Funding Mini Retirement


We just went over whether a Mini Retirement (MR) could be right for you? I hope that you had some new ideas and thought through the benefits and drawback of taking a mini retirement. We get focused on saving, investing and planning for retirement. There are some advantages to taking some time when you and your family are younger.

Today we will focus on the financial ramifications of taking a sabbatical. Almost everyone likes to take time off now and then. If you could stretch it out to a few months or years all the better. How could we arrange that? Let’s look at the financial aspects of a mini retirement and how we could fund a more laid back lifestyle.



This is a simple but not easy. If you save up enough money to fund your expenses while you don’t work for a year or two, you are home free. You have to balance some other goals if you are going to live off savings though.

Some questions to ask are can you still retire on the timeline you want if you live on savings? This can work if you can save up enough and stick to your budget for the time you need.

In the financially independent, retire early crowd the goal is to live off investments and savings. Usually, that means at least 25 times your income but some people want less risk and strive for 33 to 50 times income. You have to eventually make a decision and decide that enough is enough.

You could take a mini retirement with much less. Even if you only have one year of expenses in the bank, you could take a one-year mini retirement. The intelligence of this decision could be called into question depending on your circumstances but it’s not always a stupid decision. If you are young, healthy and have several years left to establish your career, you could take a mini retirement now and probably not delay final retirement too much.


Take Risk

If you have some savings, you could up your risk tolerance. Some investors are very conservative. If you have time on your side then you could increase your return by taking some more risk. Instead of a higher bond allocation, you could transition to more equities.

If you are 100% in equity index stocks then there are riskier investments than that. Those investments probably require more education and risk. You risk falling behind even more for retirement goals if they don’t pan out. Personally, I’m not prepared to increase my retirement investment returns by taking more risk just to take time off from regular employment but other people might be.


Work Slow

Depending on your job, this could be a wonderful option. Consulting work could be available in a variety of fields all over the world. Doing some research ahead of your planned break could allow you to reduce expenses, maintain some form of employment and stay on track for retirement goals.

Even if you work a couple months to maintain your present portfolio value, you could still take several months off for a couple years.


Passive Income

If you are the type of person that will want to stagger effort toward earning and saving, setting up some passive or at least less active income streams will allow more freedom sooner rather than later. Rental properties are an excellent choice for this strategy. Once a tenant is in place and a property manager is hired, if the economics of the property make sense then you could rely on this income to fund your expeditions during MR.


Develop Location Independent Income

Depending on your job this could be extremely easy or impossible. For my job, I don’t know how I could provide anesthesia from a home office or travel around in an RV.

Most of these location independent jobs will be accessible via teleconferencing and the internet. I’ve heard a podcast about a guy that codes on his laptop as he sails around the world. Then he uploads the work after he gets into port with a wifi connection.

Others have done marketing and design work while traveling abroad.

If you’ve read The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich by Tim Ferris, he basically outlines how to get location independent income up and running. He details starting an internet based business and negotiating remote work arrangement with your current employer. If you get a chance to read the book I highly recommend it.


Reduce Expenses

Another option to get to a mini retirement sooner rather than later is to execute a time period of reduced expenses. If you could pay off debt so that you weren’t servicing debt payments and minimize other expenditures like housing, commuting, power consumption and minimizing entertainment, this could enable you to take a longer MR.

Now whether or not that is appealing to you will affect your decisions regarding funding the MR but it’s another alternative.

I don’t know about you but if I downgrade to a 400 square foot apartment while only reading library books by candle light all day, that doesn’t exactly fit my description of an ideal mini retirement.

For other folks, this might not be a bad idea. If you are burned out and just need to get away from a bad work situation, maybe that is exactly what you need to do. Again, these decisions encompass a lot more than finances, but this is a financial blog and we can’t just go chase our dreams without accounting for the financial aspects.


How do we decide?

You decide that you want to take a mini retirement to practice retiring before you set out to tackle the real thing. There are some important variables. You might remember the Ultimate HIP Retirement Calculator that was described earlier in The Delicate and Difficult Decisions Behind Retirement. That calculator was meant to help you decide how long you would have to work depending on your savings rate and investment return.

If you decide to take a mini retirement, that adds some more variables into the mix of saving for retirement. I created this calculator to help you make some decisions about the finances associated with the choice.

Let’s go over an example.

You’re a 39-year-old lawyer with an annual income of $200,000. You save $60,000 a year and you’ve had this income and savings rate for the last 10 years. Your wife stays home with your two kids and you’re thinking about a mini retirement from your firm.

You want to take the kids and travel the country in an RV for two years. You have $100,000 in equity when you sell your home and decide to buy a $100,000 RV for the mini retirement. Even though your annual expenses are usually $80,000 when you’re in you swanky suburban home, with a paid off RV and minimizing your expenses during the trip, you budget $50,000. You withdraw $100,000 up front to fund your expenses during your MR. Let’s look at how many additional years you have to work to pay off your MR.

Is that right? If you take out $100,000 up front, start saving at your rate ($60,000/year) again once returning to work and reduce your MR expenses to $50,000 a year, you work about a month less than you would have otherwise?

(You can plug your own numbers into the calculator.)

How can that be?!

This is the beauty of compound interest.  Your retirement nest egg you’ve been saving up the last ten years is working for you while you and your family are traveling around the country in an RV. How cool is that?

Now granted, I’m anticipating the portfolio to continue growing at the same rate (7%) as before. Also, you are reducing your expenses during that two-year MR. What happens if the market had a downturn and lost 10% each your you were in MR?

You would have to work an additional 2.3 years.

We are also assuming you can resume your old job and start back up right where you left off. That could be a stretch.

This is a little precursor to the sequence of withdrawal risk. We all worry about that right after pulling the trigger to retire. The first five years of your retirement portfolio returns are a lot more important than the last five years. There are plenty of studies that show this. The best thing that can happen is for a bull market to start right after you retire for a decade. That sets you up to retire and possibly increase your safe withdrawal rate if you want.


The Bottom Line

The cool thing is if you have been a saver and want to take a bit of time off, it doesn’t necessarily mean that you are going to work several more years to attain your retirement goals. You might have to work less and get to enjoy a part of your retirement while your kids are young.

Take a look at your options and see how you could fund a mini retirement.

If you would like the HIP Mini Retirement Calculator, just join the email list. You get access to my three calculators that high income parents can use to calculate investment returns and see how you stack up financially for retirement goals.

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Funding Mini Retirement


What do you think? Does it sound too good to be true? Do these numbers inspire you to take a leap and plan a mini retirement? Does your job allow you to work remotely? Do you have skills to make some income on the side even if you didn’t have your high paying salary? Let me know in the comments below. 

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Tom is a doctor, husband and father of five with a passion for parenting and finance. When he isn't skateboarding, riding BMX, or jumping on the trampoline with his kids, he is reading and writing about personal finance. He helps high income parents educate and mentor their kids to become financially, emotionally, and intellectually self sufficient.

8 Responses to “Funding Mini Retirement

  • Mr. Adventure Rich and I both work, but have considered a staggered mini-retirement where one of us continues to work (maintain benefits, the job perks, etc) while the other takes a year off or a year of “slow work” (cutting expenses like commuting and child care). One of our biggest struggles with both of us working is the fact that our schedules are staggered (I’m a M-F 9-5, he is a T-Sa or W-Su with random hours) and there are weeks where we do not have a day off together. A staggered mini-retirement would give us more flexibility to align schedules and spend more time as a family. Who knows, maybe we’ll pursue this in the next few years!

    • Staggered work schedules between spouses is one of those things that seems very difficult to me. The same with military families that face deployment every few years.
      My hat is off to those families that make it work.
      I guess you have to concentrate on the other person with the time you have together. I did that during training and it seemed to work out alright for us.

      Tom @ HIP

  • I had a mini-retirement but it was in the form of getting an NIH grant and moving over to Argentina. It was amazing. Taking the year off of fellowship and refocusing on my relationship with my wife, learning a new language, and meeting new people while doing research was awesome.

    So in some ways, you could use a different type of job for a mini-retirement from your main carrier. That is in essence what I did. We also traveled and lived on an extremely tight budget which was easier when living abroad.

    There were less expectations of how we would spend our money and things were just cheaper.

    • If I was going to do this I could think something like you did would be right up my alley. The NIH grant was icing on the cake.

      Tom @ HIP

  • The biggest risk I think is the one you highlighted. What are the odds your same job is there when you return. I’d say for higher earners you’d probably need the option of a sabbatical in the corporate world or some other option that decreases that risk. We are shooting for limited location independence as we continue forward. It seems safer.

    • I agree totally. A lot of high earners have worked their way up the ladder and might have to start over if they left for a time. I think location independence is more sustainable in the long run.

      Tom @ HIP

  • The previous company I worked for has international locations, and they polled for who would be willing to relocate if the need arose. I answered yes for 1-2 years. The exact where would have brought some deliberation for my sense of safety and comfort, but the poll was to determine who might actually consider it.
    My current company is smaller. I’m in a new different role still gaining experience.
    Stock prices haven’t been great, and people were worried for a while. I figured out if all my stock options vest and the price hits $× (for example: the company is bought out) I could live off the money for a year. A friend noted ‘won’t places be less inclined to hire you with an unexplained gap’. So I’ve reconsidered at at least 6 months. It would have to be a specific set of events to actually happen, of course. I haven’t fully thought of what I’d do, other than visit distant friends and family for a week at a time. (Oregon, Boston, Florida). We’ll see what the future holds.

    • I think if you have a reason for taking the time off whether it be 6 months or more, it won’t hurt you and could even make you more marketable. It all depends how you describe the time off and what you accomplish.

      Tom @ HIP

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