How to Plan for a Retirement of Travel

Mortgage and Lending with Olympus Labs

If you’re like most people, traveling is pretty high on your list of long-term life goals. While you might be able to take a vacation here and there while you’re young, most people envision their best travel stories unfolding after retirement—when they have enough time, freedom, and money to go wherever they want.

If this is your idea of an ideal retirement, you’ll need to start planning for it as early as possible.

Understand How You Want to Travel

First, you’ll want to think carefully about how you want to travel, for both logistical and financial planning purposes. Every mode of travel comes with its own advantages and disadvantages, so you’ll need to decide for yourself which one would best suit your ideal lifestyle.

For example, you could attempt to travel practically all the time, turning your mode of travel into your living space. With a liveaboard boat, you could spend each night sleeping below deck and spend each day traveling somewhere new. With an RV, you could indefinitely roam the country, spending the night at various campsites.

You could also set up a “home base” (possibly your current home) and continue to treat your travels as periodic vacations. This would require you to invest in keeping your home in good condition while you’re gone, but could give you more flexibility with the types of trips you want to take.

Then you’ll want to consider at what spending level or lifestyle level you want to travel. For example, are you looking to spend lavishly, staying in the best hotels and getting the best accommodations? Or are you content roughing it from place to place? This answer may change as you get older, but it’s important to think about now.

Set a Retirement Age as Your Goal

Your retirement may depend on some unforeseeable variables, but it’s important to set a specific age as your retirement goal. That way, you’ll know what you’re working toward, and can adjust your plan to help you get there. The higher your retirement age, the more time you’ll have to save and generate interest, which means you’ll generally have more money available to you when it’s time to travel. The lower your retirement age, the healthier and more physically fit you’ll be, giving you more travel options. Retiring younger also gives you more time to see all the places you want to see, while retiring older ensures your children are adults with stable finances of their own, so you have one less thing to worry about.

Save Enough Money

The final question is the hardest, because it depends on so many variables. Before you can retire, you’ll need to build up a nest egg that can support your lifestyle. Obviously, the type of lifestyle you choose will play a massive role in how much savings you need; the more you travel and the more luxuriously you travel, the more money you’ll need. Depending on when you plan on retiring, you may or may not be able to depend on social security benefits to complement your personal savings.

Either way, try to accrue enough savings that you can live independently off your wealth. For most people, assuming you’re investing wisely, you can count on withdrawing about 4 percent of your principal every year for the rest of your life. For example, if you have a principal of $2 million, you’d be able to count on $80,000 a year in your retirement.

Your first step is determining what number you need to hit. How much will you need to meet your basic expenses? How much will you need to travel in the way you want? Multiply that annual salary by 25, and that’s about the number you’ll need to hit for your principal.

Then, the question is how to get there. For most people, that means coming up with a budget that allows you to save as much as possible on a monthly basis, then using those accumulated savings to invest in stocks, bonds, index funds, and other assets. If you can invest in these using a vehicle like a 401(k) plan or an IRA, that’s even better. With a diversified portfolio, you should be able to see a substantial rate of growth, eventually compounding to multiply your savings and get you closer to your eventual target.

Expecting the Unexpected

No matter how much you research, plan, and work, there will inevitably be little details that slip beneath your notice or otherwise get in your way. Make sure there’s ample wiggle room in your retirement strategy, from initial savings on through your course of travel in retirement. That way, when something defies your expectations, you can easily adapt.


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David Jackson, MBA

Financial lending analyst
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