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New car purchase at my age

By Terry Savage on January 26, 2020 | Wild Card

Me: 61 years old, retired, no mortgage, no credit card debt, no medical debt, no loans, no children. I want a new BMW but I don’t want monthly payments. I have $600K in my 401K, $5800.00/month in pension income. Do I make a withdrawal? Is it ever smart for an individual (no business deductions) to lease a car? I hate debt.

Terry Says

Good for you for hating debt! And I completely understand your desire to fulfill your dream of buying a new BMW. Ok by me! Here’s my analysis: You retired too early!! And if your only savings is in your 401(k) and you have no cash savings outside your plan to buy this car, then you need to go BACK TO WORK and earn just enough money to pay the monthly bill to finance it (and pay income taxes on what you earn). Or, you can take a year and save up enough money to buy the car for cash.

It’s great that you have no other responsibilities to family or for college expenses, which other 60 year olds may have. And you definitely don’t want to take SS before your FULL retirement age. And you’re living nicely on your pension. So save some of that, earn more — and then reward yourself with that BMW!

PS. No, in your situation leasing makes absolutely no sense. It mainly works for businesses who can write of the cost. Or young people who want to show off an expensive car for three years, and don’t mind that after the lease expires they have nothing but cancelled checks!

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