published 11 July 2023
Tell me if this sounds familiar: You’re making your first summer vacation plans in what seems like forever, checking dates with family and rushing to secure your flights and accommodations. Suddenly, you realize this vacation is going to cost you more than you’ve ever paid before!
No, it’s not your imagination. From airfare to hotels to car rentals, the cost of virtually everything is up over the last three years. Inflation—a problem in many areas of life—is particularly high in travel, thanks to post-pandemic pent-up demand.
According to the NerdWallet Travel Price Index, the overall cost of travel is up 18% from pre-pandemic levels. People just want to get out and see the world. Moreover, the U.S. State Department states that this summer is expected to be the busiest on record for international travel by Americans.
Understanding the Impact of Rising Travel Costs
My family and I are feeling the financial strain as well. One of our favorite summer traditions is to pack up the kids in our motorhome, pick a direction, and drive. We find campgrounds to stop at along the way. Before the pandemic, we were paying $15 or $20 a night. This year, campgrounds are going for twice that amount—some private locations can even set us back $80 or $100 a night, which kind of defeats the point of camping.
For retirees living on a fixed income, costs play an even bigger role in determining what kind of summer plans they can enjoy. Despite travel inflation, it’s still possible to have a fantastic summer. However, you may need to make a few compromises.
Retirees Facing Dual Challenges
If you’re living on a fixed income, inflation affects your purchasing power, meaning your money doesn’t stretch as far as it used to. Additionally, the stock market decline in the past year and a half compounds this issue. Since reaching its high in January 2022, the S&P 500 is down about 8%. That means retirees have less money now than they did a year ago, while costs are higher, creating a risky scenario.
If you are at the beginning of your retirement, you must carefully consider your withdrawals in a down market because timing matters. This concept, known as the sequence of returns, affects not just your immediate portfolio but how much money you’ll have throughout your retirement.
When you withdraw from your portfolio while its value is falling, you have to sell more shares to generate the same amount of cash than if the market were up. Consequently, you deplete your savings faster and end up with fewer assets to generate returns during a recovery.
Evaluating Vacation Plans Against Retirement Savings
It should come as no surprise that travel tops the list for how people want to spend their time in retirement. According to the Transamerica Center for Retirement Studies, 70% of U.S. workers say that travel is their top retirement goal.
Given the realities of the market and inflation, however, travel budgets look significantly skimpier this year. Therefore, your summer travel plans may need adjusting. Try these budget-friendly ideas.
Accepting the New Normal in Travel
Start by recognizing that you may need to put your biggest vacation dreams on hold. Maybe you imagined taking your children and their families to Disney this year, but given the new economic realities, that may not be the most practical choice right now.
That doesn’t mean it’s completely off the table. At some point, markets—and your portfolio—will recover, and you’ll have more money to work with. Markets traditionally rebound after downturns; however, in the meantime, protecting your portfolio by cutting down on expenses is wise.
Finding Creative Ways to Save on Summer Fun
Once you acknowledge that summer 2023 won’t be the extravaganza you envisioned, focus on creative ways to save.
- Instead of a luxury resort, consider a seasonal membership at a local water park for afternoons with the grandkids.
- Rather than hiking the Himalayas, purchase an $80 National Parks pass and appreciate America’s natural beauty.
- Put a hold on your Disney vacation and explore local county fairs; you might enjoy funnel cakes instead.
For people who are determined to travel abroad, consider booking for the fall. Traveling to Europe in summer is often expensive, but waiting until fall can significantly reduce the price. Conversely, traveling to South America, where it is winter, is cheaper during the Northern Hemisphere’s summer.
Exploring Savings and Discounts for Seniors
Seniors can take advantage of multiple discounts for hotels, flights, and trains. Here are some notable discounts:
- Best Western: Those 55 and older can receive a 15% discount on hotel rooms.
- Marriott: Seniors 62 and older can enjoy discounted rates on accommodations.
- British Airways: AARP members can receive up to $200 off round-trip flights.
- United Airlines: Passengers who are 65 and older may be eligible for discounts on select flights.
- Amtrak: Passengers 65 and older can get a 10% discount.
Looking Ahead to Future Travel
The compromises you make this year aren’t permanent; they will help preserve your purchasing power for future ventures. When markets stabilize, and withdrawals don’t heavily impact your savings, that will be the time to explore the vacations you’ve been longing to take.
As for my family, we’ll have to do a bit more planning as we map out our road trip this year. This means less flexibility as we aim to reserve the most affordable sites early on, potentially sacrificing some of the more luxurious camping experiences. Nevertheless, what I won’t skimp on—nor should you—is creating memories with family, no matter where this summer leads us.
Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation or the fees and expenses associated with investing.
Disclaimer
This article was written by and presents the views of our contributing adviser, not iBestTravel’s editorial staff. You can check adviser records with the SEC or with FINRA.
