Retirement Planning for Travelers – Beware the Bucket List

Beware the Bucket List - People run with the bulls, photo from above

Failing to Plan for Travel Spending Later in Life Can Sink Your Retirement Plans

The rule-of-thumb for spending in retirement is your expenses will drop to 80% of what they were pre-retirement. This number may be adequate for some retirees, but for travelers – it’s unacceptable.

The Botswanan safari you’ve always dreamed of is expensive. The RV you’re going to use to explore the country will set you back a fair amount too. Plane tickets to visit the Cup of Noodles Museum in Japan – not cheap, and a little odd, but no one is judging you here. That bucket-list of travel experiences and destinations you want to conquer can significantly affect your budget. And according to Merrill Lynch, 67% of retirees age 50 and older have not budgeted for travel in retirement.  

bucket list travel - safari where a giraffe stretches upward to eat leaves from a lone tree in the savanna

As a traveler, you should expect an increase in travel-related expenses for at least the first several years of retirement as you work through your bucket list. You’ve been dreaming about the moment for many years, you’re feeling healthy, and the jump in leisure-time all will contribute to a jump in travel spending.

How do you prepare for this new chapter in life? Create a retirement budget that includes all of these new, travel-related expenses. The earlier, the better, so you can make the necessary adjustments in your spending and saving habits along the way.

Expenses That Will Decline

Let’s start with the good news first. You have expenses during your working life that will likely go away or drop substantially when you retire.

Your daily commute can include gasoline, parking, wear and tear on your car, and the cost of public transportation. These will disappear except as they relate to leisure.

Your wardrobe will likely change, as well. Goodbye work clothes, hello loungewear! Yes, this may be an oversimplification, but you should be able to retire enough clothing to the point of actually being able to find something in your walk-in closet.

College tuition for children and mortgage payments are additional expenses that can go away. Taxes should decrease given the drop in work-related income. In addition, there’s no need to save for retirement anymore, because you’re living it!

Expenses That Will Increase

Yes, spending will increase in certain areas of your life during retirement. Some of these expenditures you will welcome with open arms, and some you will grudgingly pay wearing a look of disgust.

Travel expenses can jump dramatically in the first few years of retirement. However, there can be a considerable difference depending on your travel style. Flying in first-class while hop-scotching around the Pacific, staying in 5-star

5 Star Resort in the South Pacific on many people's bucket list

resorts, and dining at 3-star Michelin restaurants is one end of the spectrum. Driving a few states away to attend a barbecue with your family who put you up for the weekend will be less expensive.

The cost of health care in retirement is what every red-blooded American fears. But preparing for these expenses ahead of time can ease the sting.

Budgeting

If you don’t currently have a budget, I highly recommend you put one together. It’s retirement planning 101 and is key to projecting when you’ll be able to retire.

Your budget is likely to change dramatically, however, at retirement, especially if you’re a traveler. I recommend you put together a second budget, which will begin once you retire.

Many expenses in your life will not change at all. However, for those that will, do your best to estimate the change, especially for items that will significantly affect your budget.  

One expense that can drastically move up or down is housing. Paying off a mortgage or downsizing can bring down the cost substantially.

Is relocation a consideration? What does the cost of living look like in the new location? Do you want to buy a vacation home, but keep your original home? Adjust your budget for the potentially significant changes. 

Budgeting for Travel

If you love to travel, this part should be fun. Let your mind run wild and think of all the adventures you’d like to have in retirement. Create a travel bucket-list that contains all of the events you’d like to attend, destinations you’d like to visit, and experiences you’d like to…well, experience.

Do your best to estimate your travel costs accurately.  How many trips will you take per year? How long will they be? Will spending be extravagant or constrained?

Also, ask yourself how your travel might change. As people age, they tend to value service, comfort, and safety more, and they are willing to pay extra for it. Staying in nicer hotels and traveling with higher-end tour groups can be the result. For all but the most intrepid retirees, gone are the days of solo backpacking through Europe and sleeping 10 to a room in hostel bunk beds.

Travel in Style - a hostel room filled with bunk beds

However, there are also changes in retirement that can reduce the cost of travel. The time-freedom that comes with retirement allows travelers to vacation during the off-season, book last-minute deals, and travel in a more deliberate way, such as taking a bus or train instead of an expensive flight.

If you’re like me, you weren’t in a very good mood the day your first invitation to join AARP arrived in the mail. However, a benefit of being over 50 is discount offers start piling up. By the time you turn 65, discounts on airlines, hotels, restaurants, etc. are prevalent.

Now that you’ve put some thought into retirement travel, include it in your budget. Be as accurate as you can, but don’t be afraid to err on the high side. It’s better to budget for a bucket-list trip and decide not to take it than the other way around.

Here are some websites that will help you put together a budget and assist you with finding discounts:

TripAdvisor – an excellent resource for trip planning and pricing flights, hotels, tours, and more.

Kayak – another fantastic resource for pricing the major components of travel, includes one of the most flexible, user-friendly airfare search engines available.

The Senior List – an extensive list of discounts on transportation, lodging, and dining for people 50+.

Numbeo – if you’re trying to determine how expensive/inexpensive a city or country is, this website is includes the local cost of living index and the prices of everyday items.

Winding Down

A difficult part of budgeting far into the future is the many unknowns. One of the most important factors is health. I want to think I’ll still be the healthy, adventurous soul I am now when I’m 90. Unfortunately, this is unlikely to be the case.

Travel spending tends to decline with health. Ask yourself – how healthy and active are/were your parents later in life? How about your grandparents?

Studies show, on average, travel spending starts to decline as travelers enter their 80’s, so this is a good time to start lowering the travel component of your budget. Just don’t do it too rapidly, as many older retirees are still actively traveling. If you want to be conservative, don’t drop it at all.

Summary

Don’t be part of the two-thirds of Americans who fail to budget for travel in retirement. Instead, take a pro-active approach to plan your future and start saving early. The 80% rule-of-thumb may leave you ill-prepared for the active retirement many travelers desire, so try and budget for the large expenses later in life as accurately as possible and be conservative when making estimates. A little planning should ensure you’ll end up crossing off your bucket list in style.  


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    Financial Advisor David Tuzzolino

     

    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.