraw to pay cash for the car.
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Old 12-12-2011, 11:46 PM   #25
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I would just take the hit to the portfolio total, and move on.

Not too different than a bad day in the market, in my view. In fact, you would buy a new car a lot less often than these bad market occurrences, right?
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Old 12-12-2011, 11:49 PM   #26
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We budget lumpy items on a per year basis -- car replacements $3600/year (probably a little high for us), home maintenance $5000/year -- ymmv. This is really just a SWAG. We don't actually take this lumpy item money out of the portfolio until we need it -- so it is in the budget, and is included in the withdrawal rate (currently 2.5% and projected to decrease as other income sources come online, unless we increase our spending, which is very likely). Right now we are sitting on about $75,000 of accrued home maintenance money, and the house needs all of it. Cars -- we are OK on for the next four or five years unless something catastrophic happens.

Edit to add: I just saw NW-Bound's post:
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Originally Posted by NW-Bound View Post
I would just take the hit to the portfolio total, and move on.

Not too different than a bad day in the market, in my view. In fact, you would buy a new car a lot less often than these bad market occurrences, right?
And this is a very valid, but different way to look at it -- if you normally see large day-to-day swings in your portfolio -- and who doesn't?
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Old 12-13-2011, 04:44 AM   #27
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We keep separate accounts for auto and what we call our HOA fees. The car fund gets a monthly $350 contribution and the house fund gets $750. This gives us enough for major repairs, property taxes, and eventual car replacement. Also, the two cars, two boats and two houses are not counted as assets. These are treated as lifestyle expenses and budjeted accordingly.
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Old 12-13-2011, 08:03 AM   #28
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We budgeted 500 month for car replacement in the projected retirement budget plan. Over the past six years of tracking expenses we have an operating expense/ budget and a capital/expense budget. Operating covers all reocurring expenses and the capital budget are one time or very low periodic for things like new car, computer, permanent home improvement projects, furniture etc. Last car we bought 2.5 years ago paid off over a period of 18 months as we had virtually no interest expense and took the expense as the checks were written. Our Current Operating expenses tend to be right at $45K and and Capital Expenses is $15K per year. We also tend to consider the Capital expenses descretionary as if thing got really bad when we are finally ERd that is what we could cut untill things turned around. We also think that if we spend less in capital budget we could spend more in operating expenses where travel and entertainment is.
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Old 12-13-2011, 08:04 AM   #29
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We just take the hit when replacement time comes, which isn't often. Prior to 2003, when we bought two new vehicles within six months, DW's 89' Olds Cierra was 14 years old and my '85 Chevy pickup was 18 years old. We planned for the replacement vehicles and saved ahead of time for those starting at about six years beforehand.

Now DW's '03 Buick is getting to 126k miles, the GMC pickup has 76k, and the '08 Suzuki C90T motorcycle is close to 20k miles. The bike is sorta half entertainment half transportation.

When maintenance/repair/reliability get to be issues we'll just buy a new vehicle outright as we saved the cash for that. I can see DW's Buick needing replacement in 5-10 years, the pickup I'll keep hopefully until I'm too old to drive, and the bike will be sold... I dunno, probably within the next three to five years. I'm 61 now so it's probably getting close to time to hang up the helmet.
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Old 12-13-2011, 08:18 AM   #30
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This is really just a SWAG. We don't actually take this lumpy item money out of the portfolio until we need it -- so it is in the budget, and is included in the withdrawal rate (currently 2.5% and projected to decrease as other income sources come online, unless we increase our spending, which is very likely). Right now we are sitting on about $75,000 of accrued home maintenance money, and the house needs all of it. Cars -- we are OK on for the next four or five years unless something catastrophic happens.
This is the key IMO, no matter how you attack it. I've projected what our required "lumpy item money" may be over the next 30-40 years and it's a considerable sum. Though we realize it's just our best guess, seems clear it's way too much to overlook WRT withdrawal rate over a 30-40 year period. YMMV
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Old 12-13-2011, 08:22 AM   #31
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the bike .... I'm 61 now so it's probably getting close to time to hang up the helmet.
You should visit Hot Springs, Arkansas in the summer. We have lots of biker bars and bike rally's. Never have quite figured out how we became a bikers mecca.

Anyway.....at 61 you'd be called a young whippersnapper. The average age of a hog rider & his old lady looks to be around 65.
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Old 12-13-2011, 08:41 AM   #32
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... seems clear it's too much to overlook WRT withdrawal rate. YMMV
True. So, I will be trying to stay with a lower SWR, like 3%. That extra margin, plus SS later on, should be enough, I think. Then, when the time comes to make the purchase, I may spend more if the market is doing well, or cut back if the market tanks.
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Old 12-13-2011, 09:10 AM   #33
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+1, what he said. I make sure that my budget is enough smaller than my income that sufficient money can be set aside for another car (should I ever decide to get one).

I will be in my 70's before I need to get another car, so I am thinking that this will be my last car - - but REWahoo has mentioned in previous threads that I may feel differently about that when I am in my 70's. I just don't want to be one of those old fogies who are a public menace when driving.
You might want a new one in your 70s.... my mom bought a new one when she was 90.... they do get old even if not driven a lot...
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Old 12-13-2011, 09:15 AM   #34
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You might want a new one in your 70s.... my mom bought a new one when she was 90.... they do get old even if not driven a lot...
So do the cars.

My dad purchased his 'last' new car in his 60's, bought his second 'last' new car in his 70's and his final 'last' new car in his 80's.
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Old 12-13-2011, 09:22 AM   #35
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My parents are both approaching 90. They both drive, and Mom's car is about 2 years old, Dad's not much older. Fortunately they don't put many miles/year on them any more, they realize they're not safe on the roads anymore, and neither of them will drive at night. They increased their auto liability insurance drastically several years ago at the recommendation of an attorney.
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Old 12-13-2011, 09:41 AM   #36
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Whenever I finish paying off a car loan I continue to put the same amount into our general joint savings account. After 3-4 years we generally have enough to put down about half the cost of the car and we take a 3-4yr loan on the rest. In our budget there is a car payment line item. So either I am paying off a loan or saving for the next car. The amount is about $450/month.

I recommend that you take the hit in the month/yr that you spend it and then keep track of paying yourself back. While psychologically it feels bad to see such a bit hit on your budget, you can compensate knowing that you are paying it back over time. If you can't afford to pay yourself back then you can't afford the car and then its a one time withdrawal from you retirement savings.
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Old 12-13-2011, 02:16 PM   #37
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I do the math like this....

Average car cost $28k
We keep a new car 7 years (84 months)
$28k/84 months = $333/month

I budget that amount.

Obviously there are other costs like insurance, gas, maintenance, but that's the same for any car and I figured you were trying to get the "lumpiness" out of your budget.

The very first time, you save $333/month until you can afford the new car....and after that the fund will always be replenished so long as you continue saving that amount.
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Old 12-13-2011, 02:37 PM   #38
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I had to touch a tad of buff this year...
My my...........
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Old 12-13-2011, 02:44 PM   #39
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My my...........
Finally....a nibble!
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