Executive Summary
Many retirees and pre-retirees hesitate to spend money on meaningful travel, even when they have the financial capacity to do so. The concern is often not the trip itself, but the fear that spending may jeopardize long-term financial security.
Behavioral finance research suggests that many retirees underspend during retirement because of uncertainty and fear of running out of money, even when their financial resources may support a higher level of spending (Blanchett, 2014; Finke & Blanchett, 2020).
As a result, some individuals miss opportunities to enjoy experiences they have spent decades saving for.
This article explores how large retirement travel expenses can be managed through intentional planning and monthly cash flow rather than debt or significant withdrawals from retirement savings. Drawing upon concepts from behavioral finance, including Mental Accounting (Thaler,1999) and Loss Aversion (Kahneman, 2011), retirees can develop a practical framework for enjoying meaningful experiences while maintaining financial confidence.
The goal is not luxury spending. The goal is intentional retirement spending.
The Real Question Is Not “Can I Afford It?”
When retirees consider a major trip, the first question is often:
“Can I afford it?”
While this seems like a logical question, a more useful question may be:
“How can I structure this expense responsibly?”
For our recent 18-day Scandinavia trip, which included a Viking Ocean Cruise, we booked nearly two years in advance (Chien, 2026).
By spreading the cost over time, what initially appears to be a large expense becomes a series of manageable monthly decisions.
In economics, this concept is often referred to as consumption smoothing—aligning expenses gradually over time rather than creating a sudden financial shock. This concept has long been recognized as an important framework for helping households maintain stable consumption patterns over time despite irregular expenses and income fluctuations (Thaler & Benartzi, 2004).
What Behavioral Finance Teaches Us About Spending
Behavioral economist Richard Thaler introduced the concept of Mental Accounting, which describes how people naturally organize money into psychological categories or “buckets” (Thaler, 1999).
Although money is technically interchangeable, people often separate funds mentally into categories such as:
- Monthly living expenses
- Healthcare reserves
- Emergency funds
- Vacation spending
Retirees already use this concept intuitively. In our household, we maintain a monthly travel allocation (bucket) within our current income. We do not maintain a formal sinking fund. Instead, travel is simply one category within our ongoing cash-flow plan.
This distinction matters psychologically because Mental Accounting can provide structure and improve self-control when spending decisions are aligned with personal goals (Thaler, 1999). Travel is not associated with:
- Credit card debt
- Market timing
- Emergency withdrawals from long-term investments
Instead, travel becomes part of normal financial life. This is where intentional retirement spending becomes powerful.
Why Flexibility Matters More Than Perfection
Many financial plans fail because they assume life will unfold exactly as expected. Reality rarely works that way. Some months we paid more toward the cruise. Some months we paid less. If unexpected expenses occurred, we adjusted. If additional cash flow became available, we accelerated payments.
The objective was never perfection. The objective was awareness.
Behavioral finance research consistently suggests that individuals are more likely to maintain financial behaviors that are realistic and adaptable than systems that rely on rigid discipline alone (Statman, 2019).
Retirees often benefit more from systems they can realistically maintain than from highly restrictive budgeting approaches that create unnecessary stress.
The Psychology of Using Current Income
Dr. Daniel Kahneman’s research on Loss Aversion demonstrated that people tend to experience financial losses more intensely than equivalent gains (Kahneman, 2011). In retirement, this can create reluctance to spend money even when spending is financially appropriate.
Many retirees feel comfortable watching investment balances grow but become anxious when those balances decline—even if the decline is caused by planned retirement spending. Research examining retirement spending behavior has found that many retirees consume less than financial planning models suggest they safely could, often due to uncertainty regarding longevity, healthcare expenses, and future financial needs (Blanchett, 2014; Finke & Blanchett, 2020).
This is one reason why using current income strategically can feel emotionally different. For our trip, we primarily relied on current cash flow rather than significant withdrawals from retirement assets. That decision created peace of mind.
Psychologically, there is a meaningful difference between using current income intentionally and feeling as though you are continually liquidating long-term assets to support lifestyle spending.
Of course, every retiree’s situation is different. However, understanding the psychological side of spending is just as important as understanding the mathematical side.
Layering Expenses Reduces Stress
Another helpful strategy was separating travel expenses into stages.
- First, we focused on paying for the cruise.
- Next, we addressed airfare.
- Finally, we paid for excursions.
Rather than attempting to solve every expense simultaneously, we layered the planning process.
This approach made each financial decision feel smaller and more manageable. The result was less stress and more confidence.
Behavioral finance research suggests that individuals frequently simplify complex decisions by breaking them into smaller, more manageable components, which can reduce cognitive overload and improve follow-through (Statman, 2019).
Intentional Retirement Spending
Goals-based financial planning research consistently finds that people are more comfortable spending money when the spending aligns with personal values and meaningful life goals (Ameriks, Caplin, Laufer, & Van Nieuwerburgh, 2011).
For us, our Scandinavia trip represented much more than a vacation. It represented:
- Shared experiences
- Learning
- Culture
- History
- Relationships
- Memories
That distinction matters. What ultimately provided peace of mind was not having unlimited money. Peace of mind came from knowing the trip had already been integrated into our monthly financial structure long before we boarded the ship.
Research suggests that individuals derive greater satisfaction from spending when expenditures support personally meaningful goals and life priorities rather than consumption for its own sake (Ameriks, Caplin, Laufer, & Van Nieuwerburgh, 2011).
That reduced financial stress tremendously.
Research Note: The concepts discussed in this article draw upon behavioral finance, retirement income planning, and goals-based financial planning research. While the travel examples reflect the author’s personal experience, the underlying principles are supported by peer-reviewed academic literature cited below.
References
Ameriks, J., Caplin, A., Laufer, S., & Van Nieuwerburgh, S. (2011). The joy of giving or assisted living? Using strategic surveys to separate public care aversion from bequest motives. The Journal of Finance, 66(2), 519–561. http://www.jstor.org/stable/29789788.
Blanchett, D. M. (2014). Exploring the retirement consumption puzzle. Journal of Financial Planning, 27(5), 34–42.
Chien, C.-L. (2026, May 14). Norway Became Our #2 Return Destination in the World | Bergen to Stockholm | Viking Homelands 2026. Retrieved from Spending in Retirement: https://youtu.be/n4Ep0o1kyVI
Finke, M. S., & Blanchett, D. M. (2020). Guaranteed income: A license to spend. Journal of Financial Planning, 33(9), 44–51.
Kahneman, D. (2011). Thinking, fast and slow. New York: Farrar, Straus and Giroux.
Statman, M. (2019). Behavioral finance: The second generation. CFA Institute Research Foundation. https://www.cfainstitute.org/sites/default/files/-/media/documents/book/rf-publication/2019/behavioral-finance-the-second-generation.pdf
Thaler, R. H. (1999). Mental accounting matters. Journal of Behavioral Decision Making, 12(3), 183–206. https://doi.org/10.1002/(SICI)1099-0771(199909)12:3%3C183::AID-BDM318%3E3.0.CO;2-F.
Thaler, R. H., & Benartzi, S. (2004). Save more tomorrow™: Using behavioral economics to increase employee saving. Journal of Political Economy, 112(S1), S164–S187. https://doi.org/10.1086/380085.