CPA INSIDER

How to talk to your clients about travel in retirement

Encourage clients to plan ahead for the cost of travel.
By Ilana Polyak

White-sand beaches, majestic peaks, cruises to remote corners of the globe: These are the things of retirement dreams. So it's no surprise that time and again workers name travel as the thing they're most looking forward to in retirement. According to a recent survey from Ipsos/USA Today, travel tops the list of how people expect to spend their time in retirement, edging out even time with family.

But to make travel a reality, people need careful planning, say CPA financial planners.

"We always ask about travel when we're making a plan, and we make travel a separate line item in the budget," said Timothy Steffen, CPA/PFS, director of advanced planning at Robert W. Baird & Co. in Milwaukee.

CPA financial planners weigh in on how CPAs can discuss travel—and how to afford it—with their clients who are approaching retirement:

Encourage clients to articulate their goals and dreams.

If clients are to create realistic budgets, they need to get as specific as possible about their goals for retirement—both for travel and for other hopes and dreams.

Take, for example, a set of clients of Howard Hook, CPA, a financial planner and owner of EKS Associates in Princeton, N.J. The couple, who are now in their late 50s, are originally from Portugal. For years, they've talked about wanting to buy a house in Portugal and use it as their home base for spending time with family and exploring nearby European destinations. Because of this goal, they weren't sure that they would be able to pull off their other goal: early retirement.

Due to careful planning and good savings habits, "they are in a good position," Hook said. "We were able to show them that they would have to work a bit longer and could retire by the end of the year."

Get the details to estimate how much travel will cost.

Clients often don't really know how much their travel will cost. Advisers should ask them many questions to get the clearest possible picture of their plans and whether their idea of "travel" leans more toward five-star resorts or camping in a national park.

"When we talk about travel, we ask them where do they want to go, how often do they want to go, how long do they want to go, who do they want to go with," Hook said.

Past travel experience may not be a good predictor of how much clients will spend in retirement. Retirement travel often costs more. For one, there's time for longer, more immersive experiences. And those who traveled for work are suddenly having to pick up the full tab for airfare, hotels, and meals.

Still others may want to bring their entire family along for their trips.

"A bunch of my clients have gone on safari in Africa, where they're taking their family with them," said Hook. "Or they're taking the whole family on a cruise to celebrate their 50th anniversary. These trips are expensive, and they could cost $20,000 to $50,000."

Temper clients' expectations.

Clients often dream big when it comes to how they picture themselves traveling in retirement. Some of their dreams, though, are unrealistic or come with downsides they might not have considered. CPAs can help them see the pros and cons of their desires.

Many of the clients who work with Bill Sittig, a CPA/PFS in Tallahassee, Fla., for example, dream of buying a Winnebago or other recreational vehicle when they retire and setting out to see the vastness of America. With a $250,000 sticker price or more, it's something he tries to discourage. These clients often overestimate their appetite for that kind of travel, he said. And even clients who do get a lot of mileage from the vehicles find that it eats too big a hole in their budgets.

"You could stay in the nicest hotels as much as you want to and still not get anywhere near how much a Winnebago costs," Sittig said.

Sittig applies the same reasoning to clients who rush to buy real estate at retirement so they can have a vacation place. Between the upkeep, taxes, and possibly a mortgage, it's almost always "a terrible financial decision," he said.

Revisit clients' travel budgets on a regular basis.

CPAs should also encourage clients to periodically reassess their travel budgets because their plans can change at any time.

"I've had clients who spent the first six months of retirement traveling," Sittig said. "But then they get bored and want to go back to work." 

Sittig has had to sit down with those clients and revise their plans—now with less money allocated for travel.

Travel, like other active pursuits, often tapers off with age. "We usually see travel in the first 10 or 20 years," Steffen said. "We are assuming that the travel budget is not something that goes through the end of your life."

According to the Consumer Expenditure Survey for 2015 from the Bureau of Labor Statistics, people's spending in most categories, including travel, spikes between 65 and 75, and then drops off (with the exception of health care).

But clients need to be aware that when their travel days are behind them, that part of their budget may get overtaken by medical expenses, Steffen said. That's not to say that health care will become a dollar-for-dollar expenditure that travel once was. But it's usually health care concerns that curtail travel.

Getting specific on travel goals and assigning a price tag to them can help clients stay flexible. "If we're having a hard time making ends meet, we know we have this money allocated in the budget that we can shift around," Steffen said.

Travel is one of life's most pleasurable experiences, and after a long career it's no wonder that most people want to pursue it. Planning to meet that desire early on will help clients shape their retirement budget to make it a reality.

Ilana Polyak is a Massachusetts-based freelance writer. To comment on this article, email senior editor Courtney Vien.

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