Retirement Planning

What Is Semi-Retirement and Why You Should Aim for It Instead of FIRE

FIRE (financial independence retire early) might sound enticing, but semi retirement might be a better option. Here are things to consider beforehand.

Perhaps you’ve heard of the term FIRE which stands for financial independence retire early. The idea is that you amass enough investments or passive income to cover your expenses, allowing you to retire early.

Maybe you’ve seen countless examples of people who’ve been able to do it on all sorts of income levels many live frugally in order to retire before the usual age of 65 years old. However, is it realistic for you? Even yet, are you willing to sacrifice and pinch pennies for years on end, not knowing if you can even retire by the time you said you would?

Enter semi-retirement. The idea is that you take breaks or sabbaticals while you’re striving for full retirement. That way, you can enjoy your life while you’re still relatively young. Semi-retirement can last a few months to even years and then when you’re ready, you return back to the workforce.

Sounds great, doesn’t it? Let’s take a look first in more detail at why FIRE may be flawed, then well get into how to work towards semi-retirement.

Why FIRE Can Be Flawed

First off, there’s nothing wrong with wanting to retire early. It’s a great goal to live a more frugal and simple life and be able to pursue projects and careers without the pressure of relying on a paycheck. However, FIRE isn’t a great fit for everyone.

For one, many parents of young children want to be more available during those formative years. Or maybe your family is going through a tough personal time and you want to be there. You get the idea.

In this case, working hard and amassing a lot of money might not make sense. After all, why are you working so hard in the first place? Is it so you can be rich or free up time for pursuits that matter?

In some instances, FIRE might also mean that people lose sight of being more in the present moment. It can feel discouraging to work hard for so many years and not feel like you’re ready to leave the working world. In this case, taking breaks along the way means you can be more present in your life, pursue projects that you wouldn’t have otherwise, and still work towards a sound financial future.

What Is Semi-Retirement?

Think of semi-retirement as more of a sabbatical, where you have a better balance between your personal and work life by taking time off from a full-time job. The idea is to pare back to a more simple life for the time being, with plans of going back to some sort of vocation when this period is over.

Yes, it can mean quitting your job or negotiating an arrangement with your employer (more on this later) so that you can return to your job. For some folks, they have large savings they can draw from that provides a sort of steady income during this period. Or some even work in a part-time capacity to cover some expenses.

Seriously, there are no hard and fast rules about semi-retirement. The goal is to help you find a schedule that allows you time to breathe and enjoy a slower pace of life for a little while.

What About My Job?

Good question. It seems scary to leave your job or career behind for a little while, especially one that’s fast-paced and requires you to keep up with the industry. However, there are ways to negotiate with your employer perhaps go down to a part-time basis or take unpaid time off with the promise that you’ll have a job when you come back.

For some, quitting their job is worth the risk as many take this opportunity to learn new skills which can then turn into another career or make you more marketable as you’re looking for a similar job position.

This is why it’s important to plan your semi-retirement carefully so that you can look for a job successfully when you’re ready to return to work. Plus, you’ll want to have ample savings to last you more than your planned sabbatical in case it does take longer than expected to find another job.


How to Get Started Planning for Semi-Retirement

Now that we’ve piqued your interest, here are some general guidelines on how to start planning your semi-retirement.

  • Figure out your why – Sounds obvious, but if you don’t have a clear reason why you want to take a break from working life, then it’ll be hard to work on the other steps. Sometimes saving money to take extended time off can be stressful, and you could find yourself giving up if you don’t find a way to motivate yourself. Your why doesn’t have to be grandiose it can be as simple as wanting to spend more time with your kids.
  • Decide how long you want to be semi-retired – This is crucial so that you can start planning how you want to spend your time and how much money you’ll need to sustain yourself.
  • Calculate your current expenses – Take a good, hard look at your basic monthly expenses and multiply that by the number of months you want to take off, plus an extra three to six months as a buffer. This is how much you’ll need to save.
  • Create a plan for semi-retirement – What will you do? Travel around the world or start a new hobby? Whatever it is, map it out as it’ll help you figure out how much more you’ll need to save in addition to the number determined above.
  • Add in other planned expenses – Of course, you’ll probably want to spend more on fun items such as trips or equipment for your hobbies during semi-retirement. Estimate how much you think you need and add that into your basic expenses.
  • Figure out your source of income – You’ll want to decide whether you’ll save money in cash and withdraw it as needed, pull money out of your brokerage accounts, or have some sort of passive income source that’ll cover your expenses on a month by month basis.
  • Make a plan for transitioning back – Don’t forget you’ll want to make sure you’re still worthy of being hired. This can include keeping in touch with your colleagues and former boss, keeping up with marketable skills, or ramping up a side hustle.

Related: Best Retirement Calculator

Remember, you only live once, so why not make the most of it? The great thing about sabbaticals is that you don’t have to take a long time off. Perhaps experiment with taking a few weeks off, then when ready, go into semi-retirement for a few years. As long as you have your finances in order and a plan on how you’ll sustain yourself, the world’s your oyster.

Sarah Li Cain

Sarah Li Cain

Sarah Li-Cain is a finance writer and Accredited Financial Counselor candidate whose work has appeared in places like Bankrate, Business Insider, Redbook, Financial Planning Association and Kiplinger. She's also the host of Beyond The Dollar, a podcast where she and her guests have deep and honest conversations on how money affects our well-being.

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