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  • Nancy Webb

Are You Sure You Want to Save Those Unused Days of Vacation for Retirement?

Updated: Jan 8, 2023

We don’t have to wait until we retire to feed our travel bug. While there is something to be said for delayed gratification, there are also plenty of reasons why we shouldn’t wait until retirement to start traveling.


Take a Vacation Not a Guilt Trip


Americans have been notorious for not taking vacations. Workers have been afraid that somebody might be vying for their position, and that their boss might perceive them as slackers, or not being seen as team players.


The trend of workers taking vacations also termed as Personal Time Off (PTO.) is creeping up. In 2018 more than half of American workers ended the year with unused PTO amounting to more than 700 Million PTO days on the table. Fast forward to 2022, when almost 60% of us took time off from work to go on vacation for at least a week, according to a survey by Allianz Partners USA. The negative stigmas that workers have associated with taking their allotted PTO days are losing their power as employers recognize that if employees take more and longer vacations, they will be less likely to join the Great Resignation.


The Risk of Declining Health


As rational human beings, we understand the reality is that death is the only thing certain in life. There is no way of knowing how long we will live or how long we will remain fit and able. That’s why it is best to live each day like it is your last. Have you always wanted to cycle through Ireland or make the trek to Machu Pichu? What about snorkeling the Great Barrier Reef or hiking in the Colorado Mountains? Leaving retirement aside, who knows when we will still have the mobility or even the energy to start traveling? There is no time like the present – so get out there while you can!




Everything is Getting More Expensive


In addition to the increased risk of health problems, there is the I word – Inflation. Just as it is at home, transportation, hotels, food, and services are steadily getting more expensive out in the world. Airfares are at record highs, hotel prices are volatile, car rental prices have skyrocketed, and food prices are creeping up according to Nerdwallet. Travel Insurance Rates also increase as we get older. Travel Insurance Premiums remain relatively flat for travelers ages 1 – 30, but then the cost begins to climb. The most dramatic increase occurs between ages 60 – 80. Please don’t shy away from purchasing Travel Insurance – the average policy rate for a 55-year-old is less than $175. I always purchase a policy and have already recouped years of the expense with just one claim, and I was pleasantly surprised by the easy process.



The World is Changing


After living through the past couple of years, it is not so hard to believe that the world will change drastically by the time you retire. How about a worldwide Pandemic, political unrest, war, conflict natural disasters, or the Political turn of events worldwide? It’s not an unreasonable thought that situations can change in a second and prevent you from getting to your dream destination. I have personal experience with what can and will continue to happen in the world. I traveled to Egypt with Overseas Adventure Travel in December 2009. In early 2011 the Arab Spring was spreading across Northern Africa including Egypt. The Arab Spring was a wave of protest, uprisings, and political unrest during which the US Department of State issued a Travel Warning that recommended that U.S. citizens avoid travel to Egypt due to ongoing political and social unrest. However, the conditions have improved, and travel is somewhat safer to that region. As I watched the events unfold, I felt very fortunate to have made the trek before the upheaval and was able to see what I consider some of the most fabulous examples of human civilization past and present on this planet.


The effects of climate change (whether natural or man-made) are also having a huge impact, with more animals going extinct, degradation of coral reefs, extreme flooding, and extended heat waves and droughts. Yes, most of us – including governments, nonprofits, and universities are working on solutions at a frantic pace to solve the consequences of climate change – but, inevitably, some islands and coastal cities may not be accessible if you delay your trips until after retirement.


What if the Money Runs Out?


Life happens before you retire and after you retire. Lots of unexpected events can wreck your financial plans – such as getting divorced, losing your job, wrecking your car, expensive home repairs, unexcepted medical costs, or the rising cost of everything. Any one of these events could delay your retirement date or mean retiring earlier than you planned – with of course less money to use towards travel. It is also easier to recover from a financial setback while you are earning a paycheck. So why wait – why not travel now when your income is more predictable?


Should I Save my PTO for Retirement?


Some employers have a “Use it or Lose It” policy regarding their annual PTO. As per a study from SkyNova - employers that have embraced this policy are reaping the rewards for employers and employees both, in terms of less liability on employers, increased productivity (44%), and happier employees (42%). Tech company FullContact puts their money where their mouth is – they give each employee $7,500 to go on vacation as long as they follow three rules:


· Every single employee has to go on vacation.

· They must disconnect (no peeking at emails.)

· They can’t work while on vacation.


What Are Your Options When it Comes to Unused PTO


Despite the research, there are still employers that allow employees to accrue PTO. You can either:


Cash it out:


This option allows you to receive a lump sum payment on or around your retirement date. This may seem like the most intuitive option, as you will receive a nice windfall check to start your retirement. You may plan to use the money to assist in the purchasing of a vacation home or buying a red convertible. Yes, receiving an immediate cash infusion to start your retirement adventures could be one of the biggest benefits of cashing out your accrued vacation days.


However, be aware of the tax consequences of cashing out. Combining a sizeable cash-out lump sum with your usual paid compensation and bonuses could move you into a higher tax bracket. Please know that there are strategies to minimize the tax consequences – I recommend you do your research for your particular situation and that you consult a CPA that specializes in Personal Income Taxes to see what is best for your particular situation.


Benefits of Using Your PTO Before Retirement:


This option allows you to get the value of the vacation time you have earned by taking it before your official retirement date. This is where it gets good. Using your vacation days before you retire can push out your official retirement date into a different calendar year. Once that occurs, you will be eligible for a new year’s worth of 401(k) contributions, from your own savings efforts as well as from your employer. Then there are the Social Security benefits that come with delaying your retirement date. Using your vacation time rather than cashing it out allows you to retain eligibility for other company benefits such as employer-provided health insurance.


Why Travel at All?


I consider traveling an amazingly underrated investment in ourselves. As we travel, we are exposed to new people, cultures, and lifestyles. With all the newness that comes along with travel, it opens us up to new insights and a different perspective on seeing the world and day-to-day living. If you’re feeling stuck on what you want to do with the rest of your life – travel - you will be surprised about what you discover about yourself.

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