After hunkering close to home for two years amid the pandemic, Bambi Grilley and her husband are on the move. The Houston couple went to Puerto Rico in January, on a Mediterranean cruise in May, and to the North Sea in late July. In October, they’re traveling to the Amazon and South Korea, and later in the fall they’re planning a three-week cruise from Athens to Mumbai through the Suez canal.
Grilley, 58 years old, works as an associate professor at the Baylor College of Medicine. She doesn’t plan to retire soon, but her husband Kevin, 76, does. On top of Covid-19, a recent cancer scare made Grilley more aware of her mortality. “We’re really trying to make sure we optimize our opportunities right now,” she said. “At the same time, I’m trying to make sure in 10 years we’re not thinking, ‘I wish we didn’t spend that much money in 2022. ‘ ”
The Grilleys are part of a growing number of retirees and near-retirees who are making up for time lost to Covid-19. Financial advisors and travel agents report that their clients have set sail and taken flight, traveling the world despite the bear market, high inflation, widespread air travel woes, and the lingering pandemic. (Amid these headwinds, the strong dollar is a bright spot.) The phenomenon has been dubbed “revenge travel,” and older adults are participating with a keen desire to make memories while they can.
Barron’s brings retirement planning and advice to you in a weekly wrap-up of our articles about preparing for life after work.
“You’ve got the folks who have a new sense of urgency about their bucket list,” said Stephanie Serino, a luxury travel advisor with the Tzell Travel Group, who is currently working from Valencia, Spain. Multigenerational travel is particularly popular right now, Serino said, and many of her retired clients are treating their children and grandchildren to Alaskan cruises and Hawaiian vacations.
Dave Boniface, a financial advisor with Legacy Capital in Forest Lake, Minn., sees the trend being driven by “FOMO versus fear of running out of money.” FOMO is fear of missing out on precious opportunities, weighed against the fear that travel plans might jeopardize their nest egg.
Here’s how financial advisors are helping clients make it work.
High inflation, the bear market, a looming recession and the war in Ukraine have put a damper on consumer confidence. This drumbeat of bad news has made folks feel like they can’t afford to spend right now, advisors say.
Yet grim headlines belie the fact that many households are sitting on extra savings after not spending much during lockdown. This is especially true for households in the the top 10% income group, who make above $188,400 a year, according to Moody’s Analytics: This group saved an extra $117,479 between the start of the pandemic and the first quarter of this year. “They were sheltering in place, not traveling, going to restaurants or ballparks,” said Mark Zandi, chief economist of Moody’s Analytics. “That’s a big part of their budget, so the savings piled up quickly.”
What’s more, the wealth effect is largely still in effect despite high inflation and pullbacks in both financial and housing markets. While inflation has affected all income levels, higher earners are more insulated than lower-income households that devote a larger portion of their income to essentials like food, housing, and transportation.
Investment portfolios are down, but not catastrophically so. The S&P 500 has fallen about 15% for the year, to the same level it was in April of last year. At that time, stocks were on a sharp rebound from the brief pandemic bear market and investors felt flush after 12 years of stellar returns.
Although there are signs the housing market is cooling after going gangbusters during the pandemic, home values are still near all-time highs. Home prices are up 20% over the past year, according to Moody’s Analytics. What’s more, mortgage holders gained $2.3 trillion in tappable equity over the 12 months ending in June 2022, a 25% increase that equates to more than $217,000 in equity available per borrower, according to Black Knight , a provider of housing sector technology and data. Tappable equity refers to the amount available for homeowners to borrow against and still retain at least a 20% equity stake in their homes.
Making a Plan
Even in the best of times, it’s hard for many retirees to flip the switch from saving to spending. “For retirees, more often than not, you need to give them permission to spend,” said Jamie Hopkins, managing partner of wealth solutions at Carson Group, an Omaha, Neb.–based firm that helps financial advisors serve their clients and expand their firms.
Indiscriminate spending can feel scary, though, especially for those who are no longer working. So it’s good to approach travel and other priorities within the context of a financial plan, Hopkins said.
He and other financial advisors run so-called Monte Carlo software simulations that model the probability of a client’s portfolio lasting through thousands of different stock market and inflationary scenarios. Hearing that their money is likely to last through worse conditions than we’re seeing now can give clients confidence that they can travel and do other activities that they missed out on during lockdown, Hopkins said.
The Grilleys’ financial advisor, Molly Ward, starts planning her clients’ retirement income about five years before they stop working. Ward, a certified financial planner at Well Lived Wealth in Houston, an Equitable Advisor affiliate, pays her retired clients on the same schedule as they got paid when they were working. When they have a big expense coming up, she distributes more to accommodate it. “We don’t tell people ‘No, don’t do these fun things,’ ” Ward said. “But we went to make sure they understand what it means.” For some clients, an outsized expense one year might involve some belt-tightening the next. Ward keeps enough in cash to insulate her clients from market downturns, and if they ever worry about their portfolio she’ll tell them, “We have a plan for that.”
For her part, Grilley isn’t sweating the market ups and downs. “That’s not what I want to worry about,” she said. “Covid helped focus us on the fact that you only have so much time to do stuff. Now’s the time to get out and do what you want to do.”
Write to Elizabeth O’Brien at firstname.lastname@example.org