Planning your dream retirement trip? Here are 6 key budgeting tips

Most of us have a dream trip in our minds. We cut out pictures of places from travel magazines, add them to our Pinterest boards or make a good old bucket list. But life gets in the way.

Sometimes our work commitments don't allow us to take long leave, travelling with young children is not the easiest, or leaving aging parents alone might not be possible.

What if you could finally travel on your own terms? Retirement is one such time where you can leave all these worries and make your dreams a reality. Proper planning at the right time can ensure a smooth and enjoyable experience.

Here's how:

1. Determine your travel style

The first step is determining your travelling style. To do that, you must figure out if you want to do it solo, with your spouse, or other companions. If you are travelling solo, then you can start planning your travel and finances based on your interests. If you are planning to travel with your spouse, then you need to have a conversation so that it is a pleasant experience for both of you.

You might want to have answers to questions like:

1. Do you want to attend the festivals in that country, or do you prefer to do the typical tourist activities?
2. Do you want to travel in a group, hire a travel company, or do everything on your own?
3. Do you want to travel every one or two months or make a long trip of two or three months?

By answering such questions, you can determine your travel style and plan finances for your travel goals.

2. Estimate the cost of your trips

Next, we need to calculate the total cost of your dream trip.

The cost of your travel will depend on several factors such as the destination (e.g., Europe vs. Asia), duration of the trip, type of accommodation and travel expenses.

For instance, a month-long trip to Europe with your spouse could cost anywhere from ₹20 to ₹30 lakhs.

It’s also important to add the expected inflation rate to make a proper estimate of the amount.

3. Plan for responsibilities at home

If you have dependents, pets, or commitments such as caring for grandchildren or elderly parents, consider how your travel will impact them. Arranging for their care in advance ensures peace of mind while you're away.

4. Build an emergency fund

An emergency fund is crucial, especially when abroad. In case of unexpected expenses, having immediate access to funds is more convenient than relying on family members to transfer money internationally, which can sometimes be complicated and time-consuming.

5. Set up a travel fund & investment strategy

Next, you need to have an investment strategy in place. You have to consider your current financial goals including your retirement planning. Planning your travel after retirement is part of broader retirement planning.

Unit Linked Insurance Plans (ULIPs) are life insurance policies that give the benefit of savings and wealth creation that can help you plan for your retirement and travels.* It invests part of the premiums in market-linked securities such as equity and debt, which helps your money to compound and grow over time.

You can select a policy term between 15 and 40 years with a mandatory five-year lock-in period. However, the longer your policy term, the higher chances for better benefits.

Based on your risk profile, you can select between equity funds, balanced funds with moderate risk, and debt funds with low risks. During your working years, you can invest in high-return, growth-oriented assets such as equities. However, as you approach retirement, you can gradually shift from higher-risk investments to lower-risk options that invest in debt-oriented instruments by switching from equity funds to balanced or debt funds.

In addition, you can choose between single or regular premium payment options. If you are nearer to your retirement, you can choose the single premium payment option. If you are in your 30s or 40s, you can select the regular payment option where you pay an annual premium.

6. Time your redemptions wisely

ULIPs offer you the option to receive the entire maturity amount as lumpsum or in the form of regular intervals. This can help take care of travel goals. In addition, you can also partially redeem your money before the maturity date.

Adventures await

Travelling after retirement isn’t just about seeing new places; it’s about rejuvenating your life. It is about rediscovering yourself, widening your horizons and seeing new possibilities. And, with disciplined saving, a balanced investment strategy, and a transition from high-risk to low-risk options as retirement nears, you can embark on the adventures you've always dreamed of.

Disclaimer: The investment risk in the investment portfolio is borne by the policyholder. The unit-linked insurance products do not offer any liquidity during the first five years of the contract.

Mohit Bahuguna, CDO, Banca Retail, Partnerships, Group, Alternate and Business Development, PNB MetLife