The first time I heard about this concept was through a Ted Talk by Lacey Filipich. Essentially, instead of waiting for traditional retirement age or retiring early, you take these small ones during your career.
This is somewhat similar to what professors have done for decades. They take a sabbatical.
Essentially taking an extended leave of absence, a break, a time-out to figure out the next step. However, a sabbatical is not categorized as a mini-retirement because the professor is using this time to study or travel for their work and they are [usually] getting paid.
This can also be argued to be a gap-year. The year taken between high school and university to figure out what you want out of life.
This is a natural human desire, to sometimes just take a break.
So, why do many of us think it is unachievable or that we only have two options, retiring at 65 or early retirement?
What is a mini-retirement
Like I said before, it is the time away from work, sometimes it is self-reflective or it is just a time to start a new career.
Maybe you want to finally see if you can get that business off the ground. Something like this exists in Sweden, where depending on the requirements, you can take 6 months off to start a business.
So, no matter how you decide to take this time, it requires meticulous planning, not only for how you are going to spend your time but how are you going to transition back into the job market. Additionally, what are your expectations? Do you want to return to the same job that made you think about taking a break?
So why take one?
The reasons for a mini-retirement are personal.
However, the statement that always gets brought up against a mini-retirement is that you can ruin your career.
Not necessarily.
A study demonstrated that more companies are now offering sabbaticals or an extended time away. Especially since when employees return, they come back feeling refreshed, productive, and happier.
What are some considerations?
1. How long will it last?
That is completely up to you.
Jillian Johnsrud at jillianjohnsrud.com has taken some that lasted from a month to 2 years.
As a side note, a month is a vacation in Sweden. Which most people take in July, and it does affect productivity levels, at least from my own experience.
However, many people are beginning to realize that waiting to retire at retirement age is not ideal. Since, you are working for 40+ years and only get to enjoy retirement for 10 years.
Just like a mini-retirement needs planning, so does a traditional one. Essentially, how do you fill your days. We are now seeing a new phenomenon where retirees are ‘reversing’ retirement, returning to work either part or full-time. A study completed in 2016 by the Federal Reserve Board found that 1/3 of retirees are returning to work for a variety of reasons, which can be financial or social.
2. Think about your why to a mini-retirement
This is a major life decision, no matter which stage of life you are at. Yes, it is easier when you are young, single, and with no debt but you need to think about why you want to do this.
Some people dream of studying abroad or traveling abroad to teach English in another country.
Although, as someone who did a study abroad and is still getting an education abroad, I do not consider this a mini-retirement.
3. What will you do?
You need to think about this because fishing everyday can get old after a while.
Some people get the travel bug and decide to live in Nicaragua for a year as Mark Tew of Tew & Fro did.
Bren of Bren of the Road, took a 8-week extended leave from work to study Spanish in Spain, and this changed his whole life trajectory.
I have a plan as well. Which I am saving for now. When it will happen is still up in the air but I would want to try #vanlife.
4. How will you pay for it and how much do you need saved?
Many early retirees like Mr. Money Moustache and Rich Journey retired early by investing steadily and using the 4% rule for withdrawal.
For those that do not know, the 4% rule is that you have enough saved that you can survive on 4% of your investment portfolio per year. This is considering that the historical average return of a balanced portfolio is approximately 8%. This withdrawal rate, in theory, should be able to weather an economic crisis since you are only withdrawing half of that average per year. Whether or not this holds up in times of economic crisis is another discussion.
Other things to consider is how much money you need save for your current life. Will you sublet your place if you rent, or will you rent out or sell if you own?
Do you need to pay for health insurance?
Having a target number and creating a plan can help you stay on track.
5. Make a plan to return to work
Ultimately, you might want to return to work, perhaps to the same company or field. Although, you also need to prepare that you might not return to job, so you will have to be comfortable with that.
Like I said before, part of taking a mini-retirement is to reflect on why you felt the need to take this retirement. Perhaps you are burned-out. Sometimes all we need is a short break from a job, but sometimes it is a hard break.
Something to consider is that not all potential employers will like the idea that you take time-off like this, as they might perceive that you will frequently take an extended vacation. Like everything you do, it is how you portray it. So, when you go back and have to explain to a potential employer why you took this time off, think about what you learned from the experience and how that will make you an ideal candidate.
6. Other random thoughts
- Do you have any debts?
- One of the main recommendations by other mini-retirees is to (at least) be consumer debt free.
- Where will you go?
- Will you stay in your home country or travel the world?
- How many people will be with you?
- Will you be alone or with family/friends? This can affect how you take this mini-retirement.
- After you add everything up, add 20-30% extra!
- This will give you a budget and can act as an emergency fund.