5 Signs You’re Spending Too Much on Travel in Retirement
Written by
Cindy Lamothe
Edited by
Zuri Anderson
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If you’ve always dreamt of a life of travel after your working years — you’re not alone. Many retirees can easily end up spending a small fortune traveling to all of their dream spots. The downside, of course, is you might go overboard.
“Retirement travel becomes problematic when it exceeds 15% of annual withdrawals,” said Abid Salahi, finance expert and co-founder of FinlyWealth.
He said this spending level forces retirees to increase their withdrawal rate beyond the safe 4% rule, putting long-term security at risk.
“A $1 million portfolio can safely provide $40,000 annually — excessive travel often pushes withdrawals to dangerous 6 to 7% rates,” Salahi added.
Below are some signs experts warn of that can let you know you’re spending too much on travel in retirement.
A retiree also shared several ways they travel on just a Social Security budget.
Credit Card Balances Tell a Concerning Story
Retirees enter dangerous territory when they start carrying travel-related credit card debt month to month.
“A $5,000 balance at 20% APR costs $1,000 yearly in interest alone — money that should fund essential retirement needs,” said Salahi.
Emergency Fund Depletion Marks a Red Flag
According to Salahi, healthy retirement planning maintains 12 to 18 months of expenses in cash.
“When travel spending reduces this buffer below six months, retirees risk forced asset sales during market downturns to cover unexpected costs,” he said.
Healthcare Savings Neglect Signals Trouble
“Many retirees underestimate the need for $315,000 in healthcare costs,” explained Salahi.
When travel spending diverts money from healthcare savings or leads to skipping supplemental insurance payments, he said future financial stability faces serious risk.
Home Maintenance Deferrals Expose Excessive Travel Spending
Putting off $15,000 in needed roof repairs or skipping $5,000 annual maintenance to fund trips creates compounding problems, Salahi warned.
“These decisions often lead to larger, budget-breaking repairs later,” he added.
Excessive Withdrawals from Investment Accounts
According to Joseph A. Eck, certified financial planner and owner of Stage Ready Financial Planning, a sign that travel spending in retirement might exceed what’s possible is when a retiree continually has to make excess withdrawals from their investment accounts to pay for those vacations.
“The exception to this comment is if the retiree has a planned bucket of money dedicated solely to funding vacations,” Eck explained.
He said many retirees are living on investment income, and excess withdrawals from those accounts can damage the ability of the account to continue to provide income over the course of a full retirement.
“I encourage retiree clients to build travel spending into their monthly income. For example, if Jim and Sue are withdrawing $8,000 [per month] from their investment accounts, they might set aside $1,000 from each monthly payment into a separate bank account that they use specifically for vacation planning.
“They would then know that they have $12,000 per year to spend on vacations and have the cash on hand when they are ready to make the purchase.”
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