Transportation is one of the highest expenditures for older
Americans, yet many advisers aren't pushing the mobility conversation with
clients. When advisers think about the top expenditures for clients in or near
retirement, many may not consider transportation. They should. Transportation
is the second-highest expenditure for Americans age 65 and older, behind
housing and just ahead of health care, and is something advisers need to factor
into a financial plan.
Transportation costs represent nearly 16% of expenditures
for older Americans, while health care represents 13.4%, according to the
Bureau of Labor Statistics. That's a shock to many advisers, who typically
believe health costs take up a greater portion of a client's budget, said Mike
Lynch, vice president of strategic markets at Hartford Funds.
For those age 45-54, the group with the highest annual
expenditures, transportation is their third-largest expense. Many
transportation costs are fixed, whereas other expenses tend to decline in later
life, thereby giving transportation greater scale on the balance sheets of
older Americans, Mr. Coughlin said.
WHAT ADVISERS SHOULD
As a client approaches retirement, going through
bank-account and credit-card statements with clients to help determine how
costs will change in later life is important, said Erik Carter, senior
financial planner at Financial Finesse, Inc.
Transportation costs could include vehicle
purchases, gasoline and motor oil, vehicle finance charges, insurance,
maintenance and repairs, public transit, and vehicle rentals and leases. Indeed,
vehicle purchases are the highest outlay for annual transportation costs for
65-plus year olds, followed by gasoline and motor oil and vehicle insurance,
respectively, according to data from the BLS.
Early in retirement, people often treat themselves to a new
car — and a car can be a necessity, especially for those in rural areas, but is
also a symbol of reward and success in retirement, Mr. Coughlin said.
WHERE TO LIVE
Asking a client where they want to live is the primary
consideration for transportation and retirement planning, because that
determines how clients will get around and the resources they'll need to live
well in a particular area, said Mr. Coughlin. For example, can people walk
around, and are there alternatives to a car? Seventy-nine percent of seniors
over age 65 live in car-dependent suburban and rural communities, according to
a report by Transportation for America, an organization that lobbies
for investment in local transportation.
Leading with that question is a more productive starting
point than asking what a client's retirement objectives are, Mr. Coughlin said.
“That's like asking a 20-year-old what they will do in a midlife crisis,” he
Yet many advisers don't factor this into retirement planning
conversations. According to a 2014 Insured Retirement Institute survey, only
66% of advisers discuss retirement lifestyle issues such as housing and
relocation with clients. Further, there may be a time when a client isn't
comfortable with or capable of driving, so advisers should think about a “mobility
budget” for alternatives in a specific locale, Mr. Coughlin said.
CENTERS OF INFLUENCE
Advisers can add value for clients in the area of
transportation by broadening their centers of influence, according to Mr. Lynch
from Hartford Funds. For advisers operating in a local area, that could involve
becoming familiar with nearby car dealerships to help guide clients when they
need to buy a new car. Often, taking time to get names and numbers of contact
people is adequate, Mr. Lynch said. It's a similar notion to an adviser taking
tours of Alzheimer's care facilities, or referring a client to a few good
regional accountants for tax help.
Mr. Carter, who doesn't engage in these types of services
because he works with clients around the country, said these “concierge-type
services” used to be geared more toward wealthier clients with a family-office
relationship, but advisers are now offering them more to the masses.
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