Get rid of a car and reduce retirement worries


America is stressed by high costs of living: housing, health care, education, and, with the decline of progressive taxation, a rising tax burden for the lower and middle classes. Meanwhile, for most American workers the purchasing power of wages has barely budged for 40 years. Transportation is one more straw breaking the camel's back. The American Automobile Association (AAA) says that in 2022 the average cost of car-ownership was $10,728 per year. That's a little over $894 per month.

Forgoing ownership of a car by using GIG car rental as needed can be a huge cost savings. (Rates vary so check with GIG for current prices.) Since many people can commute by transit or bicycling and local errands can be done by foot or bicycle, GIG cars could be used for just those trips best done with a car. Let's add up a conceptual month using GIG instead of owning a car (prices are estimates): a weekend trip out of town ($240), a day-hike on Mt. Tam ($80), a shopping trip to Best Buy to get a big appliance ($40), and maybe a Lyft ride back from BART when it's raining ($15), for a monthly total of $375. You would save $519 per month compared to the cost of car-ownership estimated by AAA.

What if you invested your savings?
What would happen if you invested the difference in an index fund? The Standard & Poor's 500® benchmark for 10 years ending December 31, 2021, had an annual compounded rate of return of 13.6%. That assumes reinvested dividends. To be conservative, let's assume growth of 10% a year over the next 20 years while factoring in 2.5% yearly inflation. (Inflation averaged about 2.5% from 2010 to 2022; that included inflation of 7.86% in 2022.)

If you monthly invested in an S&P 500 index fund the money you save by using car share instead of owning a car, after twenty years you would be over $230,000 richer in today's dollars! After 30 years, you'd be over $500,000 richer! (If you're concerned about environmental implications of your investment, there are a growing array of progressive funds to choose from.)

The average American has about $140,000 saved for retirement. Forgoing a car—a single or that second car—could be the key to reducing the financial stress of retirement.




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