When I retire, my car is going to cost $342,220.00?!
The goods we use every day become more expensive as time goes on. While you could have bought 100 gumballs in the 1950’s with one dollar, today you’d be lucky to buy 4 gumballs with that same dollar. A few less gumballs when you retire? No big deal. However, what you can expect to pay for your mode of transportation if you live to the ripe old age of 75, could be a real shock! This prospect may be in the distant future, but it could also help to demonstrate what you could be facing in everyday living expenses as well as those expenses that do not occur every day, such as buying a car. What will you be able to afford?
So back to my original statement/question: How on earth is my car going to cost $342,220.00 when I’m retired?
Let’s say you are 25 years old right now. Now, let’s fast forward 50 years. You may find yourself to be in the market to buy a car at age 75 after 50 years of inflation and technological advancement. We have no way of knowing what will happen in the future, so let’s take a look back in time. The below example compares a 1966 Mustang to its 50 year newer version, a 2016 Mustang.
The price example above demonstrates that the 2016 model is 992% more expensive than its 1966 version. If today’s Mustang has a sticker price of $34,490.00, who’s to say that in 50 years a new 2066 Mustang could NOT be another 992% more expensive? That’s how you get a 2066 Ford Mustang at the bargain price of $342,220.00!
What if you want to live in the lap of luxury when you retire and a new Mustang just won’t do? You decide that a Mercedes-Benz convertible is more your style. Using our method above, a 1966 Mercedes-Benz 230SL stickers at $6,587.00. Today’s 2016 SL550 starts at $108,975.00. That’s a 1654% increase! By using the same logic that produced a $342,220 Mustang, one can project that your 2066 Mercedes-Benz SL will fetch approximately $1.8 Million.
Price inflation has indeed had its influence over the past 50 years, but cars became safer, had more standard amenities, and became more reliable. Inflation will not be the only variable to affect your 2066 mode of transportation; technological advances over the next 50 years could give your car the ability to perform a number of tasks previously considered unthinkable, perhaps may even include the ability to fly!
So continue saving and investing for your retirement…and that new car! Professional, competent advice isn’t out of reach or out of budget. Talk to us about using your 401K, IRA, and other savings vehicles (no, not your car…) to meet your goals.
By Martin Konsor
Woodfield Financial Advisors