5 Tips for Creating a Travel Budget in Retirement

If the American dream is owning a family home with a white picket fence, the “retirement dream” is living a life of travel!

In a recent Transamerica Retirement Survey, traveling was the most frequently cited retirement goal among workers of all ages (70 percent), followed by spending time with family and friends (57 percent) and pursuing hobbies (50 percent).

Financial stability and careful planning are prerequisites to achieving your travel goals in retirement. Whether you’re dreaming of island cruises, RV road trips, beachside resorts, or family vacations with the grandkids, a retirement travel budget is a must.

Our CERTIFIED FINANCIAL PLANNER™ professionals at Chatterton & Associates are bringing you 5 tips for retirement travel budgeting so you can take to the roads, seas, or skies without financial stress weighing you down.

1. Start Planning Early

Retirement travel budgeting is about finding ways to maximize your income and keep costs low wherever you can. Begin thinking about your travel goals, constraints, and needs early on – before retirement if possible. The earlier you start saving and budgeting, the better.

Important considerations include:

Your expected date of retirement
Your age and health
Your other financial goals
The retirement lifestyle you want
Your other responsibilities

Where do you want to go?

The places you want to visit can have a big impact on your travel budget. Depending on your finances and goals, you may want to start by perusing lists of affordable destinations.

Inexpensive US vacations include Grand Teton National Park, Colorado Springs, San Antonio, and Cannon Beach in Oregon. Hungary, South Korea, and Mexico are examples of affordable international destinations to consider for your next adventure.

How often do you want to travel, and for how long?

Do you want to take a two-week annual summer vacation? Are you planning to sell your home and buy an RV so you can live your life on the road? The number of trips you plan to take – and how long you plan to be away for – can affect your overall travel expenses significantly.

Do you want to bring family members?

Traveling solo or alone with your spouse can save a lot of money. But if you’ve always dreamed of taking your kids and grandkids to Disney or on a trip to your home country, it may be worth spending the extra money.

2. Consider Your Retirement Income

The cost of travel is only one side of the equation. Your income and savings are equally important.

Most people’s income changes when they make the transition into retirement. While retirement means foregoing the earned income you relied on throughout your career, it also means you can take advantage of government benefits, retirement account withdrawals, and tax strategies available to older Americans.

Possible sources of income in retirement may include:

Social Security
Retirement accounts, including 401(k)s, IRAs, and others
Personal savings and non-retirement accounts
Real-estate investment income
Any ongoing part-time employment earnings
Defined benefits plans (traditional pensions)
Annuities

3. Use the 50/30/20 Rule

There are a variety of useful budgeting strategies that you can pursue when it comes to retirement travel planning. The 50/30/20 rule is a tool you can use to create a long-term retirement budget. It can also be applied to a travel budget.

The 50/30/20 rule is very simple. It involves broadly allocating your funds within the following categories:

Needs (50%)
Wants (30%)
Savings/emergencies (20%)

Needs: 50%

Allocate approximately 50% of your travel budget for necessities such as:

Travel supplies, such as luggage, clothing, or obtaining required documentation
Transportation to your destination
Transportation once you reach your destination
Accommodations
Food and dining

Wants: 30%

Following the 50/30/20 budgeting rule, about 30% of your travel budget should be allocated to wants, rather than needs. These may include:

Sightseeing
Taking guided tours
Attending plays and concerts
Participating in cultural experiences
Visiting museums

Savings/Emergencies: 20%

When traveling, it’s important to be prepared for the unexpected. That means setting aside 20% of your overall budget to help you cover unforeseen expenses. These may include:

Emergency medical care
Unexpected travel costs (for example, if you miss your scheduled flight, you may need to purchase a separate ticket)

4. Consider Buying Travel Insurance

If you’re a frequent traveler, setbacks and unexpected costs are bound to happen sometimes. A reliable travel insurance plan can help cover sudden expenses such as those resulting from cancellations, delays, evacuations, medical emergencies, and more. Having that extra security helps you stay within your pre-planned budget and gives you peace of mind.

Keep in mind that if you regularly travel internationally, it’s a good idea to opt for a travel insurance plan that includes medical care.

5. Find Ways to Save

Traveling always costs money. From air travel and accommodations to food and activities, travel costs can quickly add up. That’s why finding creative ways to save money on your vacations is essential to staying within your budget.

Here are a few saving tips for traveling during retirement:

Stick to the off-season – Heading to popular destinations when tourism is low will virtually always result in lower rates for goods and services.
Save on transportation – From flying economy to using credit cards that offer miles and travel rewards, saving on the journey will give you more financial flexibility once you reach your destination.
Rent out your home while you’re away – Turning your permanent residence into an Airbnb while you're traveling is a great way to make some extra cash. You can also try house swapping to save on accommodations.
Prioritize free activities – Most destinations will have some free attractions to enjoy. From community parks and beaches to admission-free festivals and museums, take advantage of low- or no-cost activities when you can.

Achieve Financial Freedom and Follow Your Retirement Travel Dreams

Retirement is the perfect time to broaden your horizons and explore new corners of the world. But traveling in retirement isn’t just reserved for the ultra-wealthy. With realistic expectations and careful planning, anyone can enjoy traveling during their golden years.

Whether for travel or any other purpose, budgeting is about maximizing your funds and limiting spending where possible. Retirement travel is one component of a broader, longer-term financial retirement plan. But it’s an important one. By planning your trips well in advance, itemizing your needs and wants, and looking for ways to save, you can enjoy traveling without the burden of financial stress.

Sincerely,

Chatterton & Associates