BootsnAll Travel Community

Hi Everyone,
I need help making a decision….. I love learning, meeting new people, exploring new places, and experiencing life in all its fullness, and after reading Rolf Potts’ “Vagabonding,” I’ve wanted to take a round-the-world trip for over a year now. The perplexing part of choosing to do so is this: I’m 36 years old, have no commitments or debt other than a 20K student loan, which I can delay payments on for a year and so it’s not a big deal in my eyes. Compounding the decision is the fact that I’m not sure where I want to go in life from here - this is a big factor. I don’t have the money saved to pay for a RTW trip, but can cash out my retirement (Traditional IRA) to pay for it. Yep, that means paying the taxes and the 10% penalty (which stinks), but the reason I’m considering doing so as opposed to just saving for the trip (which would take two years) is three fold:
1. Age/time issue - I’m thinking about a relationship and family, and don’t want to wait much longer (bio clock ticking, age, etc).
2. Life direction change ? - I’m not sure where I want to go from here in my life. (Yes, I’ll admit it, I’m confused about this and yes I realize it affects the whole family idea too.) And I think a RTW experience may help guide me or provide some insights.
3. I can replacement my retirement - Yes, I know, I know. Cashing out my Traditional IRA is a bad choice, but it’s also the age/time issue that I’m focused on. I’m young enough to replace the money and the two years I would spend saving money for the trip might be better invested in a different endeavor (i.e. a new path in life).

I don’t know...maybe, I’m just over analyzing the situation. What does everyone think?

thanks,
Jay

I'm not sure I'd be comfortable cashing out a retirement fund at your age. I'm a big fan of saving for a trip - it means that coming home is less stressful, since you're not having to face up to financial irresponsibility.

If you really need to go now, it might almost seem better to borrow the money - interest as opposed to penalties and taxes...if you get a decent rate and pay it back reasonably quickly, it should work out better. It's not the ideal solution, but seems better than cashing out your retirement.

AmazingJulesVerne,
Sorry for double posting my question. I wasn't trying to spam the boards or anything. I just didn't know which topic to put it under, so I thought I'd try both.
best regards,
Jay

When in doubt, go for the Members Forum.

Ok, I guess I'll post my answer here too:

If you cash out your retirement acct right now, you will not only pay penalties and taxes, but will prob not get as much for it as you've put into it. With our down economy, I'm sure there are some substantial losses to your IRA (especially within the last quarter).

That being said, I would think twice about funding your trip that way. Anyone with over 20 years until retirement should keep investing in their retirement accounts and ride-out this bad market.

As for your plans to take the RTW trip, I think it's great!! I'm not sure what your financial situation is like--how much you want to spend/how long you want to be gone, but if were you I'd 1) take a shorter trip than you prob would prefer 2)find another way to fund the trip. Not wanting to wait 2 more years is understandable, but how about getting a second job and working hard for the next 9-12 months? Traveling at 37 won't be different from doing it at 36.

You will lose a lot of money cashing out your IRA--without the details (how much you have, what funds you're invested in, how much you currently make, how much you want to spend on your trip) I couldn't give you more than general advice, which is: don't touch your IRA.

2Wanderers & Wildcat1982:

Yes, I fully agree raiding my IRA is a poor choice. Again, it's that time factor that's egging me on. Ugh! I thought about borrowing (even from family and paying them interest), but no luck given the current economic situation. Thanks for the idea though.


Wildcat1982:
Sorry for the confusion. I didn't know where to best post my question. Anyway, luckily I changed my investing strategy a couple years ago, so my funds have actually gone up (some) not down with the current events. Of course, that doesn't negate the poor choice of raiding an IRA.

My RTW trip is to be 1 year long and I figure I would take 30,000 US (or about $82/day) for a wide variety of stops (Central & S. Amer., OZ/NZ, China, Russia, West & East Europe, Ireland, England, and few more if possible). This 30K would not include airfare, but would include all other expenses (visa costs, lodging, insurance, etc). And yes, the 30K would be the net amount that would come from my IRA, and would pretty much kill it. I like to do fun activites like scuba, rappeling,etc when I can.

And yep, already thought about the working 2 or 3 jobs route. Eitherway, I'm looking at two years until I could save enough to go on the trip. Maybe I should just stop worrying about the whole age thing and just save and go.

Love your signature quote!

O.K. I have children older than you and if you think the travelin' bug just goes away...think again. I agree that you shouldn't cash in your retirement account. Some day it may fund your travels. Save up, even for a year or two, the world will still be there.

I agree with the others. This is about the worst time to cash out your IRA in the last 80 years. You think you can replace it, and you probably can, but you're going to be losing out on years of compounding interest that down the road will probably equal a few hundred thousand dollars.

I think you're better off waiting a year and saving up. Maybe give yourself one year to save and go with whatever it is you have. Don't fixate on the $30k number so much. That is more than you really need.

Let me chip in here as it touches base with me a little.

quote:

1. Age/time issue - I’m thinking about a relationship and family, and don’t want to wait much longer (bio clock ticking, age, etc).

At 36 this is a question many people ask in your context. It's one that mulls around my head a lot too. I think the answer is to be happy within yourself first. If your don't have that, then family suffers. If travel is apart of that, then you know what needs to be done. Asides from that, you might meet someone on the road.

quote:

2. Life direction change ? - I’m not sure where I want to go from here in my life.

You pretty much answered that one yourself!

quote:

I’m young enough to replace the money and the two years I would spend saving money for the trip might be better invested in a different endeavor (i.e. a new path in life)

I won't tell you what to do with your money. But, life is for living. I would go for for it mate. By the time you retire, your bank might have collapsed anyway (joke). But really, so long as you have something to come back to. Family, friends etc you will be alright.

you might want to have a look at this blog on someone who packed up all and left on a similar quest.

I wish you the very best either way.

Dave

Thought about "Working Holiday"?

just putting in my two bob's worth.

I say do what your instincts tell you to do. You only live once (well, according to most theological systems of belief). I'm 39 and planning to do my RTW in five years time. Family and kids aren't an issue for me since I'm a hard-core bachelorette, but I want to do this without a loan or credit cards. Figure out what's really REALLY important for you, and the rest will fall in place.

Thanks for all the help and suggestions everyone!

Backlasher: Yes, travel is super contagious. It will be a life long passion of mine.

Skobb: I agree it’s the worst time to cash out. Luckily, a few years back I changed my investment strategy, so my investments have actually gone up. Of course, this doesn’t negate the ramifications of withdrawing from an IRA. And ya, I figured 30K would give me a little cushion and options to do some extra things.

Daveontheroad: Thanks for the encouragement and blog link. I read about Greg and can relate in terms of finding ‘my place.’ I hope he finds it.

Mim: Yep, considered that. It’s still an option. Some of the challenge is I’m not sure what I want to do in terms of work.

Canadian Bacon,
Thanks for the encouragement. It’s funny you should mention instincts. My brain is saying, “Don’t cash out your retirement, you’ll be losing that compound interest, especially over time.” And then another part of me (I guess my gut/feelings) is saying, “I want to go and just see what’s out there. It may just help me find my way and maybe even help me understand myself better. And yes, I’ll be losing out on compound interest, but what is more important my time or money?” …sigh… It would appear to be a battle between logic and instinct with both sides weighing in heavy.

Thanks again everyone,
Jay

quote:

“I want to go and just see what’s out there. It may just help me find my way and maybe even help me understand myself better.

It will help you understand yourself better. It'll put things in perspective....no doubt about it.

You shouldnt look at it as having to choose btwn keeping your IRA or seeing whats out there. You can do both, it'll just be a lot harder to do, and take more sacrafice. No pain no gain right.

Wildcat1982,

Thanks again for your advice. Sometimes it seems so easy to get confused and even lost in this crazy world of ours. It's nice to be able to chat with others who understand and have similar interests. I must admit reading your travel bio gave me a sense of peace knowing I'll be 'out there' eventually not matter what my decision. It also reminded me of the excitement that awaits as I too want to 'experience it all.' 20+ countires is quite impressive! You must have some great stories to tell. I'm curious now...how long have you been traveling? And how do you support your travel 'habit?'

cheers,
Jay

I say go for it. Maybe you'll get lucky and die on the trip and won't have to worry anyway. Just kidding, but tomorrow is promised to no man and maybe you will get lonely and come back early with some of your moolah and can put it back in in time for no penalty. Worrying about money is a bore. I do too much of it myself, but the world is full of lpossibilities, rich widows, and biz opportunities so enjoy

charlie

Ok, my two cents. I'm a couple years older than you, and quit my job a year ago to do some traveling. Like you I was also looking for some life direction. And oddly enough I also had about 20,000 in student loans. The only difference is that I had savings I could draw upon to fund my travels. So....here are some somewhat random thoughts....

1) Does your trip have to be 12 months? If you're feeling the urge to go now or sometime soon, what's wrong with a six or an 8 month trip? Yeah, you'll have to cut a few places out but that may be a better alternative than waiting or blowing your entire retirement account. Along the same lines, I would suggest focusing on less expensive countries/places. You've got a fair number of expensive places on your list.

2) You mentioned wanting to have a family/kids someday. Of course, your biological clock isn't really ticking though I can understand wanting to get married, have kids, etc., sooner rather than later. That being said, cashing out your retirement account now, will have financial implications for you and your family later on. Imagine this conversation "Gee honey, I'd love to retire early and move to the Caribbean to spend our golden years in bliss. But you know, I blew my retirement account a while ago so I'm going to need to keep working for the next 20 or 30 years." Obviously you need to balance your current needs with your potential future desires. And blowing your whole retirement account will definitely impact your later life.

3) If you're looking to shake things up a bit and perhaps "find yourself", then my suggestion would be to do things that you wouldn't normally consider doing. Maybe that's spending a couple of weeks at a meditation center, or a week by a beach doing nothing but reading a book and talking to no one, or perhaps a month volunteering to teach English to poor children. Consider what it is you're trying to figure out about yourself and what activities might provide those answers.

Good advice, EMH. Jay, you have many options and I would also advise holding on to that IRA. The notion of starting from scratch in a year or more may seem acceptable now, but it will really hurt later on.

What if you're injured? What if you get ill? You may need that money for some non-discretional spending. I'm far from a penhy pincher (probably why I've never managed to drop it all and travel for any length of time), but I have been safeguarding and contributing to my retirement funds consistently (and even as I approach 50 it doesn't amount to enough to retire on).

So my advice is to keep the IRA and save for a couple years. You have time, and you can enjoy the planning while you work.

Mia

Thanks everyone. Sometimes all a person needs is for someone else to listen and share their thoughts. It's amazing how much this can help and yet how it costs so little...Life truly is amazing each day.

Zoomcharlieb...Thanks for the encouragement. I'd love to hear your great story on Santaigo De Atitlan that you would like to share. I love stories (and story telling).

EMH... Thank you, I appreciate you sharing. It is always comforting to hear from someone in "similar shoes." I have thought about shorter trips and less expensive destinations. I may squeeze one in before I leave for the RTW long haul. Regarding family, yep, it's no my clock I'm concerned about - LOL! You make a very good point about the impact on family down the road though. And thanks for the reminder on "shaking things up." I have been a subscriber to that approach for some time now (I love adventure, just like everyone else here at BootsnAll), but with being so focused on this and a few other challenges in life, it has fallen to the way side. I have just now renewed my commitment to keep this way of thinking in the forefront of my mind - thanks again! I guess we all need reminders from time to time. What would we do without friends?!?!

Miamc...You make many good points. Thanks! I have decided to leave my IRA alone and instead work to save the money up. I just have such a desire to get out and travel! It's eating me up! I guess I need to use that energy to work, save and do a little planning....too much planning takes all the fun out of adventure!

Thanks again everyone! Having fellow travelers that help you along when you need it is one of the best parts of life and travel. It makes them so much more rich.

I did the year away and I had $20k in student loans.

I say this to most people. I LOVED my trip. LOVED it. However, if I would have known how hard things were going to be financially when I returned, I don't know if I would have had the nerve to go in the first place. And I didn't incur any debt on my trip.

Yes, find a way to go. Do NOT dip into a retirement fund. My advise is to save up as much as you can, and then go. If that takes longer, so be it. Try to stash something for afterwards too. Like I said, that was the most painful part for me.

Also, don't expect a trip to totally change your direction in life. You just have to see what happens. Maybe you will have an epiphany, maybe not. Sometimes you need to just let serendipity take over, you know?

PC

I'll second the idea of a "working holiday" and up it a notch to "Why not just get a job in another country?" I can say with a very, VERY high degree of certainty that there are a LOT of people here in Korea teaching English who fall into EXACTLY the same category as you described of yourself. Aside from the recent performance of my poor, worthless Won, generally by being here you can work, live in a foreign country, travel in the country and in neighboring countries easily and cheaply, and at the end of the day EARN a lot more than you spend.

I most definitely also agree that the retirement $$ should be left alone.

I also would like to chime in about the student loan - for the love of all you deem holy, pay it off!!! Get free from debt and you will experience a WHOLE new level of freedom! I promise!

The bottom line is, I think, if you can't afford it, don't do it. (And the retirement money is NOT an option) Sure you might have a few great experiences, but the consequences will probably FAR outweigh the gains. Especially when you CAN pay off all debts and be free in a year or two if you really decide to DO it. Maybe others will disagree, but I think that travel with debts hanging over your head just isn't anywhere near as enjoyable than traveling when you are financially independent.