Thomas Cook, the 178-year-old British travel company, declared bankruptcy on September 23rd, suspending operations and stranding 600,000 tourists around the world.
The travel company employed approximately 20,000 people, operated its own airline, and was listed on both the London Stock Exchange and the Frankfurt Stock Exchange.
If you’re like most people who think about retirement, you probably imagine traveling in your golden years. But before you browse those travel websites and whip out the credit card to buy your ticket, make sure your financial plan accommodates for your retirement travel – and that includes some emergency funds too.
Because of those 600,000 stranded Thomas Cook clients and the 20,000 Thomas Cook employees, think of how many were either in retirement or real close to retirement.
Travel on Your Bucket List?
What's at the top of your retirement bucket list? If you are like most folks thinking about retirement, travel is high on the list. But consider that as you travel, you will find that your bucket list does not grow smaller – it expands as new possibilities entice. And while certainly some people do experience years of unlimited and unfettered retirement travel, many more don't find it so easy.
Doing “what you want, when you want, with whom you want,” assumes three things we often take for granted: good health, adequate finances and meaningful relationships.
Invest in Your Health
When it comes to travel, good health may not be essential, but it makes your experience more fulfilling and enjoyable. Of course, we aren't typically in either good or poor health, but fall somewhere on a continuum. With limited mobility, you may be able to shop at the bazaar in Istanbul, but chances are you won't hike the Grand Canyon or explore the Acropolis.
Like most things, good health typically requires a conscious intention to create and maintain it. Someone who says, “when I retire I’ll have the time and money to take better care of myself,” may be in for a surprise.
Most people who chose not to take care of their health before retirement won’t do so in retirement. As one retired person might tell you, “if you didn’t have the energy to work out when you were young, you sure won’t have it when you retire.”
And you can’t bank on your spouse’s health staying good enough to share your travel adventures. Even if you've taken care of yourself, your significant other may be unable to travel. Instead of strolling a beach in the Bahamas, you could end up at home as a caretaker.
Money and the 80% Rule
On average, baby boomers have saved about $150,000 for retirement. That won't pay for many around-the-world cruises. If you want to travel after you retire, you need a serious commitment during your working years to live frugally and invest as much as you can. Otherwise, you may end up with barely enough to cover your basic living expenses.
Saving for retirement is critical, because your expenses in retirement can be significant. Consider that the average retiree spends $4,300 each year on out-of-pocket healthcare costs, according to a study from the Center for Retirement Research at Boston College. And that figure does not include long-term care.
Many financial planners suggest you think about the 80% rule: take your annual income today, and assume you will spend about 80% of that income in retirement. So, for example, if your pre-retirement income is $100,000, plan on spending $80,000 in retirement every year.
If you spend your career working 80-hour weeks, you may accumulate enough assets to fund plenty of retirement travel, but by then you may be traveling alone. Saving for the future is out of balance if it's done at the expense of enjoying life and close relationships today – especially your marriage.
Did you know that over the past 25 years, the divorce rate of couples over the age of 50 – often called the gray divorce – rose 109% according to Pew Research? For comparison, the divorce rate among couples 25 to 39 years old decreased 21%.
There are a lot of theories about what is driving this trend, but when 50- or 60-year olds divorce, their assets are divided and the respective expenses of each are usually closer to what the combined expenses were as a couple. In other words, same expenses, half the assets. So, just as you invest in your health and your retirement plan today, invest in your relationships now too.
Think About This
If travel is one of your dreams, why not do some of it now? Use your vacation time while you can enjoy yourself. Take that motorcycle trip through Europe or go scuba diving in Belize while you're in top shape. Do the international travel now when you can better negotiate airports, handle travel delays, and power through jet lag.
To save on expenses, plan ahead, use a credit card that awards frequent flyer miles (which you pay off monthly), and use cost-saving options like home swaps and off-season travel. Then, after you retire, when you need more access to medical care and less demanding travel, you can stay closer to home and enjoy the opportunities in your own back yard.
Your Financial Advisor
What a lot of people don’t understand about financial advisors is that we are not there solely to plan your financial future. We are at your side today to help you make yourself better.
A financial advisor not only helps you make sound financial decisions but also helps you think through different dreams and what it takes to achieve those dreams.
Because it is much easier to achieve your dreams if you have a tailored plan that helps you get there.