As you approach retirement, it’s normal to start thinking about all the places you’ve always wanted to visit but never had the time or money for. After years of working hard and saving for the future, you deserve to enjoy a luxurious retirement spent exploring the world. But what does it take to make this dream a reality? Is it even possible without retiring on a six-figure salary?
You’ll be happy to know that, with a bit of smart planning and by taking the appropriate actions at the right time, you’ll be able to live your dream without worrying about outliving your savings.
So, here are a few tips to help you plan and save for a luxury-travel-filled retirement.
Step #1: Turn your wishes into SMART goals.
They say that a goal without a plan is only wishful thinking. This couldn’t be more true regarding saving for retirement travel. That’s why you need to plan ahead if you wish to travel in retirement. Moreover, when crafting any plan, be it in business or life, you must start with a clear set of goals.
This is where many people fall short. Goal setting is a critical part of any plan since it gives you a clear target to work towards. But, people’s goals are often either too vague or completely unrealistic. For example, a goal like “I want to travel the world” is great in theory, but it doesn’t give you anything specific to focus on or work towards. That’s why you need to make sure to start on the right foot by setting goals the right way, and one of the best ways to do that is by making sure your goals are SMART.
SMART is an acronym that describes the best way to set goals in almost any scenario. It stands for Specific, Measurable, Achievable, Relevant, and Time-bound. In other words, when your set goals, they should be clear and concise, have a way to track and measure progress, be realistically achievable, be aligned with your overall objectives, and have a deadline.
For retirement travel, some good SMART goals might look like this:
- I want to travel to Europe for three months within five years of retiring.
- I want to spend three weeks in a 5-star hotel in Venice within the first year after retiring.
- I want to take a 6-month trip to visit at least one city in every continent within ten years of retiring.
- I want to visit at least five new countries each year during my retirement.
Notice that some of these example goals are more specific than others, but it’s easy to see that they are all easy to measure, so you’ll always be able to know whether or not you achieved your goals.
How achievable these goals are depends on how much time you have to plan and save for the trip and how much of your income you can save. If you’re one year away from retiring and you’re only now thinking of starting to save for your trip, you’re not likely to succeed, so you’d only be setting yourself up for failure.
On the other hand, any one of those goals is highly relevant if you’re setting goals with luxury travel in mind. Lastly, each one of these goals clearly states the moment you expect to have achieved it. This is one of the most important things to remember since it will determine the strategies you can leverage to make your dream a reality.
Step #2: Estimate how much it would cost to take your trip.
The next step is to understand how much your trip will cost and how much you’ll need to save. This might seem like an impossible task since, after all, you’re planning a trip for the future, and prices are always changing. However, there are some ways to get a pretty good estimate of how much you’ll need.
You can do this by looking at the cost of similar trips that others you know have already taken. For example, you may have a close colleague or acquaintance who retired before you and took a trip similar to the one you plan to take in the future. If you two are close friends, you could ask them how much they spent on that trip and get a straight answer.
However, the best way to go about it would be to research flight fares on different airlines, hotel rates, the current price of different activities you could do at your desired destination, and more. This won’t just be fun, but it could also help make the rest of the planning process much easier once you get closer to your target departure date.
This is exactly where having clear and specific goals starts to matter. If you don’t specify where and when you want to travel, you won’t be able to estimate how much you’ll need to save, and you may fall short.
Step #3: Analyze your finances and decide how you plan to pay for your trip.
This is where you start getting into the nitty-gritty of things and start planning how you’ll make your trip happen. The first thing you need to do is to get a good understanding of your current financial situation. This includes knowing things like:
- How much money you make every month, considering all possible income sources.
- How much money you currently have in savings.
- Your current spending habits or where your money is going every month.
- How much you’re saving every month for retirement.
- How much retirement income you need, and how big your nest egg needs to be to provide that income once you retire.
- What kind of retirement benefits or pension you will receive, and more.
This information is essential to ensure you’ll be able to travel the way you want to. Since you already know how much your trip could cost and have already set a possible departure date, you’ll know exactly how much money you’ll need to have saved by then. Analyzing your financial situation will let you know if you’ll be able to pull it off if you continue down the path you’re already on or if you’ll have to make adjustments.
The key is knowing how much income you want or need to receive for a comfortable, laid-back retirement. Suppose you’re thinking of purchasing a deferred annuity to generate that income. In that case, you can use online calculators to estimate how much you need to save every month for that target income. Once you’ve secured that amount every month, any extra savings can go toward financing your trip.
Step #4: Estimate how much you need to save every month to have enough for your trip in retirement.
Because you have already set a time-bound goal, you know how much time you have available to save for your trip or trips. Furthermore, since you have a clear idea of how much the trip or trips will cost, you can estimate how much you would need to save every month to reach that target on that due date, given a fixed growth rate that comes from investing your funds in different ways.
By now, you can answer the most important question of all:
Considering how much I make every month, how much I spend and how much I need to set aside to secure my desired retirement income, do I have enough income left to save for luxury travel?
If the answer is yes, great! You’re well on your way to living every retiree’s dream.
If not, don’t despair. All you need to do is some careful trimming and more planning. Keep reading for other steps you can take.
Step #5: Start making adjustments and set up a budget for your travel fund.
If you don’t have enough room in your monthly budget to start saving for your dream retirement travel, you’ll need to find ways to either free up some cash or find alternative income sources. Here are a few tips to make that happen:
Tip #1: Reduce your current expenses.
Take a close look at your spending habits and see where you can cut back, even by a little bit. It all adds up, and every dollar you can put toward your travel fund is one less you’ll need to save.
Tip #2: Move to a more affordable place.
If the place you’re living in is eating up a large chunk of your income in rent or maintenance, it may be time to consider moving. Downsizing to a smaller home or apartment or even relocating to a cheaper city can free up a lot of extra cash every month that you can put toward travel in the future. Additionally, if you’re a homeowner, you can recover a good chunk of equity from your current home by selling it and buying a cheaper place. You can even cover part or all of the cost of your move by selling off any unwanted or unused belongings.
Tip #3: Save windfalls.
If you get a tax refund, a bonus at work, win the lottery, or any other kind of financial windfall, put it into your travel fund. The sooner you can boost the balance, the sooner you’ll be on your way.
Tip #4: Find additional sources of income.
If saving more money each month is not a realistic option or is simply not enough, you’ll need to find ways to earn additional income. This could come from working a side hustle or starting a small business.
If you choose the latter case, starting a remote business is probably the best way to go. Before retiring, you can run your business from home while working your regular day job. Once you retire and start traveling, you can set up a virtual business address to handle your incoming physical mail and have anything of importance forwarded to you wherever you are. That way, you’ll still be able to run your business smoothly from a beach in Barbados or a luxury ski cabin in the Swiss Alps.
Step #6: Apply for a new premium travel rewards credit card one or two years before your trip.
One of the best ways to travel VIP-style for less is to leverage all the benefits that some premium travel rewards credit cards offer. You can save hundreds and even thousands of dollars in airfare fees, first-class tickets, airport lounge access fees, 5-star accommodations, experiences at your destination, and even travel and car rental insurance premiums.
By applying for a credit card from a new issuer, you can also take advantage of the amazing welcome bonuses these credit cards offer, some of which can be valued at more than $1,000 if you redeem them for travel (which is exactly what you want the bonus for).
The bottom line
Now that you have a general idea of how to save for luxury travel during retirement, it’s time to put those steps into action. Start by setting specific, measurable, achievable, relevant, and time-bound travel goals, then estimate how much you’ll need to save to achieve those goals. Next, evaluate your current financial situation to see if you need to make any adjustments to your budget or if you’ll need to find new sources of income. Once you know you’re well on your way to a luxury-travel-filled retirement, you can make things much better by getting the right travel rewards credit card shortly before your planned departure date.