Does the idea of a mini-retirement sound crazy to you?
It might be.
Especially when you’re working full-time, focused on building your financial future.
But consider this.
A mini-retirement may be just what you need to continue working.
Or to finally build the business you’ve dreamt of.
It can give you valuable feedback and the time to create an intentional life.
Read on to see if this might make sense for you, and how to create a monumental mini-retirement if it does.
What Is a Mini-Retirement?
A mini-retirement is a longer than usual time away from work. Unlike a vacation, it’s measured in months versus weeks.
You leave the rat race to catch your breath, but the plan is to go back to work after your mini-retirement is over.
I first learned about this concept in The 4-Hour Workweek by Tim Ferriss. He has an entire chapter devoted to the idea of mini-retirements, and he sees them as a time to reexamine your life, not escape from it as you do during a vacation.
In Tim’s book, he focuses on travel to escape the (United States) rat race and its mindset.
Why travel? Because…
“One cannot be free from the stresses of a speed- and size-obsessed culture until you are free from the materialistic addictions, time-famine mind-set, and comparative impulses that created it in the first place.”
— Tim Ferriss
I haven’t traveled outside the U.S. for more than a week, but I do remember the feeling of school field trips. It was amazing to leave the school walls and see a whole other world out there. It was exciting and energizing to leave my tiny bubble, even for a day.
A mini-retirement gives you the space and time to break out of your bubble. To venture outside your current world. Or venture into your inner world, to think deeply about what you want out of life.
Another version of a mini-retirement is the sabbatical- an excellent option if your company offers them. Taking time off from work helps you renew and come back rested. As this article in Harvard Business Review states, sabbaticals benefit both the employee and the organization, “Extended time off pays off.”
Mini-retirements are expensive, so let’s first look at four significant benefits that make them worth it.
1. Mini-Retirements Offsets a Risk of Traditional Retirement
The traditional retirement model or the “deferred-life plan” has you working full-time non-stop for over 40 years of your life. Then, if you’ve made the right investment choices, and if forces outside your control cooperate, you get to retire and stop work around age 65.
Now, it makes complete sense to make sure that you take care of your older self financially. And as someone who is now my older self, please, please, do. After all, you want to do all you can to make work optional as soon as possible.
But, since none of us know how long we’ll live, taking mini-retirement(s) is a way of hedging your bets, to experience the pleasure and mindset shifts of retirement in small doses.
2. Mini-Retirements Provide Motivation to Achieve Tough Goals
To achieve challenging goals, you need to know your why. As in why are you willing to make sacrifices and delay gratification so you can put money aside for your future?
Experiencing a mini-retirement can provide the fuel by showing you why.
Instead of waiting until retirement to see what the fuss is all about, you can take a taste now. Rather than a theoretical concept, you can make it real and experience a slice of it.
You can’t know what leaving full-time work will feel like until you actually experience it.
Once you taste time freedom, it’s hard to go back to living on someone else’s schedule.
But this can give you a reason to increase your savings and reduce spending so you can hit the real deal, full financial independence [link], much faster!
3. Mini-Retirements Provide Space for Research and Experimentation
You can use mini-retirements to experiment and to try things out. For example, you could use your time for volunteering, or working part-time to see if you enjoy a type of work…or not.
I took time off from work because I didn’t like what I was doing and needed something completely different. I enrolled with a local college to pursue an Accounting certificate. From there, I interned with a startup and started a new career as a management accountant. This led to a 20-year accounting/finance career, one where I not only enjoyed the work I did, but helped me eventually achieve Coast FI.
Mini-retirements can give you the time you need to find work you enjoy.
This helps you design the life you want to live now, not wait until official retirement to figure it out.
4. Mini-Retirements Prepare You for Full Retirement
Full retirement sounds like complete bliss, with its freedom from work and endless stretches of time.
But without a plan, retirement can lead to depression and a feeling of loss. Working provides a structure for our time, a built-in social system, and a sense of purpose.
A mini-retirement will show you what you need to work on BEFORE you make the leap. Depending on how long you take, you may burn through all those “back-burner” projects, then be left thinking, “now what?”
It can also allow you to practice living on your retirement income—to test out the lifestyle before fully jumping in.
In this article, Christine Benz of Morningstar shares her experiences from her “faux-tirement.”
Unless your company provides sabbaticals, taking a mini-retirement could mean quitting your job. Proceed with caution and ask yourself the following questions.
- How quickly can you get another job in your industry?
- How in-demand are your skills?
- For freelancers, how long will it take you to get clients?
- Will time away from working erode your skills? For some careers, even six months away can leave you behind.
- Are you older? According to this AARP article, age discrimination starts as early as age 35 (!?!).
- How are your job-seeking skills, such as interviewing?
- What’s the economy like? Right now, companies are the desperate ones, and the job market is strong. But I’ve been unemployed during a recession, and it’s an awful experience.
- Do you aspire to climb the corporate ladder? Time out of the workforce could mean sliding down that ladder.
- Are you prepared to explain the gap in your resume to potential employers? A gap in my resume almost cost me the best job I ever had.
- Are you ok with the potential impact on your future earnings? If you take time out of the workforce, you may need to restart at a lower salary. (Or you could get a better, higher-paying job if you used the time to gain new skills.)
- Do you want to retire from all work as early as possible? If you’re younger and take time off to travel the world, you have fewer responsibilities and the energy to do so. However, that means lower retirement savings at a young age, which means less time for compounding to do its magic, which could push back your official retirement date.
- What’s more important to you, time or money? Mini-retirements are expensive because you’re not earning money, and they could reduce your lifetime earnings. However, if time is a priority to you, worth every dime.
Extracting the Essence of a Mini-Retirement
So maybe a mini-retirement wouldn’t make sense. It may be completely impractical, especially if you’re an executive at a large corporation (without sabbaticals).
However, could you use your vacation time to experience the essence of a mini-retirement?
Maybe negotiating a two-week vacation would help? Or, if you’re a freelancer or solopreneur, can you press “pause” on your business or reduce your hours for a few weeks?
Two weeks won’t have the same effect, but you could use that time for self-reflection.
Instead of running around trying to cram a bunch of activities into a vacation, perhaps take time to do…nothing. Let yourself experience boredom, and see what comes up.
Or, if starting a business has been your dream, take the time to create a business plan. Think through what you need to do to make that a reality in your life. Use your time off and your weekends to move forward.
Skim through steps two and three in the next section to see what you could do in your current spare time. This is how you could extract the essence of a mini-retirement, even if it isn’t practical right now.
How to Take a Stress-Free Mini-Retirement
If you work with a financial professional, talk to them since they know you and your personal situation. This is for educational purposes only and is not financial advice! Getting the money part right will make the difference between an enjoyable, intentional mini-retirement and the potential for gut-wrenching stress.
Ok, that said, here are three steps to maximize your mini-retirement.
1. Create A Financial Checklist.
Here are some financial things to check off your list before taking a mini-retirement.
Living Expenses Saved in A Risk-Free Account
This is the minimum amount you’ll need. You need to know your average yearly expenses, divided by 12, multiplied by the number of months you’re taking off.
Depending on what you’re doing with your time (relaxing at home versus traveling internationally), the expenses will be more or less but start here.
So, if you want 6 months off and you need $3,000 a month for your living expenses, you’d save up at least $18,000 to cover your expenses during your mini-retirement.
Here’s where frugality helps because the less you spend, the less you need to cover!
You’ll want to circle back to this one after going through steps two and three below.
Because you’ll also want to set money aside to fund your adventures during mini-retirement. For example, money for travel, courses, or a career or business coach. It all depends on your plan.
You’ll also want an emergency fund for unanticipated crises.
If your fund already includes savings for potential unemployment, you can skip the next item.
Additional Savings for Job Seeking (or Business Ramping) Time
You’ll want to cover your expenses for the time it takes you to get a new job or ramp your business back up.
FlexJobs.com states a job search takes from 3 to 6 months, but this is only an average. If your industry average is around 3 months, you may want to save up another 6 months of expenses, just in case.
The more money you save, the less stress you’ll feel when it’s time to get back to work.
Have a plan for how you’re going to earn money after your mini-retirement is over. Creating a marketing plan to fill your freelance schedule back up or pulling lists of companies to apply to in your field are just two examples.
If you’re taking this time off to start a new business, remember that it could take longer than expected to start earning money, so you’ll want a backup plan!
Do you have a plan for health insurance? This is something you don’t want to overlook! If you’re covered by a partner, excellent, but also consider disability insurance, dental insurance, and any other insurance your employer provides.
2. Set An Intention for Your Time Off–What’s Your Purpose?
The next step is to clarify WHY you want to take a mini-retirement. What is your intention for taking time off?
Do you want to go travel the world and experience a different culture?
Or do you need time off to refresh and recharge, to come back stronger in your work life?
Or maybe you need space and time to figure out what’s next in your life? For example, to explore alternatives, like starting a business, freelancing, or consulting.
Before moving on to the next step, be clear on why you want to do this—be specific.
3. Make A Plan for Your Time–What Are You Going to Do?
Now that you know your purpose, how will you spend your time to achieve that purpose?
Some ideas are to:
- Explore ideas for a new career and test them out by interning.
- Do volunteer work.
- Travel (the original mini-retirement purpose).
- Take courses to learn new skills or to improve your existing skills.
- Dive into a time-consuming hobby you’ve wanted to try.
- Finish the projects you’ve always wanted to do but haven’t had the energy or time.
Also, create a giant list of things you like to do for fun—bonus points for low-cost activities!
You’ll want to circle back to your financial plan and add in the costs of the activities you choose.
One Last Thing
If you’re close to full retirement or have a partner who can easily cover your household costs and insurance, the financial preparation may not be a big deal.
But be warned.
A common theme is that people who take mini-retirements don’t return to the work they were doing.
For example, I took what was initially intended to be a mini-retirement once we hit Coast FI. But I never went back to an office. Instead, I decided to pursue my lifelong dreams of becoming a writer and an entrepreneur.
So just be prepared that a mini-retirement could upend life as you know it.
But of course, that was the whole point of this, wasn’t it?
Now Go Maximize Your Mini-Retirement
Taking a mini-retirement can be one of the best ways to spend your money.
“Classic” FIRE is all about saving the maximum you can, so you can achieve financial independence as soon as possible. But there are alternatives to this alternative, ideas like Coast FI and semi-retirement.
Taking mini-retirements is yet another concept on a continuum where you lead an intentional life, not simply the default we were all handed.
So, do your research, get professional help with your money (if needed), and make sure you have a plan for working again.
Then enjoy your time off and savor every moment, knowing the best is yet to come.