Last Updated on May 27, 2023 by Ellen
Last Updated on May 27, 2023 by Ellen
A reader asked us, “Do you need a million dollars to retire and travel the world?”
We answered!
We break down our opinion and reasons into four parts below.
![breakfast table overlooking the himalayas in nepal](https://www.earthvagabonds.com/wp-content/uploads/2022/05/himalayan-breakfast-1024x576.jpg)
Do you need a million dollars to retire and travel the world?
Part 1: Your money, your plan
We are not retirement planners or financial professionals. Nothing we say should be construed as advice or expert opinion. We have no idea about your overall financial situation. So for us to offer specific advice without complete and detailed knowledge (and the training to do so) would be irresponsible and a disservice to to our readers.
With that disclaimer, our first suggestion is that you sit down with a certified financial planner – an accredited retirement finance expert. Have that individual analyze your overall financial picture in regard to your early retirement plan.
Theo’s example
Theo paid a well-regarded retirement planner $1,000 for a one-time review of his whole ‘financial life’ about one year before he stopped working.
He submitted all bank and investment and retirement account statements, outstanding loans, mortgages, credit card balances, pension statements, life insurance, expected rents – everything. And then the financial planner/advisor did his job.
Of course, the planner tried to ‘up sell’ Theo to become an ongoing paid advisor. Theo declined, but we have not dismissed the idea for continual advisory services in future.
The certified planner produced a report that showed several varying scenarios with Theo’s potential finances, asset growth and depletion, over the next 30 years. In the end, Theo needed to be comfortable with even the “worst” of the ‘possible futures’ before he could retire early.
Theo’s figures didn’t include Ellen’s assets, which were about 25 percent of Theo’s total. With those added in, Theo felt even better about a calculated risk to retire early and travel the world.
![Ellen stands on a tidal sand bar on Boracay Island in the Philippines.](https://www.earthvagabonds.com/wp-content/uploads/2021/09/Ellen-on-White-Beach-sand-bar-Boracay-Sept.-2021-1024x589.jpg)
Part 2: The answer & health care
We want to stress again: we are not financial advisors. We can only offer personal opinions derived from our situation — what we are comfortable with, what we did, and what worked for us.
None of this should be applied to anyone else’s specific situation.
Only a reputable, trained, experienced, certified, retirement finance planner can provide definitive answers regarding any individual situation. The retirement decision is too important to not employ that kind of person.
So, do you need a million dollars to retire early and travel the world?
Personally, we don’t think so.
As a couple, we cannot imagine retiring early with less than $500,000 in assets – minimum. Still, that’s just us.
We are not comfortable divulging all the specifics of our situation. But we will say this: today, we have well over half a million – plus ongoing current rental income, a future private pension payment, investments that will hopefully continue to grow, and standard U.S. social security benefits due at age 67.
Of course, some people believe much more than 500K is required. Others believe less is needed.
Indeed, we know people who live overseas on monthly social security checks of $1,200 to $1,500 — with barely any savings. That is totally scary to us!
It is conceivable that we could live another 40 years. Or more. And with age comes ailments.
We have read many news articles saying an average American couple will spend $250,000 on out-of-pocket health care expenses in retirement. We advise a substantial savings cushion.
Whatever you do, don’t discount your need for health care.
You may be in great shape today. But life is full of unknowns and surprises. Age. Accidents. Cancer.
Ellen was diagnosed with very early stage breast cancer in year three of our early retirement.
![my dcis cancer cells on a slide from the stereotactic biopsy in a foreign country](https://www.earthvagabonds.com/wp-content/uploads/2018/07/my-cancer-slides.jpg)
The point is, health care must be a consideration in your retirement process. And we don’t have any definitive answer. Again, only you can determine what you are comfortable with in this regard.
Travelers medical policies? We have used those. They are more geared toward emergencies. They provide treatment (via reimbursement) then ‘repatriation’ to your ‘home’ for ongoing, serious treatments.
Then what? Obamacare? Deductibles? Where to live/rent? American costs. Eventually, Medicare.
Pay out of pocket? We do that, too. It’s what we did for Ellen’s cancer care. Obviously, U.S. health care is a thorny issue without perfect answers and potentially disastrous consequences. And each year, as we all age, it becomes ever more crucial and necessary.
One thing is certain: keeping in the best physical condition possible is critical in retired life.
![tedly on white sand beach on boracay island](https://www.earthvagabonds.com/wp-content/uploads/2020/09/tedly-white-beach-boracay.jpg)
Part 3: Taxes
We would like to touch on taxes.
Also, first, another reminder: We are not retirement planners, financial industry professionals, or tax experts. Nothing we say should be construed as advice or expert opinion.
The information we share is simply our personal ‘real life’ experience. Readers should get a reputable, trained, experienced, certified, retirement finance planner to provide definitive answers regarding any individual situation. Similarly, we would urge everyone to consult with a well respected tax professional to gain a complete understanding of the tax matters mentioned below, and more.
IRA to ROTH conversions
These can be a HUGE factor in early retirement (and a long term tax savings) if handled correctly. We ourselves have been converting tens of thousands of dollars each year from traditional IRA accounts to ROTH status.
In fact, IRA to ROTH conversions make up the majority of our yearly AGI (adjusted gross income). Our low overall income in early retirement allows these conversions to be done with very small current tax ramifications.
Roth conversions are considered income in the year they are made. Thus, it is far less advantageous to make Roth conversions while still working or collecting substantial income of any sort. Doing so could easily raise your tax bracket and bill.
But when you leave the workforce early, it is very likely your taxable income will plummet. Roth conversions can then be done nearly ‘tax-free’ as long as AGI remains below about $35K for a married couple filing jointly. You likely have just a few ‘low-income’ years between your ‘early retirement’ date and when you can begin accessing IRA/ROTH/401K funds at 59.5 to make best use of this strategy. Do so!
![theo looks at the taj mahal in agra, india](https://www.earthvagabonds.com/wp-content/uploads/2022/12/theo-looks-at-taj.jpg)
HSAs – health savings accounts
These accounts can save money both now and in the future. You can easily investigate the details. And your tax expert can advise you. Some high-deductible ACA/Obamacare health plans are HSA eligible, if you choose to join the exchange. Further, using Roth conversions, as mentioned above, is an easy way to legally manipulate yearly AGI and qualify for ACA subsidies/tax credits. Not everyone can contribute; many health insurance plans are not eligible. But make use of HSAs if possible.
Social Security taxes
There is one taxation ‘downside’ to early retirement that should be clearly recognized: your eventual Social Security benefits are likely to be lower. Social Security benefit payments are calculated based on an individual’s highest 35 years of earnings (and tax payments). Your payout is based on average indexed monthly earnings from those highest 35 years.
If you quit the workforce without 35 years of earnings/tax payments, $0 will be included in the calculations for the years not worked. In addition, the early years of a career are often lower income years — whereas years near retirement are usually more highly paid. A 35-year average would likely be brought down by retiring early.
The Social Security website has more information and an online estimation/calculator tool that can model different scenarios. And retirement planners and taxation professionals can create very accurate estimates of future benefits based on any individual work history.
Rental income & taxes
One final tax topic that we and other early retirees might contend with: rental income & taxes, “depreciation recapture” and capital gains. If you decide to rent your home or property for income during retirement, these issues will affect you – and could potentially be an area of unwelcome confusion/surprise.
Again, consult a tax professional for a thorough understanding of all taxes related to property ownership, rental, and sales.
![the birth of venus](https://www.earthvagabonds.com/wp-content/uploads/2018/05/florence-uffizi-botticelli-the-birth-of-venus.jpg)
Part 4: In our experience…
Emergency Funds
A few words about budgeting and emergency funds. It’s highly advisable to have easily available additional funds for an enjoyable early retired life – especially early retired travel.
We recently urged a bog reader/questioner to have a minimum of 25% in excess funds available at all times. Take your estimated monthly budget, and add a quarter more.
Expect the unexpected
Bottom line: vagabond travel is fun — and unpredictable. It sometimes requires a budget surplus.
Medical bills, family emergencies, trips home, amazing tour offers, luxury moments, partying with new friends, donations to a needy soul; there are many ways and reasons to blow your budget. And it is no fun to have to pass on once-in-lifetime opportunities. Be ready.
Of course, the easiest way is to use a credit card when needed. But we ourselves make every effort to pay any balances in full every month to avoid finance charges. Still whatever your budget is – it is very easy to kick into ‘vacation mode’ and overspend. Allow for excess fun/spending – especially at the beginning of retirement.
Budget Slow travel in early retirement
We’ve been on slow travel mode for years. We’d like to think we’re pretty good at it. But there are plenty of times we’ve exceeded our budget – and we’re glad we could do so. We worked hard and made sacrifices to retire early and travel the world. It was so worth it!
Here’s hoping the info and experience we’ve had can help you plan your dream retirement – without needing a million dollars.
![Earth Vagabonds Ellen and Tedly stand on a hillside in Morocco](https://www.earthvagabonds.com/wp-content/uploads/2019/09/Ellen-and-Tedly-in-Morocco-on-a-hillside.jpg)
We really do feel lucky to live this lifestyle, and we like to help other people whenever we can.
Hopefully, as more baby boomers and others approach retirement, our blog and information can be useful in some way.
If you feel our experiences might benefit someone you know, please forward this post! Thank you!
Thanks for reading, “Do you need a million dollars to retire and travel the world?”
For more early retirement content, try this post.
To find out if a nonstop travel lifestyle is for you, try this post.
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