How to Budget For Travel In Retirement

For many people, travel is the first thing that comes to mind when they picture retirement. It’s a wonderful way to stay active, explore new experiences, and keep life exciting. After years of hard work, retirement offers the freedom to go where you want, when you want, but making the most of that freedom starts with thoughtful planning and budgeting. Below are five things to consider when budgeting for travel in retirement.

Travel Style

A big thing to consider is your travel style. Are you going to take one big trip a year, are you going to take a few trips a year, or are you considering traveling somewhere for a few months out of the year? You don’t need to take the same kind of trip every year; if you splurge on a big, expensive trip one year, consider planning a smaller, more affordable trip the next to help stay within a budget. This helps shape how much you’ll need to set aside for travel during retirement. These are very important to consider as the costs between these choices can be extremely different. Setting an annual budget will help with these decisions.

Travel Expenses

There is a lot more to consider than just lodging and flights when traveling. Depending on where you are traveling can greatly determine the extra expenses you might be spending. 

When planning your travel budget, don’t forget about the smaller expenses that can add up quickly:

• Meals, tips, and daily spending.
• Airport parking, luggage fees, and transportation upon arrival
• Travel insurance or medical coverage while abroad
• Currency exchange fees or ATM charges in foreign countries
• Pet care while you are away
• Excursions, souvenirs, or gifts

Flights and lodging alone can cost a few thousand dollars, so it’s important to factor in these often-overlooked expenses when budgeting for travel each year. These expenses will fluctuate depending on where you go and will depend on your frequency of trips per year.

Frequency of Trips

One of the biggest things to consider when planning for retirement travel is how often you’ll take trips each year. Will it be one big trip a year or several smaller ones? The frequency of your trips will have a major impact on your travel budget. The more you travel, the more those travel expenses that are mentioned above will add up. Your travel frequency may vary from year to year, but it’s important to create a budget that fits your overall retirement plan and keeps you on track. If traveling is a big part of your lifestyle, set aside a portion of your income specifically for it. Traveling less often or during off-peak seasons can also help keep costs down.

How Many Years Will You Travel in Retirement?

When thinking about traveling in retirement, it’s helpful to consider how many years you’ll actually be able to travel. There are three stages of retirement: 

• Go-Go Years: The early years of retirement when you’re healthy, active, and able to take longer or more frequent trips.
• Slow-Go Years: The middle years, when trips might be shorter or less frequent.
• No-Go Years: The later years, when traveling can become more difficult and less frequent.

How long you travel really depends on your health and lifestyle, and the age you retire. Retiring earlier usually means more years to travel, while retiring later might shorten that window. Realistically this all just boils down to how your health is when you are older. You could be healthy enough to travel until you are in your 90s or you may have to stop travelling in your 70s. That is why the first few years after retirement people tend to spend a lot more money and time traveling. 

Annual Budget

Once your travel style and travel frequency has been decided it is then time to consider an annual budget. Figure out how much of your retirement income you can comfortably dedicate to travel each year without cutting into essentials like healthcare, housing, or everyday living. Looking at the above topics of travel style, travel expenses, and frequency of trips will help you determine your annual budget. A good rule of thumb is to not withdraw more than 4% a year from your portfolio so that can be used to help determine your budget.

A financial advisor can help you understand your unique situation and create a plan to manage your budget throughout retirement. Schedule a complimentary consultation with our team today to get prepared for travel, retirement, and everything else that comes with this new chapter.