For most Americans, retirement is a distant milestone they hope to reach around the same time Medicare and Social Security kick in. These days, however, more and more members of the so-called younger generations are abandoning the notion of waiting until their 60s to live a life of leisure. Instead, they want to live enriched lives today rather than postponing travel and adventures until retirement.
Unconventional? Perhaps. But the idea isn’t as absurd as it might seem at first.
You only have one life; why wait to live your dreams until you’re in your 60s? If possible, why not take a portion of your retirement and enjoy it at an age when you’re capable of doing more? After all, what good is wealth in a wheelchair?
And it doesn’t just have to be travel. You could take time to volunteer. Go back to school. Pick up and master a new hobby.
Of course, these pursuits all come at a cost – especially if you’re taking an extended break from your career. The key is to do it responsibly and have a plan.
That’s where Wealthfront comes in.
Wealthfront is a robo-advisor that offers world-class financial planning tools. Their latest addition to their arsenal of tools is called “Time Off for Travel.” The feature is designed to help users determine whether they can afford to take an extended leave from work to go on a grand adventure.
How It Works
Until recently, most people wouldn’t dream of taking a lengthy sabbatical from their job to travel or just have fun for a year or two. And truthfully, that’s still a financial impossibility for the average person.
But don’t write it off just yet.
If you haven’t tried Wealthfront’s specialized tool, there’s a chance that your dream trip could be closer to a reality than you’d expect!
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If you’re already familiar with Wealthfront, then you know all about Wealthfront’s Path tool. (If not, you can check out our review here!) Path is a sophisticated system that analyzes users’ financial information to generate a detailed overview of their financial future and provide personalized advice to help them achieve their long-term financial goals.
The Wealthfront Time Off for Travel tool is similar, except that it provides actionable advice to help make those extended travel plans a reality.
Here’s how Wealthfront does it…
When you first join Wealthfront, it helps if you link your various financial accounts. Doing so allows Wealthfront to analyze your real-life financial behaviors (e.g., spending habits, debt obligations, savings rates, etc.) to forecast your overall financial future.
With the Time Off for Travel tool, you can input customized information about your potential travel scenario – how long you’ll travel for, your income while traveling, your anticipated travel expenses, recurring bills (e.g., subscriptions, insurance, etc.), and housing costs (e.g., mortgage payments). With that information in hand, Wealthfront can answer complex questions like the true financial impact of taking your dream trip.
The tool spits out the results in plain English. It’ll tell you whether your travel plans are “comfortable,” “manageable,” or “unaffordable.”
Exploring Your Options
Wealthfront says its new travel tool is geared for millennials who are keen about “collecting experiences to collecting assets.” While I don’t care much for being stereotyped as a typical millennial, this characterization couldn’t be more accurate as it relates to my outlook on my financial priorities.
I’m already a huge proponent of Wealthfront’s Path tool, so it goes without saying that I was eager to plug my information into Wealthfront’s Time Off for Travel tool to see how a year-long sabbatical would impact my long-term financial goals.
With that being said, let’s play with some [hypothetical] numbers:
For the sake of this example, let’s suppose I’m 30 years old and have a net worth of $100k.
Rather than experimenting with some far-fetched dream trip scenario, I started with something more realistic – a six-month adventure.
I think I’ll explore Southeast Asia. And I’ll start my journey in February, my birthday month, of 2020.
I estimated that I’d spend roughly $2,000 a month. That seems reasonable for traveling throughout Southeast Asia. Of course, I can change that figure if continued research indicates that it could be more accurate.
In all, my hypothetical six-month trip would cost me a total $12,000.
Discover What’s Possible
According to the tool, I could comfortably afford this type of travel scenario without derailing my long-term financial goals. On the downside, my trip would reduce my hypothetical net worth at age 65 by $300k!
It’s worth noting that the tool defaults to certain settings, but users can adjust those assumptions as they see fit.
For example, Wealthfront assumes that your income will drop to $0. Obviously, earning income while you’re away would significantly alter the tool’s estimates. (The tool also assumes that when you return, your income will bounce back to where it was pre-trip – more on that below.)
The tool also assumes that you’ll continue paying the same housing costs (e.g., rent or mortgage) while you’re away. If you plan to go rent-free or sublet during your trip, you can easily change your inputs.
You can get as nuanced as you’d like by adjusting your inputs. The tool is designed to give you the most personalized recommendations possible. The more accurate your inputs are, the more reliable the results that the travel tool generates will be.
A Few Words of Caution
Wealthfront’s Time Off for Travel tool is incredibly sophisticated. It can account for all sorts of complex economic factors like inflation and Social Security income. But there are some things Wealthfront can’t predict. Like what your career will look like after an extended hiatus.
There’s no secret formula that will tell you whether taking a break is right for you.
The Time Off for Travel tool is a dynamic experience designed to let you explore your options. That’s how it should be used. Not as a magic eight ball that can tell your traveling destiny.
You’ll have the best sense of what your income and earning potential will look like when you return. Just as Wealthfront can’t predict whether you’ll return to a high-paying gig when your travels conclude, it also doesn’t know if you’re the type of person who’ll buckle down and take your career to new levels.
A Few Final Thoughts
Wealthfront’s Time Off for Travel tool does everything it can to take the guesswork out of forecasting the impact an extended getaway will have on your financial future.
Some folks need that person in their life who can be the bad guy that says, “You know, you really can’t afford to…” Others need just the opposite – someone to help them dream big and discover what’s actually possible!
The Time Off for Travel tool can fit either of those roles.
Whatever the case may be, Wealthfront’s tool acknowledges that time is the ultimate luxury.
Whether your dream trip is on the horizon or still years down the road, the prospect of a future trip can be just the thing to inspire you to save a little more, pay down debt and live within your means. For me, that’s an incentive far stronger than preparing for some nebulous retirement that’s still decades away.