Should you plan a mini-retirement?

The way people work is continuing to evolve, as is the overall model for a career. The standard job outline of working nine to five, 40 hours a week is a lot less prevalent now than it was for previous generations.¹ Gig work has become more common, and real-time global connections have led to the expectation that many of today’s workers will be online and accessible around the clock. This has pros and cons; flexibility in work hours can be a plus, but the “always on” work model can lead to burnout and fatigue. In addition, it can be difficult to adapt when personal and professional routines overlap.

As the whole idea of work becomes ever more varied and complex, there’s a growing trend among younger workers—often in their thirties and forties—of temporarily leaving the workforce and taking a mini-retirement. This can be viewed as a self-indulgent act, and it comes at a cost—income will be lost during prime earnings years. But a mid-life retirement can also be a life-affirming break in which aspects of post-work life can be explored.

Whether it’s carelessly irresponsible or progressively enlightened, mini-retirement planning during your career years is a compelling topic. It also raises an interesting question: Should you plan a mini-retirement? Here are some questions to consider before making a decision.

Are you financially prepared to leave work?

A mini-retirement is usually for a set period of time and taking one can be more realistic than retiring early. Mini-retirements are often taken by people who have earned financial success and can afford to take a break from work. But even people who don’t have a lot of cash wealth may be able to figure out a way to afford a mini-retirement if they plan carefully and apply a strategic approach to funding their lifestyle. For example, renting out your home and relocating to a more affordable area could offer a way to fund your mini-retirement. Bear in mind, though, that using your savings alone to fund your mid-life retirement ideas could come at the cost of diminishing your future assets; your savings would otherwise be growing in value and interest.

If your goal is to take a break from work and return later, consider an alternative retirement savings vehicle that you can contribute to while you’re not working. For example, if you’ll no longer have a 401(k) match at your job, you need to look into other vehicles, such as traditional or Roth IRA. Consider putting money into a deferred annuity, this way you’ll avoid a gap in saving for retirement during years that can have a significant impact. If you have a long-term life insurance need, a whole life insurance policy can be a versatile solution – providing life insurance coverage but also a cash value that can be accessed to supplement retirement (or mini-retirement) if the insurance needs decrease down the road.²

Will you benefit mentally and physically from a mini-retirement?

More people today feel overworked and burned out from their jobs than ever before. This is a big reason behind the mini-retirement movement. Some of the most common reasons for employee burnout include unmanageable workloads, unreasonable time pressure, and a lack of role clarity. Work has become overwhelming for many people in their forties, thirties, and even twenties—pushing them toward the decision to take a mini-retirement for the sake of their mental and physical health. Job-related depression, anxiety, and even suicides have proven the importance of taking time off for self-care. Some jobs are also physically taxing. Workers in those jobs may make the decision to take a mini-retirement for the benefit of their bodies and their overall health.

A mini-retirement can also serve as a trial run for real retirement—helping people figure out what type of lifestyle will make them happy when they officially reach their retirement phase.

Can you afford to give up the time during your prime career years?

Planning to take an extended time-out from work should be meticulous and should include some specific goals. Try to avoid taking a mini-retirement during the most important career years in your line of work. It may make sense to take a break from your job if you’re able to live without your paycheck or if you plan to return to work and retire later than your standard retirement date. You could also use your mini-retirement time to make plans for your later years away from work—figuring out your priorities, your financial needs, and how you want to live in the future.

Before you make the decision to take a mini-retirement, draw up a plan for how you will use your time, and come up with alternative methods for saving for retirement when you aren’t working. Your plan should include the details for when and how you’ll return to work. If your plan is to go back to the same job, make sure you’ve discussed this with your employer and that your job will be waiting for you. If unemployment rises and you’re in an older demographic group, it may be harder to find employment when you reenter the workforce. Your short-term mini-retirement should be part of your long-term plan, so make sure you can afford to give yourself this break.

¹https://hbr.org/2019/12/burnout-is-about-your-workplace-not-your-people
²Accessing cash value reduces death benefit and available cash surrender value.