Expert Advice on How to Include Travel in Your Retirement Plans (Video)
It's not too early to start planning.
Travel is high on the list of plans for baby boomers, according to a 2020 AARP survey. Respondents indicated that they expect to take four to five leisure trips within the year, and about half plan to travel internationally in addition to domestically. Most said they travel to spend time with family and friends. Multi-generational travel continues to be popular with baby boomers, too.
Spending for the trips was anticipated to be around $7,800, according to the same survey. For many, whether close to retirement or already retired, that amount could represent a big chunk of their budget. Since travel is a priority for so many seniors, Travel + Leisure decided to look into ways of accomplishing this without breaking the bank.
We spoke to Mark LoCastro of SmartAsset, an award-winning financial technology company that publishes educational tools to help with personal finance decisions, including retirement planning, home buying, taxes, and investing. As the director of public relations and spokesperson at SmartAsset, LoCastro leads a team that works to bring financial literacy to people across the country.
We asked him how seniors can be sure to have the funds to travel during retirement.
LoCastro emphasized the importance of “knowing their numbers,” meaning how much they’re spending and how much they’ll need to save in order to have sufficient funds available in the future. Although many people avoid doing it, it’s necessary to create a budget — a comprehensive list of expenses. From there, they can project how much they’ll need in the future, and how much they should save to get there.
Pension income, current savings, anticipated retirement age, expenses, and plans are different for everyone, so individual situations vary. SmartAsset’s retirement calculators provide a way to get personalized information on saving, social security, 401(k)s, and expenses. LoCastro strongly suggests having a financial advisor to work with before retirement and for periodic check-ins during retirement.
LoCastro described an income spending formula to try and live with as preparation for the future. That would mean allocating 50 percent for needs, 30 percent for wants, and 20 percent for debt payoffs and/or savings. This might mean living frugally or below one’s means. Although this may be difficult to do in some areas, LoCastro tells Travel + Leisure that rent or mortgage payments should not exceed 30 percent of monthly income.
Some savers like to set aside funds for travel, just as they might save for a new car or other large expenditure. The important idea is to have a realistic goal and keep it in mind when spending decisions are made. Be sure to pay off debt and avoid paying interest, such as on credit cards or personal loans.
We asked LoCastro what advice he has for younger people who might be starting to think about retirement. “Work toward building wealth by saving and taking advantage of the power of compounding,” he recommends. “And participate in company 401(k) plans, contributing at least as much as required to get the maximum company match.” Even with current interest rates at around 1.7 percent, savings will grow through compounding.
As far as mistakes to avoid, LoCastro mentioned spending too much, not starting to save, and not contributing to a company 401(k) savings plan if one is available. For retirees, he recommends against spending too much and not checking in periodically to monitor savings versus spending. They should keep in mind that health care costs increase as time goes on, and maintaining an emergency fund for unexpected expenses is vital.
Many retirees decide to relocate to a lower-cost state or even another country to make their savings last longer or to allow them to spend more on travel or other priorities. Taxes, housing, and daily expenses vary significantly among states and countries. Climate, available health care, family, and social life may also influence this decision.
Most seniors who want to travel after retirement find ways to include out-of-town vacations in their lives. They may choose off-season trips, search for deals, take advantage of senior discounts, or even try a home exchange, volunteer program, road trip to a national park, train ride, or low-cost cruise. If travel is a priority, most people — young or old — find a way to get out and enjoy what they love most: spending time in new and interesting places.