Many of us spend our lives dreaming up travel plans with the hope that one day we can make those dreams a reality in retirement. Yet, when that day comes, many retirees find themselves unprepared for the added costs associated with traveling and they never achieve the dream lifestyle they desired. Budgeting for travel in retirement can be made easy with just a bit of our help!
At Calamita Wealth Management, we believe it doesn’t have to be this way. With proactive retirement planning that accounts for travel expenses, our clients can spend more time living life instead of wondering how to afford it. Here are 5 tips to help you budget for travel in retirement.
1.) Determine Your Travel Goal
The first tip to help you budget for travel in retirement is determining the goal. Deciding you want to travel in retirement is about as broad as saying someday you want to retire. There are many different variations of travel and many destinations to consider. Before setting a budget for traveling, you must first decide where you want to go and how often.
Perhaps you only want to travel to see your children within the United States, or maybe you prefer international travel with several different destinations all packaged in one trip. Maybe you like the idea of renting an RV or taking a cruise. Perhaps once a year is sufficient, or maybe you want to travel quarterly. Whatever it may be for you, get specific about your travel goals. Like other financial goals, the clearer you can be with what you want to achieve, the easier it will be to chart a course to get there.
2.) Estimate Your Travel Costs
Once you have an idea of where you want to go, you can begin to estimate the costs. Don’t forget to factor in things like long-distance and local transportation, food, accommodations, entertainment, and shopping. Again, the more specific and detailed you can be, the easier it will be to create a realistic budget.
For perspective, in 2018, the average retiree reported spending a total of $11,077 per year on five vacations. Thanks to inflation, that number is inevitably higher today and will continue to increase in future years. That same $11,077 is now roughly $13,093 on an inflation-adjusted basis. Your travel costs could be higher or lower depending on the goals you outlined in step 1. If you’re already traveling, compile your expenses for the last three to five years and take an annual average to get a good idea of your specific travel costs.
3.) Consider Your Everyday Expenses
If you’re already outlining your goals, adding up the costs, and thinking to yourself, “Wow, I definitely don’t have enough saved,” you’re not alone. Many retirees say they dream of traveling, only to find out they don’t actually have the funds to do so. All hope is not lost, though! If you’re just shy of your goal, it may be worth it to go through your everyday expenses to determine if there are some areas for improved cash flow.
Do you have unnecessary or under-utilized subscriptions that you can cancel? Are you willing to forgo certain everyday luxuries (like recreational activities or going out to eat) in order to put that money toward your travel goals? Keep in mind that you shouldn’t short-change yourself on necessary expenses, like medical care, insurance, housing costs, food, and transportation just to make a travel goal happen. But if you know there are discretionary expenses that can be redirected, consider adding them to your travel fund.
4.) Start Saving
Once you have your goals defined, your expenses outlined, and your everyday expenses reassessed, you can begin to start saving toward your goal. One of the best ways to do this is the bucket savings method, which groups your goals (and your savings) into time-specific categories, each with a different asset or savings account tailored for that time horizon.
- Short-term travel goals are trips that are coming up in the next 2 years. This could be a family reunion or your niece’s wedding. Money saved toward these goals should be in easily accessible accounts like high-yield savings accounts or money market funds.
- Intermediate travel goals are trips that you know won’t happen for at least 3-7 years and can utilize longer-term investments like certificates of deposit or short- to intermediate-term bond funds.
- Long-term travel goals are 7-plus years away. The best way to invest for these goals is to focus on growth-oriented assets, which generally include a large allocation toward stocks.[Text Wrapping Break]
5.) Consider Less Expensive Alternatives
Even if you can easily afford your retirement travel goals, it’s always nice to save money where you can. And if you are traveling on a budget, these tips can help you make the most of your trip in a cost-effective way:
- Visit family or friends and opt for staying with them as opposed to a hotel.
- Pack light so you can avoid baggage fees when traveling via plane.
- Consider using a credit card or booking with a specific hotel or airline that offers travel rewards to help reduce the cost of future trips.
- Avoid costly transportation services like Uber and taxis. Instead, look for less expensive alternatives like airport shuttles, public transportation, biking, or walking.
- Booking well in advance can be a great way to save on necessary travel costs like airfare and accommodations.
- Avoid excessive fees by using a credit card that does not have foreign transaction fees while traveling.
- If you plan to travel for extended periods of time, consider renting out your house or condo to earn extra money while you’re gone.
- If you’re up for it, traveling overnight can be an inexpensive option to make your travel goals a reality.
- Avoiding peak season is another way to save, as many flights, cruises, and hotels will have price surges throughout the season. Avoid this by researching the seasonal times for your travel destination and booking a trip out of season.
Make Your Travel Dreams a Reality in Retirement
Don’t spend your life worrying about how to afford your travel dreams in retirement. Instead, create a retirement plan that accounts for travel costs from the beginning. Our assistance doesn’t end here with these tips on how to budget for travel in retirement. At Calamita Wealth Management, we can help you make your travel dreams a reality in retirement. Schedule an introductory phone call using our online calendar or reach out to us at (704) 276-7325 or firstname.lastname@example.org.
Todd Calamita is the founder and managing principal of Calamita Wealth Management. This is an independent, fee-only wealth management company located in Charlotte, NC. Calamita Wealth serves people locally and across the country, that focuses on providing wealth management solutions to affluent individuals over age 50 and their families. He has more than 20 years of experience in the financial services industry. Todd Calamita is passionate about helping people have a better life. He does this by designing and implementing customized financial plans that bring clarity and confidence.
Todd is a CERTIFIED FINANCIAL PLANNER™ and CERTIFIED DIVORCE FINANCIAL ANALYST® professional. His educational background includes a Bachelor of Business Administration from Ohio University. He also received a Master of Business Administration from the Weatherhead School of Management at Case Western Reserve University. Aside from planning, he authored, Plan Smart: Conquering 10 Common Money Traps. Todd also wrote numerous articles on wide-ranging personal finance topics, from taxes to retirement accounts. He was featured in a Financial Boot Camp TV series as a volunteer. There he was showing people how to make smart decisions with their money. When he’s not working, you can find Todd spending time with his wife, Teresa, and their two sons, Colin and Cameron. He enjoys rock climbing, swimming, and traveling. Todd even has a black belt in Tang Soo Do, a Korean martial art. To learn more about Todd, connect with him on LinkedIn.