Mini Retirement

What is Mini-Retirement?

The idea of mini-retirement was popularized by Tim Ferris in his book The 4-Hour Workweek. Mini-retirement is an intentional break from your career. It is essentially different from a vacation or a sabbatical in the sense that you retire from your day job. Of course, the means by which you implement your mini-retirement could involve using any combination of Sabbatical, Vacation or something else.

Why should you take a Mini-Retirement?

There are several reasons for pursuing Mini-retirement but the single most important reason is FOMO (Fear of Missing Out).

Imagine that you sit down with your Financial Adviser or you are the DIY types and build your own Retirement Spreadsheet. You take stock and realize that if everything goes according to plan, you are set to FIRE(Financial Independence Retire Early) at the young age of 50.

This is both good and bad news. The good news is that you are able to retire almost 10-15 years before the usual average age for retirement. That’s about 15 years of freedom!

The bad news is that there are things that you would want to pursue on your bucket list that don’t go well with a 50 year old body regardless how much of a fitness freak you are. I am almost certain that I would not be able to start learning Surfing or Snowboarding at the age of 50+.

It is not only about the physical fitness but also several other factors that come into play.

For example, you may want to be there for your children in their early formative years. This is something that cannot be postponed to a later stage of life. It could even be re-connecting with your aged parents in their Final days of life, once again something that cannot wait for your actual Retirement.

A mini-retirement could also be a means to handle the stressors of life that arise during midlife, commonly known as a Mid-life crisis.

I personally think that Mini Retirement can be a good test-drive for FIRE. You may discover that Early Retirement is not for you and you are quite deeply Institutionalized

This is not a bad thing. It means that there is some effort required to de-institutionalize yourself before your actual retirement. Imagine the shock of retiring early only to find that you hate it way more than being at work. You miss your work, colleagues, titles etc. A Mini-retirement can help prepare for such a future and really test your true motivations.

Why not to take a Mini-Retirement

As a word of caution there are times and circumstances when it is not wise to consider a Mini-retirement:

You just want to get out of a job you hate
Have no plans on how to spend the time – ‘Doing Nothing’ is not going to be easy over extended periods of time
Personal Life is not Stable

If your decision to Retire is motivated by some form of the above three reasons then I would strongly suggest going back to the drawing board and rethink your reasons and motivations for Mini-retirement.

How to take an Mini-Retirement?

Now that we have addressed the What? and the Why? Let’s explore the How? Below are some of the key items to think of on executing your idea of Mini-Retirement.

Re-Entry Strategy

The single biggest difference between Retirement and Mini-Retirement is the fact that at the end of the Mini-Retirement one would have to get back to work in some way.

So, the first thing one has to consider is the Re-Entry Strategy. Having a re-entry strategy figured out will help you enjoy the Mini-Retirement with lower anxiety or stress. Of course every individual’s circumstances are different but here are some examples of re-entry strategies

Sabbatical – This is the most reliable of re-entry strategies. Here you can negotiate with your current employer to take an extended period of time away from work.

The employer does not pay you for the time spent away but would take you back into the same or similar role after your return.

I think getting a good sabbatical depends on the employee-employer relationship and also the corporate policy in the firm that one is working at.

Re-Skill – A portion of time spent on the Mini-Retirement can be allocated to learn a new skill so that you can get back to the job market in a job domain that is different from what you were working on previously.

Switching Jobs – If you are switching jobs it could be a good opportunity to work out a mini-retirement deal with your new employer. You could quit the firm that you are working with earlier and join the new firm later.

The time difference between the dates of quitting and the date of joining would be the period of your mini-retirement. Once again it depends a lot on your ability to negotiate.

It can be a win-win as the new employer does not have to pay for the time you take off before you join the firm and you have a solid re-entry situation setup.

Timing

It is crucial to think about the right time in your career to take a mini-retirement. For example, if you are just starting out in a new career and have not fully established yourself then it may be very hard to get back into the workforce easily.

If you have stock options and are currently vesting, then it would be financially a bad idea to leave money on the table.

Timing does not only apply to when you take your retirement but also the duration of the retirement. Taking a couple of months off is way too different than taking a couple of years off. This closely ties to the next most important aspect – Money.

Budgeting

Setting up a budget for the period of mini-retirement is absolutely crucial for success and peace of mind. Building a budget is a complex exercise that requires a lot of planning. Some of the factors that affect the budget are the location, healthcare costs, Rent, travel expense, Insurance, Food and Entertainment costs, Activity costs etc.

I recommend doing a weekly budget estimation instead of a monthly estimate as it helps you track more closely and make adjustments to your expense behavior if you lose track.

For example – If you are planning to take 6 months off in Thailand to learn Sailing. Then a high level budget would look something like this:

6 months = 24 Weeks

Sailing lessons 2000$ or 84$/Week

Health Insurance 1200$ or 50$/Week

Rent 1200/Month or 300$/Week

Travel – Flights 1500$ or 63$/week + 30$/week of local travel = 93$/week

Food & Entertainment 30$/day or 210$/week

Total = 737/week , adding 20% buffer = 885$/week.

Total for 6 months of Mini-retirement = 21,200$

You may have noticed that the biggest source of costs were rent and food. These costs vary a lot based on the choice of your location.

With a baseline number in hand you can iterate between location, timing and budget until you land on the ideal timing, location and budget.

Psychological Preparation

I had hinted on the Psychological aspect earlier when I briefly mentioned the topic of Institutionalization. A complex word that in simple terms means that human beings are creatures of habit.

Reminds me of the famous scene from the movie Shawshank Redemption. The Character brooks is serving a 50 year sentence (roughly the duration of employment) and is released into the world at the end of his sentence. He cannot fit into the normal world as he had gone too comfortable in a high-security prison in spite of how awful the place was. He later kills himself in one of the most poignant moments in the movie.

Being prepared to become an unemployed bum in the eyes of others, wasting away your prime years needs a lot of thick skin and self-belief. This does not happen overnight but has to be worked towards.

Once again it all depends on your personal circumstances. You may have friends and family that are very understanding and supportive or they could be a bunch of insecure nags. The fact of life is that this has to be managed.

In the scenario that you are married with kids then it is only fair to share your ideas about mini-retirement with your spouse and kids and get their buy-in and support.

Career Risks

Although most hiring managers do not like to admit in the open, gaps in your career is something that is looked down upon, either consciously or subconsciously. This leads to a kind of risk that affects your career both in the short and the long term.

Like all risks this cannot be avoided completely but can be managed. I offer no solutions but a bunch of hacks that I can think of. For example, Re-cast the Why? Of your retirement into something purposeful.

For example, you could say that Sailing is important to you as you are considering becoming a competitive Sailor and this break is a training period.

Another hack could be to register a startup as a resume gap filler while you take time off. You can make it look legit by having a website, complete with a vision-mission statement etc.

I am not suggesting to fake it but if you have a business idea that you always wanted to explore then giving it life in the form of visible artifacts makes the career gap less detrimental to your career.

My personal favorite is to enroll into a PhD program that involves a subject area that you always wanted to study but did not because it did not have any career prospects. Janet from (https://mytwentycents.com/) is currently pursuing this. Better still, she is getting paid for her PhD so it is almost like a paid retirement.

Mini-mini-mini-Retirement a.k.a. Start Small

If mini-retirement is your way of starting small on the larger goal of FIRE then I would suggest starting even more small.

For example, begin by first maximizing your paid time off. Then slowly progress to taking more and more time off by adding in a few more extra days, Sabbaticals etc. Starting small helps de-risk and also helps test your own attitude towards FIRE/Mini-retirement.

Conclusion

In summary as part of your Mini-Retirement plan pay attention to:

The Duration
The Location
The activities
The weekly expenses – I recommend Weekly rather than Monthly
The Re-entry strategy
The Psychology

I would like to end this article with a personal anecdote. An acquaintance of mine really loved acting, although he was a project manager in a large multinational company. He spoke to his spouse and struck a deal with her. He would take 2 years off to work on his acting career. If he cannot make it then he would return back to his usual gig. He worked out the same deal with his managers as well. There was no job waiting for him if he came back but at least a network of people who knew the reasons that he took time off and willing to at least consider him for a position.

This acquaintance is an Indian and his decision is almost sacrilege in the middle-class Indian society. When I came to know about this decision I too was a bit dismayed. I thought this guy was having some sort of a mid-life crisis and is reacting stupidly. But little did i know his level of commitment.

He stuck to his calling and trusted his spouse and close friends for support and plunged mind and heart into acting. He relocated to India from the US, worked hard at acting schools, worked on silly small gigs etc. Eventually he ended up getting a role in an Indie movie that went viral and now he is a star of some sorts, well at least his calendar is booked until 2022 when I last checked.

The reason for sharing this with you is not to inspire you to simply follow your heart and the universe will somehow make it work for you. The reason was to emphasize the prep-work that he did before he followed his heart. I am sure if he flopped dramatically he would still have a supporting spouse and career opportunities to choose from. He had a solid re-entry strategy.

Choosing to have a Mini-retirement is a highly personal decision. Like everything in life it comes with its own trade-offs. Once you have chosen to have a Mini-retirement it is helpful to go in with a good strategic plan so that you can reduce anxiety and truly enjoy your time on this planet because time is the only thing we really have.