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Travel in Retirement

5 Tips on How to Create a Travel Budget for Retirement

by Maggie Leave a Comment

lake and mountains with boats - travel budget for retirement

You’re in your 50’s or 60’s working hard, saving money, paying off debt and doing everything to prepare for an enjoyable retirement. You always wanted to travel more, but with a tight work schedule, and kids, it was not possible for many years.

But now, when you’re an empty-nester and getting closer to retirement you started daydreaming again. This dream is about how to quit work, sell the house, pack a suitcase and head out into an adventurous life of travel. And it crosses your mind more often than ever.

But before you get on a life of travel, you need to find out if you’re financially ready for this kind of life.

These 5 tips will help you to determine if you can afford to travel the world in retirement and how to create a travel budget for your trips.

1. Envision your retirement years

How do you envision your retirement years? Are you going to relocate to a warmer place, join the country club and play golf 5 days a week with one exotic vacation trip per year? Or you’re planning to retire in place and go on extended trips to see your family and friends.

Maybe your idea of retirement is to have a more adventurous life – to sell all your possessions and live the life of senior nomads exploring the world.

Any kind of life you choose in your golden years requires the decision of how to pay for it. In retirement, you live on a fixed income, and you’ll need to have enough savings to pay for any travel and leisure activities.

It means you need to create a travel budget first.

2. Calculate how much to spend on travel in retirement

3 glass jars with coins - travel budget for retirement

You know that you want to travel in retirement, but how much you can afford to spend on it? To come up with the answer and estimate your travel budget you need to start by taking an honest look at your finances.

First, calculate your current expenses and get the idea of your cost of living in retirement. Then find out the size of your nest egg.

Take an inventory of retirement accounts including 401(k), IRAs, Roth IRAs. Then add to that number all your savings from the bank checking and savings account, your investment accounts, and any income from rental properties or business. The final number will show how much is your current nest egg.

When you stop working you expect to receive an income from several sources:

  • Social Security retirement benefits
  • Pension plans – if you’re a lucky one
  • Retirement savings – your nest egg

Use a 4 percent rule of thumb to calculate how much retirement income you can generate from your savings. As a general rule, you can withdraw 4 percent of your nest egg each year without worry of running out of money in retirement.

For example, your total estimated nest egg is $600,000. Based on the 4 percent rule, you can withdraw $24,000 annually from your retirement savings.

Your total retirement income includes a combined income from your Social Security, pension and calculated withdrawals.

After estimating how much you will spend on basic living expenses like housing, transportation, food, insurance, and medical cost in retirement, you’ll find out how much money will be leftover each year.

For example, your estimated retirement income from your nest egg and Social Security is $60,000. Your basic living expenses are $40,000. You’ll have $20,000 leftover each year, and you can spend it on travel without taking any extra money from your other savings.

Related Post: 3 Best Ways to Generate Retirement Income

Related Post: Social Security as a Retirement Income

Related Post: 7 Easy Steps to Help You Set Up a Budget

Related Post: What Is the Source of Your Income in Retirement?

Related Post: Why Predicting Retirement Expenses is Important?

3. Create the categories for future travel

table with smart phone, piece of chocolate, laptop & color pencils

The key to any successful travel is to plan ahead of time. After calculating how much you can spend on travel, the next step is to divide your travel ideas into separate categories.

I would recommend creating the categories or groups for your future travels:

  • Weekend getaways
  • Road trips
  • Camping trips
  • 3 to 5 days of mini-vacation
  • Cruise vacation
  • 1 to 2 weeks of international or domestic trips

Are you planning to have an annual vacation with your family? If yes, this might be a separate category in your travel budget.

If you have a retirement bucket list or just list of places you want to visit, put it as a separate category.

After you laid out all categories you want to know how much they might cost.

4. Estimate the travel expenses

a woman in yellow coat walking a street

If you’re in your 50’s or 60’s and still working, you have lots of time ahead of you. But keep your traveling vision in focus. Start mapping out the details of your travels. Think about what you want to do every day of your trip.

You should talk to your spouse or partner and decide how many travel trips you want to have per year and calculate if you can afford it. It’s important to figure out what kind of trip is more important to you and then find out an approximate total cost.

Related Post: Here’s How to Travel the World in Retirement

World travel doesn’t come cheap and if you envision going on 1 to 3 months international or domestic trips, you need to do some preliminary budget planning.

Think of every step involved, including flights, accommodations, local transportation or car rentals, groceries and eating out, entertainment, and insurance. You’ll need to have a hefty nest egg if you like to stay in chic hotels while traveling through Europe or North America.

But if you are willing to stay in modest accommodations like rented apartments or budget hotels and use public transportation instead of rental cars, you can travel inexpensively.

When you go on long-term travel, you’ll have the same basic needs as you do at home. Do your research and get the idea of how much the adventure will cost rather than just guessing at it.

After you created a list of your future trips, write beside each item what that is going to cost. Then build your travel budget around those numbers. When planning for long-term travel in retirement don’t forget to leave a room in your budget to pay for your household expenses. Even you’re exploring the world, you’ll still need to pay for your cost of living at home – mortgage or rent, utilities, insurance, phone, and more.

A website like Numbeo.com will make it easy for you to figure out the cost of living in different countries.

Numbeo

Many websites provide excellent travel deals. You can get discounts on flights, hotels, and cruises from Kayak, Vayama, Cheap-o-air and Google Flights.

Kayak

Vayama

Cheap-o-air

During the travel, the cost of the accommodations is the highest besides the plane tickets. A website like Airbnb helps to find comfortable and less costly accommodations for travelers. VRBO is a great source for finding vacation-house deals.

Airbnb

VRBO

Many cities in the world offer discounted public transportation passes for a day, a week, or a month.

If you read my blog, you already know that Roman and I love to travel. We constantly talk and discuss our future travels. Right now, our vacations usually include 1 or 2 international trips, a couple of weekend getaways and sometimes a short domestic trip for 3 to 5 days.

3 starfish - travel budget for retirement

We are still working full-time and our regular paycheck helps to pay for our travels. Moreover, we set up a separate bank savings account and save money there each month diligently. The money we saved is part of our current travel budget. When we travel, we like to splurge and allow ourselves to spend money on boutique hotels (if we can afford it), all-inclusive resorts or cruise vacations.

Once we retire, we’ll be living on the reduced income and our travel budget will be different. Our retirement bucket list is long, and we want to travel and explore the world, go to places we have never been to before. So far, our estimated travel budget for retirement is $30,000 per year.

We would like to start our retirement by traveling to Europe. We are planning to have two trips per year and each trip is up to 90-days, so we don’t need to apply for a long-term visa. Our travel budget is $15,000 per trip.

If cannot afford two trips per year we will have to scale it down to one 90-days trip to Europe. Then we can visit other countries and travel to more affordable places like Southeast Asia or South America.

With a limited travel budget, we will have to change our travel habits. We are planning on staying at rental apartments, using public transportation, buying our groceries, cooking our meals and scheduling our trips for during the off-season.

5. Decide how to pay for travel in retirement

master card -travel budget in retirement

Once you’ve figured out the cost of travel and your retirement income, you’ll need to take a serious look at your numbers and decide how to pay for your trips in retirement. If you want to accommodate regular or full-time travel and don’t have enough funds, you need to start saving more money now.

Save more money

Open a separate bank savings account, call it “travel” and start stashing money there regularly. Even $50 or $100 a month will help with funding your future travel.

Sell your home

If you’re planning to be on a road for a year or more, it’s time to discuss the downsizing to finance your trips. Selling your home, your cars and a big part of your belongings is not an easy decision, but it will help to increase your travel budget.

Rent your home

Another option is renting out your home while you travel. The rental income will help to pay for some of your cost of living at home and the cost of your trips.

Swap your home

House swapping is another way to afford travel in retirement. If you’re not planning to sell your home, you should put it to work supporting your travels. The house swap means you and another homeowner moving into each other’s house for a scheduled period of time. It may seem like too much hassle or too risky option for many people, but it’s a great way to travel around the world and stay in places for free.

Home Exchange

Work part-time

Some retirees like to work part-time with their paychecks set aside for travel. This gives them peace of mind that they are not reducing their nest egg.

Related posts:

The 3 Buckets Strategy for Retirement Income

5 Ways to Reorganize Your Life to Afford Retirement

Smart Ways to Take Money Out of Retirement Accounts

5 Easy Steps to Calculate Your Retirement Income Gap

Putting It All Together

How do you create a travel budget for your future trips in retirement? What is a reasonable amount of money you can spend? It’s all depends on your retirement income. Everybody is different and we all have different spending habits.

If you’ve always dreamed about traveling the world or even retire abroad, you’ll need to take an honest look at your financial situation and your travel goals. I think the priority is to find an amount of money you’re comfortable spending and then fit your travel into your financial limitation.

How will you pay for your retirement travel? Did you think about setting up a travel budget for retirement?

Enjoyed this article? Make sure to hit that sign up button for more articles like this!

Filed Under: Retirement Planning, Travel in Retirement Tagged With: travel budget for retirement, travel in retirement

Here’s How to Travel the World in Retirement

by Maggie 2 Comments

Louvre in Paris- travel in retirement

Are you dreaming about traveling and exploring the world in retirement?

If yes, you’re not alone. According to the 18th Annual Transamerica Retirement Survey, to travel the world is the most common retirement dream and shared by 70% of Americans.

When you retire and have so much free found time on your hands, traveling the world will be an ideal time spending. It would be nice to find yourself leisurely strolling the cobble streets of Florence, enjoying the secluded sandy beaches of the Algarve region in Portugal or hiking the mountains and ancient ruins of Machu Picchu in Peru.

People entering retirement today are more active and adventurous, and they want to explore the world. I know that many of us have a bucket list of places and countries we want to visit in retirement.

But traveling could be expensive. It includes not only dreaming about beautiful places, but the cost of air tickets, accommodations, transportation, food, tickets to museums and exhibitions, travel insurance, and more.

When you retire, you’ll likely spend more than you ever before. The good advice is to hold back on big spending and stick to your budget. You don’t want quickly to blow through your savings like there is no tomorrow.

But before mapping out your trip schedule, you need to look at your finances and see if you can afford to travel.

Look at your financial situation

two people discuss finance-travel ni retirement

When you stop working and start living on a fixed income, you have to be careful with your spending habits. In retirement, the only paycheck you have is the one that comes from your savings and another one from Social Security.

Look at you your overall financial situation and decide if you can afford to be a long- term traveler or just allow yourself a couple of visits to see family and friends. There is a big difference between life- based travel and a two-weeks’ vacation trip.

If you’re planning to retire within 5 to 10 years, take an inventory of your retirement savings – 401(k), IRA, Roth IRA, your investments, your bank accounts, and estimated Social Security Benefits. Calculate your total retirement income.

Then look at your expenses and calculate the cost of mortgage or rent, utilities, cars, food, clothing, insurance, and medical cost. Subtract your calculated expenses from the total retirement income.

Do you have enough money to cover the cost of travel?

For example, you calculated that your retirement income coming from all sources will be $50,000 and your basic cost of living is $40,000. According to the calculation you can spend $10,000 on travel without taking any extra money from your other savings.

Related Post: 3 Best Ways to Generate Retirement Income

Related Post: Why predicting Retirement Expenses is Important?

Make a list of places you want to visit

a boat on a water in Venice Italy-travel in retirement

The key to any successful travel is to plan ahead of time. Do you have a list of countries or places you want to visit? The world is a big place and there are so many wonders you want to see and explore.

Once you got an idea of how much you can afford to spend on travel, your next goal is to make a retirement bucket list.

Our retirement years are a wonderful opportunity to fulfill those dreams we’ve held for many years. If you don’t have a retirement bucket list written down yet, don’t worry – most people probably don’t have it either. But I am sure that you may have a few places in mind that you love to visit.

I discovered that writing down your bucket list is a great way to put down on paper your hopes and dreams for your retirement years.

If you’re looking for some inspiration, here is my retirement bucket list. Read through some of my ideas and combine them with your own.

  1. Live for 3 months in Paris, France
  2. Take a boat vacation on Canal du Midi in France
  3. Go to Brazil for the Carnival in Rio de Janeiro
  4. Travel across Italy by car or train
  5. Take a gondola ride in Venice, Italy
  6. Take a food tour in Rome, and a cooking class in Florence
  7. Buy tickets for La Scala opera house in Milan
  8. Travel across Spain and Portugal by car or train
  9. Take a trip across Austria and Switzerland
  10. Visit Argentina and Chile
  11. Visit Singapore and Hong Kong
  12. Visit Japan for cherry blossom season
  13. Book a trip on the Orient Express
  14. Go on African Safari
  15. Visit Morocco
  16. Take 15-days river cruise along a Danube river
  17. Visit Azorean islands
  18. Visit Madeira island
  19. Travel to Seychelles
  20. Spend Christmas and New Year in London, England
  21. Visit Edinburgh Castle in Scotland
  22. Live in Aix-en-Provence, France for a month
  23. Go on a cruise and visit Greece and Turkey
  24. Visit Dubai
  25. Visit Thailand and Malaysia

Estimate the cost of travel

map on the table for travels

Finding enough funds to do everything you want in retirement can be challenging, especially if you have to live on the reduced income.

After you figured out how much you can spend on travel and came up with your bucket list, the next goal is to get a solid sense of how much the trip will cost.

Today it’s very easy to find all the necessary information about the cost of living in different countries. The internet is full of websites with all kinds of data from different sources.

Roman and I like to travel. We have set up a separate bank account for travel expenses and save money diligently there every month. We are still working full-time and our regular paycheck helps to pay for our current vacation trips. On average we spend 5,500 for two people per seven-day trip. But we like to splurge and during our travels, we stay at the nice hotels, all-inclusive resorts or going on the cruise vacation.

We found that the average spending amount is comfortable for us and try to fit it into our travel budget when planning for a trip. I know that everything will change once we retire. We will be living on a fixed income and have to fit our future travels into our financial limit.

For your travel in retirement, you might prefer to go with a more detailed analysis of budgeting. If you do, you should calculate the cost of accommodation, transportation, food, entertainment, and then build your budget around those items.

Are you planning to take short travel trips like 5 to 7 days? Or you can afford to go on long-term travel, like 3 to 6 months or maybe even a year-long?

When you go on long-term travel, you’ll have the same basic needs as you do at home. Research the fixed cost of rental apartments, utilities, groceries, and public transportation and then budget it as a per-day amount. Then add the cost of air tickets to get to your destination.

Here is the list of items for your research:

  • Rental Apartment
  • Utilities – Electricity, water, cooking gas
  • Groceries
  • Eating out
  • Cell Phone
  • Public transportation – bus, train or ferry
  • Rental car, gas, insurance
  • Entertainment – entrance fee to museums, art galleries, tickets to a movie theater, opera theater, local excursion, food tour, cooking class
  • Clothing
  • Health Insurance
  • Air tickets to the destination

After you created a list of your future travel expenses, write beside each item what that is going to cost.

A website like Numbeo will make it easy to figure out what will be your cost of living in different countries.

Numbeo.com

When planning for long-term travel in retirement don’t forget to leave a room in your budget to pay for your household expenses. Even you’re away exploring the world, you’ll still need to pay for your cost of living at home – mortgage/rent, utilities, car insurance, phone, and medical insurance.

Schedule your trips

pedestrians crossing the street -travel

Once we retire, we are more flexible in our travel time and that is why we may be able to reduce the overall cost of each trip. If you want to maximize every travel dollar, you should schedule a trip during the off-season (sometimes it’s called “shoulder season”), which is the time between the peak and low seasons.

You don’t want to travel to Europe in the middle of summer – June, July, August because you will hit the major tourist crowds and will overpay for everything. You’d rather choose your trips during September, October, November or March, April, May.

Watch online for airline deals to find the best prices:

Vayama for International flights

Kayak for Domestic flights

Cheap-o-air for European flights

Plan for slow travel

a young woman kissing a stone sculpture at the sea

Decide what do you want out of your travels? A fast tour seeing everything there to see and changing locations every 2 to 3 days? Or do you want to spend your travel days leisurely and got to know the places, people, culture and food in a more authentic experience and off the beaten path?

Traveling slowly can be a more inexpensive option than a typical tourist vacation trip.

You’ll save on the cost of food if you buy your groceries and cook your own meals instead of eating out. Instead of buying food at the supermarkets, visit the local markets and buy fresh and seasonal products from the local farmers.

During the travel, the cost of the accommodations besides the air ticket is the highest. You’ll reduce the price of accommodation if you stay in rental apartments, hostels or budget hotels instead of staying in upscale hotels.

Also, if you want to save on air tickets, try to combine a visit to several places in one trip. Instead of going to France one year and to Spain the next, plan to go to both places in one trip. You’ll have the 90-days visa-free to explore both countries without applying for a long-term visa if you want to stay longer.

For example, flights from Boston Logan airport to Europe are about $1,200 on average per person. The price of a rental apartment is about $100 per night or less if you rent it for one or two months. A two-week trip to France will cost you $3,800 – $1,400 accommodations and $2,400 air tickets.

But if you stretch that trip to three weeks, the price will go up only $700 since you don’t have to buy an air ticket for the third week. So, the cost of a three-week trip to France will cost you $4,500 – $2,100 accommodations and $2,400 air tickets.

Stretch that trip to four weeks and the price will go up only $1,400 since again you don’t have to buy plane tickets for the third and fourth weeks. The cost of a four-week trip to France will cost you $5,200 – $2,800 rental apartment and $2,400 air tickets. The longer you stay in one place the more money you’ll save on your travels.

Those websites are helpful to find accommodations for your trips:

Airbnb

Home Away

VRBO – vacation Rentals by Owner

Final Thoughts

Traveling the world in retirement can be your dream life. While many retirees will be happy to spend time at home and go on a short vacation trip once a year, others prefer a more adventurous lifestyle.

If you’ve always seen yourself traveling around the globe in retirement, you need to start preparing yourself for the next adventure of your life. Take an honest evaluation of your finances, write down your travel goals and dreams and prepare your daily budget.

Bon voyage!

Are you planning to travel in retirement? Share your thoughts and ideas with us about your future travel trips.

Enjoyed this article? Make sure to hit that sign up button for more articles like this!

Filed Under: Retirement Planning, Travel in Retirement Tagged With: travel in retirement

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Hi, I'm Maggie. Welcome to Save, Invest & Retire! I am on a mission to help baby boomers learn how to save & invest smart. Follow me on detailed information about retirement planning, travels and living the life of your dreams.

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