Plan Now for Your Travel Bucket List

by David Novak

It is summer and that means the travel season. Our big family vacation this summer is to go see good friends of ours who recently moved to Arizona. While everyone in the family is looking forward to the trip, I’m not sure a week in Tucson in August will go down as the best decision we have ever made.

In discussing goals with clients, I have found that travel in retirement is usually near the top of the list. And it’s not always the exotic Mediterranean cruise that people seek; it can just as easily be to rent an RV and explore the American West.

I have found there to be a correlation with the amount of travel by retirees and their personal fulfillment. The benefits of remaining curious and emotionally engaged are many.

You don’t need me to tell you that travelling costs money. And these costs make it all the more important to start planning early.

In my personal experience—both with clients and my own family— there is a trend in how those in retirement travel. In the early years, there is a burst of activity; people are excited to spend their new free time in taking those trips they had always dreamed about while working, especially when they have the energy and the money. Then, as the years go by, gradually health issues arise; the combination of increasing health expenses with the physical decline makes retirees’ willingness and ability to travel also drop.

The fact that travel expenses are “lumpy”—i.e. not consistent each month—means that these lump sums needs to be accounted for when creating your portfolio distribution strategy. In addition to factoring in these expected costs when determining how much your portfolio needs to generate each year, it is also important to run these simulations with goal-planning software that uses Monte Carlo analysis. Since future portfolio returns are unknowable, you want to make sure your distribution plan is built to last over all your retirement years. The last thing you want to happen is that you are too aggressive with your distribution strategy in the early years of retirement, which could impact your ability to make future trips or even worse—send you back into the workforce.

With conservative assumptions and the right goal-planning software, you can create a strategy that will allow you to pursue everything on your retirement travel “bucket list”.

David Novak, CFP® is a Certified Financial PlannerTM at Novak & Powell
Financial Services in Pinellas County. Please note: he is not an attorney and this
article should not be construed as one offering legal advice. For information
about investment decisions and financial planning, contact him at
(727) 451-3440.

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