Whether it’s as a result of the pandemic or a general move towards more flexible living, mini-retirements are becoming a new goal for many people. Instead of focusing on an early retirement strategy, taking time out to enjoy meaningful breaks is more popular than ever. It’s a chance to press pause on everyday life, to pursue something a little different for a short period, knowing you can pick up where you left off. Sounds pretty good, right?
But what price do you pay for either option? With the help of some stats and facts from Aviva, we compare the different strategies involved for these alternate forms of retirement.
Are mini-retirements the new early retirement?
25% of Brits aspire to retire early by the age of 60
Considered the golden age of retirement, sixty is the preferred age for people to retire or even sooner, but this simply isn’t a reality for many people. The term “mini-retirement” was coined by author Tim Ferris in his book “The 4-Hour Workweek” and refers to a series of career breaks instead of a definitive end of employment in order to fully retire.
For many people who did not experience a student “gap year” (or those who did and never lost the travel bug), a mini-retirement might give you the chance to travel at an earlier age in life. After all, there could be destinations on your bucket list that warrant a level of adventure that may be less appealing as you move into your golden years.
But who said a mini-retirement has to involve going anywhere or spending anything? This could be your chance to write that book you’ve always wanted to. Or learn a new skill; maybe you want to go back to study – who said you can’t teach an old dog new tricks?!
Either way, a mini-retirement could be good for the soul and just what you need to reconnect with things again.
68% of people report an increase in overall happiness as a result of retiring early
One of the main reasons people want to retire early is freedom. Early retirement gives people the chance to enjoy more quality time with their family or visit places they hadn’t had chance to yet.
People are keen to enjoy their retirement while still young enough and physically fit to make the most of their time. Interestingly, around half of early retirees report a boost to their mental and physical health due to their retirement (Aviva). But unless you have a robust financial plan in place, how could you know if that’s possible and that the money won’t run out.
47% of early retirees find their finances take a hit
Early retirement may not be that easy to achieve; you will need enough money to last you throughout your retirement. And as people are living longer than ever before, you may need to plan for enough income to last you and your partner well into your nineties. So, this is where a mini-retirement might be a suitable alternative, and with some careful planning, you will still have enough money to cover yourself when you finally do retire.
The key to making a mini-retirement work for you is to design a career break that won’t break the bank. Mini-retirements do carry a level of risk. You will stop earning for a while, which means you will need enough savings to fund your lifestyle while you’re away. In addition, you might have to stop contributing to your pension and savings, which will have an impact on your final retirement income, so you will need to put certain plans in place before you go.
Here are five things to consider when you’re thinking about taking a mini-retirement:
- Decide on the amount of time you would like to take off and what you will do while you’re temporarily in retirement. Visualise it and set yourself a goal. Obviously, the more extravagant your plans are, the more money they will cost and the more planning you will need to do.
- Look at your savings. You may need to plan far ahead to allow enough time to save up, so you can take a break with a safe financial buffer.
- Could you generate a passive income whilst you’re on your mini-retirement? What about temporarily letting your house out or renting out your driveway or garage whilst you’re not using it? You could even try your hand at blog writing or selling something online.
- Think about whether you need to live more frugally for a while. Create a realistic budget based on the costs of where you plan to travel. It might be time to cut back on a few luxuries in the short term for the long term payoff.
- Make a financial plan to support your mini-retirement and your future retirement goals. Safeguarding your present aims and future plans will give you peace of mind.
As more people move towards more flexible ways of living, mini-retirements could soon become the norm. If you’re making plans for a mini or early retirement, it’s important to check that your financial plans are in line with your goals. Planning for both the short and long term will give you and your family the security you need to live a fulfilled lifestyle.
If you would like a financial review to help you make an informed decision about your retirement goals, get in touch to speak to our independent financial planners.