How to Plan Differently If You’ll Spend $250k in Travel in Retirement
More retirees than ever are making travel a central part of their retirement lifestyle. Whether you’re dreaming of jet setting across the globe, taking scenic train rides through Europe, or exploring America by RV, these aspirations are completely reasonable.
But if you’re planning to spend $250,000 or more on travel during retirement, that dream deserves more than just a casual line item in your budget.
It requires intentional, strategic planning that’s deeply aligned with your values and long-term financial health.
Let’s break down what this actually means for your retirement planning and how to build a strategy that protects your travel dreams while maintaining your financial security.
Putting Travel Spending in Perspective
Spending $250,000 on travel might seem substantial, but spread over a 25 or 30-year retirement, that’s roughly $8,000 to $10,000 annually. For many couples who enjoy regular trips, this is completely reasonable.
However, those seeking more luxurious adventures – international business class flights, five-star cruises, bucket list excursions – can easily exceed this figure, especially during the early years when health and energy levels are at their peak.
This is why a travel-heavy retirement needs a custom plan that reflects both your aspirations and your financial realities.
Treating Travel as Core Spending
First and foremost, treat travel as a core component of your retirement spending plan, not an extra. Just like housing, healthcare, and food, travel needs its own category with a forecast that adjusts over time.
Many retirees front-load their travel in the first 10 to 15 years of retirement – often called the “go-go years.”
If that’s your plan, your withdrawal strategy should reflect those phases.
This might mean withdrawing more heavily from your portfolio early and tapering down later. This approach can work, but only if the plan is built with these phases in mind.
Managing Sequence of Return Risk
This brings us to sequence of return risk – one of the most underappreciated challenges in retirement planning. If you’re withdrawing large amounts early in retirement and the market drops simultaneously, the combination of lower portfolio values and higher withdrawal rates can significantly impact your long-term sustainability. A $250,000 travel plan amplifies this risk.
One effective strategy is building a dedicated travel fund within your overall retirement portfolio. This separate bucket, invested more conservatively in cash or short-term bonds, is designed specifically to fund your first decade of travel. Think of it as your “adventure fund.”
This strategy protects your travel plans from market volatility while preserving your core nest egg for essential spending. If markets perform well, you can replenish the fund opportunistically. If not, you won’t be forced to sell assets at a loss just to book your next flight to Tuscany.
Tax Planning for Large Travel Expenses
Many retirees overlook the tax impact of large discretionary spending. If your travel expenses require substantial withdrawals from traditional IRAs or 401(k)s in a single year, you could inadvertently bump yourself into a higher tax bracket, trigger Medicare surcharges, or reduce eligibility for other tax benefits.
A multi-year tax strategy can help. By coordinating withdrawals across multiple account types – Roth, traditional, and taxable – you can smooth out your income and potentially save thousands in taxes over time.
If you’re still working and planning for travel-heavy retirement, consider prioritizing Roth contributions and conversions now. Roth accounts allow tax-free withdrawals in retirement, providing flexibility when planning large one-off expenses like an African safari or a month in the Greek Isles. Pair this with a taxable brokerage account for a powerful combination of flexibility and tax efficiency.
Balancing Dreams with Longevity
While it’s tempting to focus on the exciting first 10 to 15 years of retirement, remember that your money might need to last 30 to 40 years, with potentially significant healthcare bills toward the end.
Your retirement plan must support both your travel dreams and ensure long-term security for healthcare, long-term care, and basic living expenses. The solution is balance – earmark a portion of your assets for discretionary travel spending while protecting the rest for essential income. This ensures your core lifestyle is never at risk.
Planning for Inflation and Currency Changes
No travel plan is complete without factoring in inflation, especially for experiences priced in foreign currencies. Airfare, lodging, and travel insurance costs tend to rise faster than average US inflation. Your travel budget should grow accordingly each year to ensure your fund doesn’t fall short when you’re ready to book that dream trip to New Zealand.
The Emotional Side of Travel Planning
Consider how travel fits into your values. Is it about adventure, connection, or legacy? For many people, travel represents more than a reward for hard work – it’s a way to stay engaged, challenged, and curious.
You might want to plan for multi-generational trips, bringing children or grandchildren along to create lasting memories. This means planning for higher costs but also deeper meaning.
Adapting Over Time
Be honest about how your travel patterns might change. Most retirees travel more initially, then scale back as mobility and energy decline. Having a plan that reflects this natural rhythm helps ensure you don’t overspend early and become restricted later.
Remember to build in smaller, more frequent travel like weekend getaways or domestic exploration. These can keep the spirit of adventure alive even as your pace slows down.
Creating Your Custom Strategy
If you plan to spend $250,000 or more on travel in retirement, don’t treat it as an afterthought. Treat it like the life goal it is. Build a custom strategy that protects it, funds it efficiently, and adapts with your life.
Whether you’re chasing sunsets in Bali or sipping wine in the south of France, your retirement plan should support not just your needs but your dreams.
Take the Next Step
Ready to build a retirement plan that supports your travel dreams while ensuring long-term financial security? I can help you evaluate where you stand today and build a plan that aligns with your specific goals and timeline. Click here to get started.
