Travel during retirement is the perfect way to engage in new experiences, make memories, relax and unwind. It can also be a costly endeavor, however, so being financially prepared is the key to satisfying your sense of wanderlust during your golden years.
Almost 70% of Americans feel retirement travel is worth stashing away some extra cash in one's nest egg, according to a joint survey by the TransAmerica Center for Retirement Studies and the Global Coalition on Aging. But surprisingly, less than 20% have actually budgeted for travel in their long-term financial strategy in order to make their dreams a reality.
So what can you do to avoid becoming part of the latter statistic? Start planning now! Following is a list of factors to ponder when forming a financial strategy for retirement travel:
1. Consider a change in residence
If you plan to travel extensively, you could free up some significant funds by downsizing your living space. You’re not going to be there much anyway, right? Moving to a condo or small home in a retirement community could equal significant savings on traditional homeownership costs, such as maintenance.
Another option for more adventurous travelers is to sell their homes, invest the proceeds and rent different spaces for short periods of time through websites such as HomeAway or Roomorama. If you decide to go this route, work with a financial professional to put profit from your home sale into a portfolio that will cover the later portion of your golden years. Other income streams and savings accounts can then be used for travel expenses.
2. Add a cushion for unexpected costs
As you map out what your travel expenses may cost during retirement on a yearly basis, make sure to include some extra cushioning. While travel is one of the most popular forms of leisure, it’s also expensive and unpredictable. If the unforeseen should happen—such illnesses, flight changes or cancellations, lost luggage, or extra hotel costs, it’s better to be prepared than resort to credit cards and debt accumulation, or dipping further into your retirement fund than you were anticipating.
3. Create a detailed budget that includes your travel aspirations
Before booking a vacation, take a look at what you’re willing to spend, and then calculate the costs of transportation, food, accommodations, and entertainment expenses once you get there.
The things that are most important to you can help you decide how to best distribute your travel budget. For instance, if you’ve always wanted to see a certain show or musician at a particular destination, consider booking a more modest hotel (check out Airbnb) and dining at lesser expensive restaurants to balance out your budget. Or, if staying in luxurious accommodations is your number one priority, just make it a shorter trip so you don’t break the bank, or travel during off-peak times to decrease costs.
4. Decide on the details of your travel desires
When, where and how often do you want to travel? These three factors all play a huge role in how much you’ll need to save. It’s a good idea to make travel plans at least a year in advance to ensure your bankroll will cover them. It’s also wise to do some research and estimate travel costs way ahead of time, depending on your personal preferences.
Perhaps you simply want to drive a couple states over to visit your grandchildren once a month. This will obviously cost a lot less than extended trips abroad during your golden years. Find out if you can actually afford the excursions you wish to take. If not, talk to a financial professional about saving in a way that you can.