The case for a mini-retirement

Mini on vacation

One of the new Financial Independence (FI) crazes bloggers are tripping about, is a mini-retirement. There are entire blogs dedicated to discussing how to finance this and the planning involved. I’m just going to scratch the surface to get you thinking about whether it is something that might work for you. A mini-retirement involves taking some time off every few years and then continuing your career afterwards. Yes, it’s like an extended holiday with a fancy name. Typically, this will mean working for a few years and then taking a subsequent year off.

Why take a mini-retirement?

The main argument for a mini-retirement is that you are too old to really appreciate traditional retirement. I still remember seeing the graph below on social media, joking about the catch-22 of enjoying life. Mini-retirements are a way of getting around the time issue during your working career. This allows you to achieve the time, money and strength trifecta.

With the drastic advances in the medical field, I’m not too convinced that this argument still holds up. To me, there is a more appealing reason to consider a mini-retirement. As humans, we thrive on change. Imagine having to eat your favourite meal for the rest of your life. We love chillaxing at the beach but would be wiped out after 40 consecutive beach days (and your shoulders will be cooked through). Working on and off is a great way of achieving a balanced lifestyle.

Most people identify work as a major stressor in their lives. So taking a break from work can relieve some of the stress of a 9 to 5 job for years on end. A study by the Society for Human Resource Management found that employees that took time off for an extended period came back refreshed, more productive and happier. A mini-retirement can also be a welcome break between jobs if your boss is starting to piss you off.

How to fund a mini-retirement?

The absolute best way to fund a mini-retirement is using an income stream that does not require you. A good example of this will be if you own a company that can operate without you. Even if you need to attend a few meetings during your retirement, it might still give you the off-time you need.

The more common way for funding a mini-retirement is simply to live off your savings and accepting that you will not be earning anything during this period. This will, however, extend your working career to save the capital you need for traditional retirement. But if you save enough, this will still mean early retirement, even after taking regular mini-retirements.

So first the assumptions. I used an inflation figure of 5%. I estimated your investment return at 12% (so a real growth of 7%). Then I also assumed that you live on 70% of your salary and save 30% while working. The graph tracks how long it takes for you to save 300 times your monthly expenses. Saving 300 times your monthly salary is just an easy way to implement the 4% rule. The traditional early retirement plan can be seen below:

Early retirement

At a 30% savings rate, you should be able to retire in about 19 years. If you started investing at 24, you will be retired by 43. To see how savings rate influences your retirement horizon, you can read this article (note that the assumptions differed slightly). How does mini-retirements influence your early retirement?

Early retirement with mini retirements

Ignore for a moment the fact that this graph looks like it is on the verge of devouring something. The spikes show that during the retirement years, you dip into your savings. During the first and second mini-retirement, you reduce your savings. By retirement number 3 you actually end the year with more money invested. This just shows how hard compounding is working for you.

You end up retiring after saving for 22 years, at 46. Since you had three mini-retirements, you also end up working for 19 years. You get the best of both, mini-retirements and early retirement and you didn’t even have to do any extra work to make up for the lost time.

What to do during your mini-retirement?

Since you aren’t location bound, the first thing that I would do is travel. However, I suspect everyone would also grow tired of travelling after a few months. This gives you the ideal opportunity to start setting up a side hustle or passive income. A dual-income once you go back to work, will speed up your retirement considerably.

Then there are always those woodworking projects that you have promised your wife you will get to and never did. All the golf that needs to be played. Your friends are on a zero handicap and they’ve been making fun of you for years now. First world problems are rough man.

At the end of the day, a mini-retirement is not a financial thing, it’s a personal thing. It’s not for everyone. You will need to make some bold decisions to quit your job or you will need a good relationship with your present boss. You also need to consider your kids. It might be necessary to home-school if you are on the road a lot. However, mini-retirements are possible and numerous people have done it successfully. For a bit of motivation, you can read Montana Money Adventures.

Be safe out there,


Cape Talk interview

I did an interview about Mini Retirements that can be found in the Cape Talk podcast section.

Quote of the week

“If hard work were such a wonderful thing, surely the rich would have kept it all to themselves.” – Lane Kirkland Click To Tweet


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