Travel is the most preferred way to spend retired life. Unfortunately, not all people fit the mould of retirees who have enough disposable income to jet off to wherever they desire regularly.
If you’re hoping to discover a whole new world through travel when you retire, then planning ahead is crucial.
Part of the planning process involves setting money aside for retirement travels early and being smart about how you spend those dollars.
Here are four ways to travel on a budget during retirement:
Plan for Retirement Activities
Early planning is key to having a successful and happy retirement. Many people give little thought to how they will spend their newfound free time, but they should.
The best way to plan for retirement is to be as specific as possible. Create a list of day-to-day activities and provide as much specificity as possible. For example, you may want to volunteer or explore new hobbies while travelling or even do some side work fixing things like lighting maintenance.
Have a Strategic Financial Plan for your Retirement
Good financial planning involves assessing your financial health and creating a wealth building strategy that will ensure your desired retirement lifestyle. It is crucial since it identifies your sources of income and expenses and creates your retirement budget.
A successful retirement financial plan should address your retirement goals, define your sources of retirement income and ways to organize your money. Cover these bases, and it should be easy to save enough money to travel on a budget during retirement.
Take Advantage of All Your Tax-Favored Accounts
One way to top off your retirement savings is to invest in tax-favored accounts. Contributing to accounts with guaranteed tax advantages and making catch-up contributions can make a significant difference in your retirement nest egg.
Accounts to consider investing in include traditional IRA, Roth IRA and 401(k) Plans. You can also invest in real estate, buy a whole term insurance or stuff your Health Savings Account (HSA). You are not required to pay tax on appreciated real estate or premiums made to a whole life policy or HSA. Additionally, if the policy or HSA is no longer wanted, you can use the funds to save for your retirement.
Since income tax rates are somewhat higher than returns on investment, make sure you don’t forget about tax when looking at the big picture. If you’re looking to pursue an aggressive growth plan and hope to shield as much as possible from tax, consider consulting a tax professional or investment advisor.
Maximize Social Security Benefits
Another great way to boost your income during retirement is to maximize your Social Security benefits. While the government has a formula for determining monthly benefits, certain strategies can be employed to optimize your Social Security earnings.
To maximize your Social Security benefits, consider working until your full retirement age, claiming when you’re over 70, claiming spousal payments, and minimizing Social Security taxes. This way, you can collect your Social Security benefits from abroad – this is key if you hope to travel on a budget during retirement.
Maintain Financial Freedom for The Rest of Your Life
There are lots of ways to achieve and maintain financial freedom in retirement. The most obvious way is to find multiple sources of income. These can include rental real estate, interests, dividends from an investment portfolio, selling your life insurance (but keep tax in mind) Social Security, an annuity and freelance or consulting work. Another great way to accomplish financial freedom in retirement is to invest in a lazy ETF portfolio such as a stock fund or an equity fund.