Retirement travel: budgeting for it, and the Medicare gap nobody warns you about

Financial planners often use an informal shorthand for retirement spending: "go-go" years, "slow-go" years, and "no-go" years. The idea is simple. You're typically most active, and travel the most, earlier in retirement. Spending on travel and other discretionary activities tends to taper off later. This framing is a popular heuristic, not a precise statistic — treat the exact ages loosely.

What real data backs up is the general shape, not the folk labels. A widely cited 2014 study by researcher David Blanchett looked at this question directly. It appeared in the Journal of Financial Planning. It found that retiree spending declines by roughly 1% a year, in real, inflation-adjusted terms. That decline is an average; spending tends to rise again late in life, as medical costs take over. A separate, earlier study pointed the same way. It used the same government spending data referenced below. It found that retirees 75 and older spend almost 30% less overall than retirees 65 to 74. T. Rowe Price's own research points the same direction. Using a long-running federal health and retirement survey, it found spending drops roughly 2% each year.

Travel and entertainment specifically show this pattern clearly in the government's own numbers. The chart below compares combined transportation and entertainment spending between two age groups. It's a reasonable proxy for travel and leisure activity.

That's a 38% drop, using the Bureau of Labor Statistics' 2022 Consumer Expenditure Survey. It's not proof any one person's travel spending will fall by that exact amount. But it's a real, government-sourced signal, pointing the same direction as the research above. Budgeting more for travel earlier, and less later, matches how retirees actually spend.

Here's the part that surprises a lot of retirees. Original Medicare, Parts A and B, generally doesn't pay for care you receive outside the United States. Medicare's own guidance is direct. In most situations, it won't cover health care or supplies you get abroad. Part D prescription drug coverage doesn't work outside the U.S. either. Medicare plans simply can't cover a drug you buy in another country.

There are three narrow exceptions to the Original Medicare rule, and they're genuinely narrow.

• You're in the U.S. when a medical emergency happens. A foreign hospital is closer than the nearest U.S. hospital that can treat you.
• You're traveling the most direct route between Alaska and another state through Canada, without unreasonable delay. A Canadian hospital is closer than the nearest available U.S. one.
• You live in the U.S., and a foreign hospital is simply closer to your home than the nearest U.S. hospital. This applies whether or not it's an emergency.

There's also a cruise-ship exception. Medicare can cover medically necessary care if the ship is in a U.S. port. It also covers care within 6 hours of a U.S. port. Medicare Advantage plans are a separate story. Some plans do offer limited extra coverage abroad as a plan benefit, but Medicare itself doesn't guarantee it. Check your specific plan's Evidence of Coverage before you travel.

The Medigap exception worth knowing about

Medigap is also called Medicare Supplement insurance. Overall, most Medigap plans sold today include a foreign travel emergency benefit. That group covers Plans C, D, F, G, M, and N. Older, legacy plans E, H, I, and J carry the same benefit, for people who already hold them. Those legacy plans are no longer sold to new enrollees. However, Plans A, B, K, and L don't include it at all. Where it applies, the terms are specific. The plan pays 80% of billed charges for medically necessary emergency care abroad. That's after you meet a $250 annual deductible, up to a $50,000 lifetime limit.

To make that concrete, picture a $30,000 emergency hospital bill overseas. It's a hypothetical, not an average, since real bills vary enormously by country and treatment.

That $6,200 is the $250 deductible plus 20% coinsurance on the remaining $29,750. It's still real money, but it's a fraction of the full bill. A larger bill can approach or exceed the $50,000 lifetime cap, especially one involving a medical evacuation. That's worth knowing before you assume any supplemental plan covers everything.

The U.S. State Department is unambiguous about this gap, independent of Medicare's own guidance. The U.S. government doesn't pay medical costs for citizens traveling abroad. Medicare and Medicaid don't either. For travelers 65 and older specifically, the State Department "highly recommends" getting insurance. It should cover emergency medical care, dental care, and evacuation.

Two different products cover two different problems, and it's easy to confuse them.

• Travel medical insurance pays for treatment if you get sick or hurt abroad. That includes doctor visits, hospital stays, and sometimes direct payment to the treating hospital.
• Medical evacuation insurance pays to transport you to adequate care, or back to the U.S. It applies if local facilities can't treat you. In a serious emergency, it can be the larger cost of the two.
• Trip cancellation insurance is a different product entirely. It protects your trip cost if you have to cancel, but it usually doesn't pay medical costs abroad at all.

Still, this page won't quote you a premium. Prices shift constantly, and depend on your age, destination, and trip length. Before buying any policy, confirm a few things first. Check that it covers your destination, your full trip length, emergency treatment, medical transportation, and any pre-existing conditions. The State Department's own pre-purchase checklist covers exactly these points.

The Retirement Withdrawal Strategies page covers sequence-of-returns risk. That's the danger of being forced to sell investments at a loss during a market downturn. It happens simply because you need the cash right then. In fact, a big trip is exactly the kind of near-term expense that risk applies to.

That page's 3-bucket strategy offers a direct fix. Money you'll spend in the next year or two, including a planned trip, belongs in Bucket 1. That's cash or a money-market account, never exposed to a market drop. Don't fund next year's trip by selling stocks in the middle of a downturn. Still, the calendar saying it's time to go isn't a good enough reason.

A few things worth confirming before your next trip, especially an international one.

• Check your Medigap plan letter, if you have one. Only C, D, F, G, M, and N, plus legacy E/H/I/J, include the foreign-emergency benefit. Plans A, B, K, and L don't.
• Price real travel medical and evacuation coverage before you go. Notably, this matters most for a trip outside the narrow cases Original Medicare actually covers.
• Confirm your passport's expiration date well ahead of booking. Six months of remaining validity is a common requirement, though not a universal one.
• Fund near-term trips from cash, not from selling investments in a down market. See the bucket strategy on the Withdrawal Strategies page.
• Budget more for travel earlier in retirement, and expect it to taper. Don't assume flat spending for the next 20 or 30 years.

None of this replaces a real quote from a travel insurer, or a look at your own Medigap policy documents. It's a starting checklist, not a substitute for confirming your own numbers. For the bigger picture on the transition into retirement, see the Nearing Retirement page. Use the Retirement Planner & Modeler to see how a travel budget fits into your full plan.