The traditional picture of what it looks like to be retired in America is rapidly evolving from one of declining health and increasing inactivity to one of new ideas, new challenges and new frontiers to be conquered. Modern medical advances have allowed a much larger segment of the senior population to remain healthy well into their seventies and eighties, and many of these retirees eventually decide to give in to the travel bug and hit the road. More seniors than ever are now selling or renting their homes and hitting the road in campervans, fifth-wheels or other recreational vehicles that allow for extended driving.
According to the Recreation Vehicle Industry Association, approximately 8.9 million U.S. households owned an RV in 2011. This development has created a huge niche market for financial planners.
While the majority of RV travelers tend to be older and more affluent, this is not always the case. There is a growing segment of younger travelers as well - in fact, according to the Recreation Vehicle Industry Association, the number of RV owners under age 35 has been rising by roughly 5% yearly. And not all travelers are necessarily affluent or wealthy. Many that go over the road either work from a laptop computer or else find temporary work at each destination.
A New Target Market
Although the demographics show not all RV owners are affluent, being able to afford an RV suggests a certain level of disposable income. This makes the RV set a prime target for financial advisors. In fact, there is a comfortable niche market available for those who are experienced in dealing with the unique set of needs faced by travelers.
Some of the needs that planners must be able help clients meet are:
- Budgeting: A budget that factors in RV insurance and fuel costs (which may be astronomical) is a must for long-term or year-round travelers.
- Housing issues: Long-term travelers need to determine whether their house should be sold, kept or rented out.
- Safekeeping: Protecting important documents and heirlooms is an important issue for this group.
- Health insurance: Advisors need to make certain that a client's policy will be in force wherever the client travels.
- Practical issues: Is the client visually and physically capable of an over-the-road lifestyle? What type, size and age of RV is appropriate and affordable for this client?
- Income: Many clients will need a relatively safe source of income to depend on while they're on the road. Will their portfolio be able to sustain them?
- Part-time work: Is there any kind of work that retired clients could do from a laptop computer or at each destination? Will this be a necessary part of their plan?
- Comprehensive RV insurance: Advisors can ensure that their clients are properly covered, as inadequate coverage here could obviously result in disaster.
These issues will take some time and planning to adequately prepare for. The budget issue is probably one of the most straightforward issues to consider. If the clients have planned well, then food, fuel and all pertinent insurance coverage plus a reasonable spending allowance may be all that is required. However, if a client decides to retain a home, or must still make payments on the RV, those things must be factored in as well.
The nature of the budget will obviously be somewhat dependent on the client's portfolio and the amount of risk that can be taken. Most clients that opt for this lifestyle will need some income they can depend on, which translates into fixed-income investments such as laddered certificates of deposit, U.S. government securities, fixed annuities or other similar instruments. Therefore, this type of lifestyle is appropriate for those with an adequate asset base for such income generation, and those who do not measure up in this respect would be advised to seriously consider either postponing or modifying their traveling goals.
What clients should do with their houses is also a major issue that will impact both budget and portfolio. This decision can determine whether over-the-road travel is a plausible alternative for some clients, who may not have sufficient assets to generate adequate income without the sale of their house. Other more fortunate clients may be able to get away with merely renting their residences to trusted tenants, who may also be willing to continue receiving clients' mail and provide other services of convenience, such as home maintenance or other such amenities. But either rental income and expenses or sale proceeds must be factored in to any comprehensive financial plan for traveling clients - unless, of course, they are well off enough to keep their homes without needing to consider either of these alternatives. Factoring in the cost of buying another RV in the future may also be a critical point to consider for those whose travel aspirations could last for more than five years.
As stated previously, it is absolutely necessary for traveling seniors to ensure that their health insurance (and all other types of coverage as well) is valid wherever they decide to go. This may necessitate transferring various types of coverage to national carriers that are registered in all states, or at least in the states that clients will be inclined to visit. If any major type of coverage, such as life, health, long-term care or even RV insurance is not in force when it is required, the results can be disastrous not only for clients but also for their heirs. Purchasing emergency medical evacuation services may be a good idea for clients with health issues, and this service can include the return of the RV to a designated place as well. In most cases, the RV itself should probably be covered with a cost of replacement policy. This coverage can generally only be purchased on a new RV and will stay in force for five years. But this coverage is vitally necessary for those who have no other home to return to.
In general, clients who choose to wander the country tend to be fairly good planners themselves, lessening the burden of planners at least in some respects. But the aforementioned issues must be adequately addressed one way or another in order for clients to enjoy a trouble-free life on the road.