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Thinking of traveling after years of work? Plan for it and save for it.

When it comes to planning for your retirement, consider the possibilities that await you. However, you also should consider the fact you will most likely be living on a fixed budget and costs become crucial, according to Investopedia in “How to Plan for Travel in Retirement“.

The average retiree spends about $11,077 per year on travel, and the mean after-tax household income for seniors who are 65 and older was $44,051 in 2017. How do you make these two numbers work and see the world? Think budgeting and financial goal-setting, both before and after you retire.

Start by considering how well prepared you are for handling everyday costs during retirement. Do you have the cash flow to cover the normal cost of living? Then add the cost of travelling. If the answer is yes, start making plans. If not, then it’s time to go to work on planning and saving.

Analyzing current cash flow and projected retirement spending can help determine how much you’ll realistically be able to devote to travel. Obviously, the more retirement savings you have, the more room you’ve got to plan.

A few things to consider:

  • If the travel you have in mind is too expensive, can you still travel but at a lower cost?
  • Can you afford to travel at all, based on your current cash flow?
  • Should you delay travel plans, so that you have time to save for them?
  • How many trips do you think you can manage, financially, each year?

Once you know your annual travel budget you then can decide whether you want to take one big trip a year or a series of smaller, less expensive trips. Remember to include airfare, hotel costs, food, shopping and entertainment. Don’t forget the cost of medical care.

Medicare does not provide health coverage when travelling overseas, so you’ll need to be aware of what, if any, coverage you have from Medicare Advantage. You may need to purchase additional travel health insurance, so include that in your budget as well.

You might use a “bucket” strategy: have one bucket for fixed expenses, another for variable expenses and a third for a future bucket. Travel would be the future bucket, for those who are still working. You might also want to start a dedicated account, savings, money market or CD. You can also allocate a portion of your investment portfolio for travel costs.

Reference: Investopedia (Nov. 19, 2018) “How to Plan for Travel in Retirement

For more information on elder law and estate planning, please visit my estate planning website.

Mr. Amoruso concentrates his practice on Elder Law, Comprehensive Estate Planning, Asset Preservation, Estate Administration and Guardianship.