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5 Ways To Plan A Mini-Retirement: How You Can Take An Extended Break From Work

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Brandon Chapman, CFP CLU

Principal
SaaS Wealth Insurance
Office : 604.687.6066
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Many people are chasing the dream of early retirement. Evidence of this can be seen with the FIRE (Financial Independence Retire Early) movement gaining a large national following. But not everyone wants to retire early. Many people enjoy their careers and are energized by working in their chosen field. 

Perhaps this explains the growth of another trend — taking a mini-retirement. Similar to a sabbatical, a mini-retirement is a short-term break from work. Depending on your situation, you might take all of the vacation days you’ve accrued to take two months off from work, or you might even leave your current job with the intention of not working for a year or two before finding a new job.


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No matter how you do it, the key is to intentionally step away from work and reflect on your life. A mini-retirement isn’t about taking a two-week vacation to recharge. Instead, it requires extensive planning and the ability to ensure that you have a way to get back into the workforce at the end — or forge ahead with a new path for making money.

Here’s what you need to know if you want to take a mini-retirement.

How Much Money Do You Need?

The first step most people need to take before starting a mini-retirement is to figure out how much money they need. To do that, decide how long your mini-retirement will be — and what you will do during your mini-retirement

Maybe you want to spend six months traveling. You’ll need to research expenses and figure out what it will cost you to travel and live abroad. You also need to figure out what to do with your current home. Do you need to wait until your current lease expires? Should you sell your home or can you rent it out to someone? Will you need to pay for a storage unit for your things?

Perhaps you just want to take a year off to explore your life and reflect on where you want to go next, but you plan to stay put. In that case, you need to know how much it will cost to maintain your life without a regular source of income.

Don’t Forget Your Healthcare Costs

While planning your mini-retirement, you also need to consider how you’ll pay for healthcare. If you’re taking a mini-retirement with built-up vacation days and you won’t quit your job, perhaps that health insurance is taken care of. However, if you quit a job with benefits to take a mini-retirement, you’ll need to decide how you’ll account for healthcare. 

Save Up For Your Mini-Retirement

Once you know how much you need, you can begin saving up for your mini-retirement. Let’s say you need $15,000 for your mini-retirement and you aim to take the plunge in one year. You have 12 months to save up, so you need to set aside $1,250 each month to reach your goal.

In some cases, you might have a bit of money stashed away for other goals. If you decide that mini-retirement takes precedence, you can shift some of that money to reduce the strain of saving up. 

Decide where to keep the money. A high-yield savings account can be a good choice. However, if you have a higher risk tolerance, you can consider putting a portion of your money in a taxable investment account. Keep in mind that if you go this route, you have to accept that you could lose money. 

Plus, if you don’t lose money, you have to be careful about how you liquidate your shares during your mini-retirement. If you carefully sell shares so that you qualify for the favorable long-term capital gains rate, you can more easily manage your tax bill. As you save, consider the tax implications that come with your decision. The good news is that you can also use tax-loss harvesting, and if you don’t have earned income during your mini-retirement, the taxes can be quite manageable.

Consider Developing a Revenue Source

You can speed up your efforts to save for a mini-retirement by getting a side gig or by developing passive income. This can help fund your mini-retirement and reduces the amount of money you need to save prior to taking time off work. If you end up spending more than you thought, or an emergency arises, you can fall back on your side gig to generate supplemental income.

Passive income can be an even better way to prepare for a mini-retirement. If you have another revenue stream, it can help buffer you from unexpected expenses, and even help you extend your retirement if you’re not quite ready to go back to a job. This has to be built up ahead of time, though, so plan ahead.

Going Back to Work

Taking a mini-retirement comes with the assumption that you will go back to work at some point. If you didn’t actually quit your job, this is a much easier re-integration. 

However, if you did quit you’ll need to explain to potential employees why you have a gap in your resume. It can help if you did some volunteer work during your mini-retirement, or if you studied a different culture or acquired a new skill. That at least explains the big gap. 

Otherwise, you might just have to sell yourself as someone enthusiastic and ready to give your all — and convince your new employer that you’re not going to just leave again for another mini-retirement in a year or two.

Finally, it’s also possible to use your mini-retirement to transition to a “work-optional” lifestyle. Maybe you start a business or develop a passive income stream that allows you to avoid going back to a traditional job after your mini-retirement. Or perhaps you take on freelancing assignments, consulting jobs and side gigs to make ends meet.

No matter what you decide, the important thing is to have a plan and work toward making it a reality so your mini-retirement doesn’t derail your long-term financial future.

Ryan GuinaFormer Contributor

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This Forbes article was legally licensed through AdvisorStream.

Brandon Chapman profile photo

Brandon Chapman, CFP CLU

Principal
SaaS Wealth Insurance
Office : 604.687.6066
Schedule a Meeting