Planning to See the World as a Retiree
Once the kids are out of the house, many empty nesters are faced with too much free time. When considering what to do, one popular option for retirees is travel. In a Fifth Third Bank survey, 81% of pre-retirees and retirees said travel was their top priority – more so than spending time with loved ones or taking up a new hobby.
Before the trips can begin, it’s important to understand your finances and the type and length of trips that best fit your budget. According to Investopedia, while the average retiree spends more than $11,000 annually on travel, over 26 million senior Americans earn less than $25,600 annually from all their income sources. It’s important to keep your budget in mind to make sure those dream destinations are within reach.
Many retirees believe that their annual expenses will amount to only 70% to 80% of what they spent while working, but this is not always true. If you have a mortgage or have unforeseen medical expenses, your annual expenditures can equal what they were pre-retirement.
Whether you are transitioning into retirement or already retired, you may want to review how much you spent in the last month or two to better understand future spending. This inventory will help clarify what your fixed and variable expenses are and serve as a foundation when building a retirement budget.
Travel budgets are not always straightforward. One of the biggest, yet overlooked, expenses is medical care. Most plans do not provide international medical coverage. Traditional Medicare does not, except for a few in-patient services in Canada and Mexico. Adding travel insurance to your budget can help fill in these coverage gaps and perhaps bring peace of mind while on the road.
During the pandemic, the nomadic lifestyle took off across all age groups. Whether or not you are looking into buying an RV, Savant’s Justin Smith has a few tips to keep in mind. Envision what a year of travel would really look like. Consider time, money, and the emotional toll, among other things, that can come with extended time away from home.
Factoring in travel to your retirement plan means being able to have the cash flow to cover your general cost of living plus the cost of travel. If you’re thrifty and research off-season travel and other ways to lower costs, it’s likely you and your travel budget can go farther.
Whether you want to become a nomad or take a few longer trips each year, there are three things to keep in mind when getting ready to book a trip:
- Determine how much you want to spend on travel this year.
- Prioritize where you want to go and when.
- Add in time and money buffers in case plans change.
Then, start planning early but keep flexibility in mind. You can often get the best deals when you wait until the last minute. If you’re smart about where you stay and take care to not overspend at restaurants, it’s fairly easy to stay within budget. Keep in mind that longer trips may be the most economical, especially if airfare will be the most expensive part of the trip.
The Savant team knows the ins and outs of retirement planning and the financial details to consider as you plan the next phase of your life. If you’d like a second opinion on your portfolio or retirement plans, we invite you to schedule an introductory call with a member of our advisory team.