The first step in planning for retirement involves forming a clear vision of the lifestyle you want to enjoy in retirement. Often that means pulling up stakes and moving to another location in the United States or abroad – choosing your new home based on tax-friendliness and other factors. But other retirees choose a very different lifestyle: traveling around the world permanently aboard a cruise ship. If you’re considering this option for retirement, there are some important financial implications to keep in mind.
What Is the Cost of Retiring on a Cruise Ship?
Living on a cruise ship in retirement could be a cost-saving measure for seniors who may be working with a smaller financial nest egg.
“A cruise ship retirement has the potential to be more affordable than a standard retirement, if you were comparing it to living in a retirement home or assisted living community,” says Tricia Tetreault, financial analyst for Fit Small Business.
There are two ways to consider the costs of spending retirement on a cruise ship. The first is what you might pay if you’re booking cruises consecutively and moving from ship to ship.
According to Cruise Market Watch, a website that provides statistics about the ocean cruise industry, the average person spent approximately $212 per day aboard a cruise ship in 2018. This included the ticket price and on-board spending for food, entertainment and miscellaneous purchases. Based on that number, the average cost of living aboard a cruise ship year-round would total a little more than $77,000 for retirees taking a nomadic approach. So if you were planning to spend 20 years in retirement, you could spend $1.54 million to live on a cruise ship.
To put that cost in perspective, the average 65+ household spends $49,542 annually or around $135 per day, according to the Bureau of Labor Statistics. Over a 20-year retirement window, that amounts to $989,040. When you compare the numbers, cruise ship living obviously looks more expensive. That’s assuming, however, that seniors are indeed paying $212 or more per day to live aboard a cruise ship full-time.
Buying a Cabin
The cost could be lower for seniors who establish themselves as permanent residents aboard a cruise ship. There are several cruise lines that allow travelers to purchase an apartment or condo onboard, with food and other amenities included.
Storylines, for example, is a newer cruise line offering retirees and other travelers the opportunity to purchase onboard condominiums starting at around $352,000 for 172 square feet. At the high end, Storylines offers permanent residences starting at $3.2 million for up to 1,690 square feet. The purchase price includes all meals and beverages for residents, laundry service, onboard gratuities and laundry service. The cruise line also offers an onboard fresh foods market for residents who prefer to prepare meals themselves.
Assuming that retirees pay cash for an all-inclusive condo that includes meals, rather than financing it over the long-term, that could substantially lower the cost of living. You do, however, have to factor in the annual assessment fees. These fees cover things like ship maintenance, supplies and staff salaries. With Storylines, the average daily assessment fee ranges from $70 per person to $205 per person, based on the choice of condo. At that rate, the yearly cost of living onboard permanently would range from $25,550 to $74,825.
An alternative to booking back to back cruises or buying a condo is booking long-term cruises. Oceania offers 180-day cruises around the world with fares starting as low as $35,899. That fare includes meals, beverages and other amentities onboard, as well as airfare to the ship’s port. Assuming two cruises booked per year at that rate, the annual cost of retiring on a cruise ship would be $71,798. That, indeed, looks like a cost-saving over a traditional retirement – assuming you’re okay with having less space to yourself than you would on land.
Of course, if you decide to keep your home while living on a cruise ship, it would change those numbers. And even if you sell, you may have to account for other land-side expenses, such as storage for personal property or vehicles, or debts you may still be paying off.
What About Paying Taxes?
“As a U.S. citizen, your income is still taxable, even if you’re at sea the majority of the time,” Tetreault says. That includes both federal income tax and state income tax if that applies to the state of your primary residence.
If you’re receiving Social Security, some or all of that income may be taxable if you also have earned income. Working a regular job while living aboard a cruise ship probably isn’t likely, but you might be making money from an online business.
Even if you don’t have earned income in retirement, you may be drawing income from your tax-advantaged or taxable investment accounts. Distributions from a traditional 401(k) or IRA would be subject to ordinary income tax, while earnings from investments in a brokerage account would be subject to capital gains tax. Living on a cruise ship wouldn’t change your responsibility to file a tax return. Not filing at all could result in some steep tax penalties.
Planning Your Insurance Needs
On the insurance side, the most important kind of coverage to have would be health insurance. At age 65, you’re eligible to apply for Medicare coverage. But Medicare may not always cover you on a cruise ship. Generally, Medicare only applies outside the U.S. in situations where:
- The doctor is allowed under certain laws to provide medical services aboard the cruise ship
- The ship is in a U.S. port or within 6 hours of a U.S. port when you receive services
If you’re more than 6 hours away from a U.S. port, your Medicare coverage wouldn’t kick in. You could maintain a private health insurance policy as a supplement, but you’d need to read the fine print. Make sure your coverage includes any treatment that a cruise ship’s physician may offer.
When weighing the costs of health care, it’s important to think about your overall health. Having a serious medical condition or certain risk factors for developing one, for example, could increase your cost of care. This applies both on and off the cruise ship.
“In the event that you have a medical emergency that requires you to be evacuated from the ship, the expense could be astronomical,” Tetreault says.
One solution is to purchase cruise travel medical insurance. This can help you manage these types of costs if they become necessary. According to online travel insurance company Squaremouth, this coverage typically costs around 5 to 7 percent of the trip cost when purchased through a third-party insurer. Cruise lines can also offer their own travel insurance, which includes emergency medical coverage.
Something else to keep in mind is the quality of care you could receive on a cruise ship. Ships are required to maintain medical staff on-call 24/7, including at least one physician. That’s reassuring for emergencies but if you have a non-life threatening condition that requires specialized treatment, that may be more difficult to come by on the ship.
Other Considerations to Keep In Mind
Living on a cruise ship year-round may mean being away from your family and friends for long periods of time. Your cruise dates may coincide with major milestones such as graduations or births. You may miss out on being present for those events.
It’s important to think about how you’ll stay connected with the ones you love back home. For example, you may arrange a weekly Skype call, or stay in touch via email, text and online chats. At the same time, consider how you’ll expand your circle once you’re aboard the ship.
Cruise ships can offer recreational activities so that you have a way to stay active while engaging with other passengers. As you compare cruise lines, consider what opportunities for socializing they provide.
Also, take into account the broader list of amenities to determine whether a cruise line offers the features that interest you most. For example, you may be looking for an on-deck walking track, gym or yoga studio so you can keep up your fitness routine. Or you may want a cruise that allows you to pamper yourself with regular spa treatments. You’ll want to look at everything to make sure it fits with your vision for retirement.
Tips on Planning Your Retirement
- Run the numbers using a retirement calculator to see how much money you may need to cover your retirement expenses. This will give you a sense of how to save in order to reach that target.
- Consider meeting with a financial advisor to discuss your retirement plans. An advisor can help you plan for taxes, make a retirement income plan, and ensure that your nest egg grows enough to meet your needs. Don’t have an advisor yet? The SmartAsset financial advisor matching tool can connect you with up to three advisors right in your area.
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