Take Vacation and Still Retire Early

mario gets all the babes

Mario knows how to vacation large.

I had a request from a reader to discuss taking vacations in the context of early retirement.

It’s an interesting subject.  After all, we all know that working sucks. (An astonishing 87% of workers are either merely disengaged or actively hate their jobs, so please don’t argue with me here.)  And we also all know that you’ll need some time off in order to keep your sanity over the decade-plus journey to early retirement.   But at the same time, if you want to retire early, you’ll have to enable a high savings rate.  That’s the only way that the math works.

Clearly, these goals conflict, because taking those vacations is going to cost money, and that cash is going to come out of your stash.

The average vacation isn’t cheap, either.  A recent study by American Express shows the U.S. per-person average for a summer vacation was $1,145 in 2013, which brings the total for a family of 4 to a whopping $4,600 for a completely optional expense.

That’s a lot of dough to shell out considering that you also want to stop working forever.   The challenge is to figure out how take vacations that don’t significantly derail plans to retire early — maybe even occasionally taking one that does, if it ends up being worth it to you.   It’s all about creating an equation that works for your own situation.

Technical Stuff:  Vacations and Savings Rates

There’s no getting around it:  money spent on vacations is money not saved for early retirement.  In terms of budgeting, it’s probably best categorized as an entertainment cost.  Everyone’s got an entertainment budget — some acceptable amount of cash to blow on stuff that is fun and makes us feel good.  I go to a few concerts every year.  One of my friends likes to ski.  Another enjoys taking his kids to outdoor fairs.  And this is perfectly okay — you’re frugal, not dead.   Sometimes you need to blow steam or relax.  Still, it’s money spent and needs to be listed as an expense on your budget.  The better you control this expense, the higher your savings rate will be.

So let’s take a closer look at how this spending affects your savings rate.  A refresher:  Any recurring expense on your yearly budget is doing two things simultaneously.

1) Decreasing the amount of cash you have to invest

2) Increasing the amount of cash it takes for you to live on each year.

Put another way, if you’re used to taking 10K vacations during your earning years, you’ll save that much less each year while also creating a need to take 10K vacations in retirement.  How could you not?  You’ve become accustomed to it; doing anything less would feel as though you’re depriving yourself.

Even relatively small changes to your saving rate can make years of difference in terms of how long you have to work before saying goodbye to your employer.  Play around with the mustache-calculators for a while and you’ll quickly see what I mean.

Example Time

Let’s say Janice is the single earner in her family of 4.  She makes 100K and pays about 25K in taxes when it’s all said and done.

We figure out her savings rate with the following formula:

(pre-tax savings + post-tax savings)/(gross income - taxes)

She contributes 17.5 K to her 401(k), another 5 to a Roth IRA (post-tax), and an additional 15K into taxable accounts, making the total yearly savings 37.5K.  Plugging the numbers in we get:

(17.5 + 5 + 15) / (100 - 25) = 50%

Janice’s family has a savings rate of 50%. Let’s consult the chart.

Savings Rate and Years to Retirement

Rate Years
45% 19
50% 17
55% 14.5

At a 50% rate, Janice has seventeen years to work before leaving her job.

What happens when we add a 5K vacation expense to the annual budget?  Her savings would drop from 37.5 to 32.5 as she’d only be able to contribute 10K into her taxable account, down from 15.  Let’s plug those numbers into the equation again:

(17.5 + 5 + 10) / (100 - 25) = 43%

Consulting our handy chart again, we see that a 43% savings rate translates into about 19.5 years of working, up from 17.  Janice will have to work an additional two and a half years in order to fund a 5K annual vacation.

Is it worth it?  Only Janice and her family know.  If Janice doesn’t mind her job too much, and those vacations are absolutely awesome, maybe.  On the other hand, if Janice cries herself to sleep every night because she hates her industry so much, maybe it’d be worth exploring cheaper vacation alternatives.

Keeping Costs Down

5K is a lot of money for a week of vacation for a family of 4.  You can get this number down by travel hacking and looking into slow-travel style vacations.  Punch those search terms into google and you’ll find some good stuff.  I’m partial to the Mad Fientist’s guide myself but there are plenty of others.

Cutting the cost of that annual vacation by 50%, from 5K to $2,500, would put Janice at a 47% savings rate, saving her about a year and a half of work in the process.   Chances are good that there’d be virtually no reduction in the quality of their vacation.  Some people get so good at travel hacking that they reduce vacation costs even more.  If you could get that number down to 1100 or so, what would be stopping you from taking two vacations a year instead of one?

Nothing.  That’s exactly why people do it.

Alternatives To Traditional Vacations

Most people think of travel when they think of vacationing — getting on a jet plane and ending up in an exotic place of luxury.

But this isn’t necessary all of the time.   Think about your goals for your time off work. Maybe all you need is a change of pace.


This wince-inducing phrase gained popularity back in 2008 when the markets were taking a huge dump and people were learning to cut back on expenses.   But just because it sounds idiotic doesn’t mean it’s not a viable alternative to travel and traditional vacationing.  So what if the first image your brain conjures when you hear this word is an indoor cat sleeping on a windowsill?  You are an outdoor human and can do whatever you like.

The challenge is to create activities that you’d never normally do over your typical weekends.  In other words, you’ve got to make it special.  If you’re going to be at home for a week off of work, seek out local things to do that you’ve never done before.  Check out that museum or landmark around you.  Discover new hiking trails that you never knew existed.  Try out a new hobby that you never had time for before, or pick up an old one that you used to love.  If you live near a city, look for special events.  Try some extreme fitness challenge you’d never otherwise be able to do, like biking 100 miles in a day or running  a half-marathon.  Cook some new meals.   Check out a camp site that’s close to you and rough it a little with the family.

Think about taking a reading vacation, too.  There’s nothing like getting lost in that 1000+ page book you’ve always wanted to get to.

Home Projects

Yeah, it initially sounds weird to work on your house when you could be doing something fresh and exciting.  But think about it.  You probably have 3 weeks of vacation a year and are only going somewhere for half of that.  Maybe you could take the spare week and do a home project that you can never seem to find the time for.  This way, you can work at a reasonable pace and enjoy the benefits long after your break is over.

This is the ultimate staycation four-fer because you’ll:

    1. Save money by not traveling
    2. Improve the value of your home, i.e. increasing your net worth and shaving some time off your RE clock
    3. Get a break from the routine of office life
    4. Pick up a new skill

Who’s a big winner now?  That’s right.  You are.


I’m not suggesting that anyone stops vacationing.  Quite the opposite.  You should take each and every single day of vacation your employer provides.

But at the same time it’s important to be aware of the numbers, to remain conscious of the effect that your spending has on other goals in your life.

It ends up being a very simple equation:   Is it worth it to work an additional X number of years in order to take vacations that cost Y every year during your office life?

Put another way, how much longer are you willing to work in order to enable vacations costing a certain dollar amount every year?

The answer to this question will vary depending on your personality, your specific situation in life, and your feelings about your job and industry.  Maybe a 5K annual vacation is worth it because that money buys you so much happiness that it allows you to continue working.  Maybe without those vacations you’d feel compelled to quit tomorrow because otherwise you couldn’t stand the job.

Maybe you don’t even mind your job that much.  But if that’s true, why are you reading this blog, anyway?


Over the course of my 14 years or so working, I’ve mixed things up.

In my 20s I did some travel, most of it domestic: Flordia, Vegas, Disney World, LA.  (Yeah, I didn’t need to go to LA.  Good god.)

It didn’t take long for me to learn that fast travel didn’t give me all that much pleasure.  In particular, after the trips to Vegas, I was left feeling like:  That was it?  Vegas is so incredibly hyped up by the travel and gambling industries that I imagined that my time there would be unceasing debauchery, with the potential to witness random acts of human idiocy practically every minute.   In the end, I found it to be just OK.  Some nice restaurants, some crowds of pretty people here and there, lots of easy ways to blow money.  But at the end of that vacation, I was still me, I had to go back to a job I didn’t particularly care for, and I had 3K or so less in my wallet.

For me, the final analysis was clear. Fast travel is not my style.  I get a lot more out of going hiking or skiing, doing something outdoors or visiting a historical site.

Upping The Geek Factor

This is probably more than you want to know about me.  But I’ve taken video game vacations.

The idea here is that you look forward to a release of a highly anticipated game and coordinate time off work to coincide.  Viola — the game comes out and you actually have tons of hours available to dump into it.

Most recently I did this with The Legend of Zelda:  Twilight Princess on the Wii, back in 2007.  And yes, it really does feel like a vacation.   Mentally I wasn’t on planet Earth — I was exploring Hyrule.

More, You Fool!  Give Me More Geek!

OK, okay already.  Just stop yelling at me, will you?

The truth is that I’m waiting for science to unlock the secrets of memory replication and information storage in the human brain.

Once that’s done, we’re just a stone’s throw away from implanting experiences into ourselves, like Total Recall.

Video game vacation

Give me memories that replace all of my office-life experiences, please.

This is ideal because, if it’s cost effective, it’ll make travel super cheap and probably even more fun than the real thing.

Just hope that they don’t implant memories of playing the Total Recall video game on the NES.  That would NOT be a vacation.

You don't have to be a fan of video games to see that this one sucks.

A masterpiece of suck.

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9 Responses to Take Vacation and Still Retire Early

  1. Thegoblinchief says:

    Our last vacation was just a couple weeks ago. 5 days for a family of 5: $250.

    We stayed with friends, split cooking duty, and did one expensive activity.

    • livingafi says:

      You’re a champ, Mr. Goblin. The last traveling vacation I took was also to a friend’s place. $79 for a flight, a few meals at home, one night out, under $200 for a week, which I thought was pretty good until I read this comment — 5 days for 5 people at $250 is just amazing.

      • Thegoblinchief says:

        It was mainly gas (350 miles each way) and $65 for the family to go to the City Museum in St Louis after everyone recommended it to us. Bizarrely awesome place.

        Admittedly our friends took more than their fair share of the food bill, but even if it had been exactly half, it wouldn’t have made us spend that much more.

        And it’s so much better to stay with a friend when there are small kids involved. This way we could stay up late playing board games (one night went till 1AM) while both sets of kids slept. Not only would a hotel have cost a lot more, but it’d really limit the kid-free time since we would have had to leave and put the kids to bed at 9 or earlier.

      • livingafi says:

        Bad-ass. You’re proof that when I say I haven’t completely optimized my life, I mean it. I’ve been a much lazier saver than I could have been.

        Thanks for the tip – I’ll be sure to check out the city museum when I get around to visiting St. Louis. That’s the hometown of my closest friend, so it’s somewhat likely that we’ll head down there in the future.

        BTW, it’s better to stay with a friend even if you’re an adult, IMO. Late night conversations seem to have a different texture — sometimes you get a different side of the person you’re hanging out with.
        Also, I’m surprised you were able to get the kids to sleep. When we have my nephews over our house for a night, the last thing they want to do is go to bed. I’ve been thinking about getting tranquilizer darts to solve that problem for the next time. I think I’m kidding. Probably.

      • I didn’t say WHEN they got to sleep 😉

  2. Moooooser says:

    Great post!
    It’s only been recently that I really considered FI (although I’ve always been a saver, to an extent). Looking back over the years, I seriously cringe at the amount of money I’ve spent on vacations. Alaskan cruise, Caribbean Cruise, All-inclusive resort in the Dominican Republic, Italy (x3), Germany, Ireland, UK, China, Canada, Sweden, Mexico, Spain, and that ignores my (slightly) lower cost trips within the continental states. Several (~½) of those I was able to eliminate the cost of the flights because I piggybacked them on a work trip. But instead of saving the money, I just did more expensive stuff while I was there! While I’m glad I went on all the trips (each of which created some fantastic memories), I’m not happy about how much money I wasted. Fortunately I’ve seen the error in my ways, and I’m young enough to still correct my course and hit FI well, well before the generally accepted norm. And yes, that still includes some more modest (financially speaking) vacations in the future!

    • livingafi says:

      That’s an impressive list of places you’ve visited and it sounds like you got some terrific lasting experiences. Traveling when you’re young enough to enjoy it is important — it sounds like the cost equation worked for you at that time, but may no longer work for you in the present or future. It makes sense — our wants/needs in life all evolve as we get older. Also I do plan on taking international vacation over the years to come. One of my observations over the years of saving is that it’s critical continue to do things that make you happy — otherwise trying to be frugal will end up feeling like deprivation. And anything that feels like deprivation is hard to stick to. I find it’s more constructive to think of the changes in habits as positive optimization rather than “cutting back” or depriving yourself of something that you want. Spending less will, over time, make you feel better about your current life as well as your future life, and probably won’t even affect your day to day quality of life.

  3. Aaron says:

    Both my wife and I want to travel, but like you’ve said it’s ridiculously expensive. We’ve settled for going to my family’s beachhouse each year because it’s free, while peers have gone to the mountains, wine country, exotic beaches etc. I’ve taken a Dave Ramsey approach to vacations: to live like nobody else we have to first live like nobody else.

    One day when I’m FIRE I’ll be able to travel to my heart’s content, while my peers are stuck in the office. You either get to travel well in your youth or you get to travel, possibly, even better in middle/old age. You don’t get to do both.

    • livingafi says:

      It’s true what you say. A few of my friends took very expensive party-style Euro vacations in their early 20s and I decided not to go. These are the kinds of vacations where it’s good to be single, if you catch my drift [insert_sleazy_wink.] Although there are surely some awesome cross-atlantic trips in my future, my experiences will be very different from whatever they did 12 years ago because I’m somewhat older and married. Still, I stand by my decisions. I’m very close to the finish line while they’re just ramping up their careers. Honestly I’ve never been more satisfied to have stuck to this path.
      BTW, the way you get to do both types of travel is if you are one of a very small number of lucky bastards who inherits a trust fund 🙂

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