Should I Take A Mini-Retirement or Stick It Out?

I received an e-mail from a reader heading into the next chapter of his life: a soon-to-be empty-nester! 

He has a big question for us: should he take a mini-retirement while he’s still young, or stick it out until fully financially independent (FI)? He has a great salary and a high net worth, but doesn’t find his job fulfilling. It is quite the conundrum.

Weigh in with your advice, encouragement, and thoughts in the comments. 

Here are the details of his situation:

Dear Financial Mechanic,

Any advice for someone trying to decide between a mini-retirement or sticking it out until fully FI?  Two key factors:

  • Many of my goals require good health. For example, I just backpacked the Tahoe Rim Trail and want to do more and longer backpacking trips.
  • I’m 47 and at my peak earnings of my career. If I take off for five years I’m unlikely to earn this kind of money again.
backpacking the tahoe ridge trail
Here we are on the Tahoe Rim Trail

 Let’s Get Gritty– Money Details

I currently have a guesstimate that $1.5 million would be a comfortable FI number.  I understand the FI number is yearly expenses multiplied by 25.  I certainly expect my expense to decrease in the coming years but it is hard for me to be certain by how much.  Some reasons:

  • I have two teenagers who are about to start college.  One starts this week (yay!) and the youngest starts next September.  We have money set aside in Coverdell ESA’s for each of them which should cover most of their college expenses.  I expect my expenses to drop this year and further drop next September when we are empty nesters.  How much will my expenses decrease?  I can’t say for sure yet.
  • I am in the process of selling my five bedroom home and purchasing a 3 bedroom townhouse.  If all goes well, by December I will have no mortgage and a much smaller home to maintain and heat.  However, I can’t be certain until these transactions are completed.
  • Like everyone else, I have no idea what health care will cost in a few years.  My wife and I are both relatively healthy but costs continue to rise faster than inflation and the future of healthcare policy is uncertain.

Net Worth

Our net worth is currently $1.1 million with a split of about 70% in retirement accounts and 30% invested in non-retirement accounts.  Although I only became aware of JL Collins last year, I have been a Vanguard enthusiast since my early 20’s.  All our money is in Vanguard Index funds.

Career and Income

I am a Software Engineer with a large software company.  I have been in software for over twenty years.  My wife is a public school teacher. Together, our combined adjusted gross income was about $235k last year. My wife is 100% on board and in support of FIRE.

Our expenses were around $60 – 65k last year.  We live within our means and have zero consumer debt but still, this spending seems high. Ouch!  For sure those expenses will go down when the kids are on their own and we no longer have a mortgage (hopefully in a few months!).

We are both feeling a bit burned out with our careers and eager to focus on non-career goals.

Our Goals

We both love the outdoors and hiking.  I especially like backpacking and would like the opportunity to hike some of our nation’s long trails (i.e. Appalachian Trail and Pacific Crest Trail).  These long-distance backpacking goals require both time (up to 6 months for each trail) and physical and mental endurance. I worry that as each year passes it will become more difficult to accomplish these goals.

backpacking
Passing the lake on our hike.

We would also like to travel and possibly try van life.

Here are some quick pros and cons for mini-retirement vs sticking it out until FI (let’s assume that’s another five years).

Mini-Retirement

Pros

  • Would give me the opportunity to start working on my ambitious backpacking and travel goals.
  • Would provide an escape from careers that we no longer find fulfilling.
  • Not quite sure if this is a “pro” but it’s possible that after a few years of mini-retirement I may find a strong desire to return to work.

Cons

  • Would mean walking away from the highest salary years of my career.
  • Eventual return to working would most likely be at much lower salary.
  • The software industry evolves quickly.  A return to the workforce after up to five years away would require a significant effort to ramp up on the latest technologies.  I would guess that it would take up to 6 months of self-training just to be ready and able to score a decent position.
  • The software industry has a reputation for ageism which could make it difficult for me rejoin the workforce.

Sticking it out to FI

Pros
  • If we can stick it out another five years or so we can meet or exceed our FI number and retire for good with a very comfortable nest egg.
Cons
  • Ugh.  We really don’t want to keep working.

So, should we take the mini-retirement, or stick it out to FI?

Sincere thanks for any guidance and advice you can provide.  It is much appreciated.

Sincerely, 

Dave*

*Name changed for privacy

Mechanic's Musings

First off, wow! You are seriously killing it on all fronts. No matter what you decide, you and your wife have built a solid foundation that gives you a lot of freedom to make big life moves.

Secondly, you are definitely not alone with this question. Most of the core questions in money management are trying to find a balance between the here and now and the distant future. 

The way I see it, you have 5 options:

  • 1. Full Retirement
  • 2. Mini-Retirement
  • 3. Sabbatical
  • 4. CoastFI
  • 5. Stick It Out

Let’s explore each of these, then I’ll summarize with my final advice.

Option 1: Full Retirement

For full-retirement to work, you would have to drastically cut your expenses. It sounds like you plan on spending much less once your children are out of the nest and you won’t have a mortgage to pay, although by how much is uncertain.

If you dropped your expenses dramatically, you could be FI right now. 

With your current portfolio of $1.1 million, if your spending dropped from $60-65k to $40-44k, you could be considered financially independent. 

Of course it is difficult to radically change one’s lifestyle, and to drop over 20k in yearly expenses would mean a big lifestyle overhaul. With all of the question marks around how much you will be spending into retirement, it is unlikely (though not impossible!) that your expenses will drop that much. 

In addition, health care is still a looming question mark, so this is likely a higher risk and less desirable option overall.

Verdict: Not ideal

Option 2: Mini-Retirement

One option you mentioned is taking a break for a few years, then returning to work later. The obvious downside is that you start drawing down on your portfolio and give up your current high salaries.

Ideally, your portfolio should be left to compound and eventually launch you into  retirement. If you start drawing down early, it will prolong the amount of work you have to take on later.

Also, you pointed out that due to ageism and quickly changing technology, it might be difficult to re-enter the workforce after an extended break. I agree that this is a factor to consider when thinking about a mini-retirement. With all of these drawbacks, it is hard to recommend a mini-retirement, but I think there are steps you can take before taking off for multiple years to decide if this is the right thing for you.

Verdict: Not Ideal.

Option 3: Sabbatical

Burn out can make it feel like we need to get out now. It can lead to drastic measures like quitting a job without a plan. However, a radical change might not be necessary! Rather than taking off 1-5 years, a sabbatical would be a great option to explore.

Negotiating a Sabbatical

If you can negotiate a sabbatical with your employers, you could take off for six months to do the Pacific Crest Trail (PCT) or the Appalachian Trail. Look at it this way—you would be very expensive to replace. They would have to post job descriptions, interview many candidates, and then train them up. It generally takes about half a year for new hires to start to feel comfortable and competent in their job. In fact, two of my close friends both quit their jobs last year to do the PCT. They worked different jobs at different companies, but both companies asked for them to come back after their adventure.

Experience the Pros of Mini-Retirement

It is possible that your employer won’t want to hold onto your job while you are gone, and that is okay. You should be able to find a job after a 6 month gap without missing a technological beat. Certainly it will be much easier to find a job after 6 months than the few years a mini-retirement would take.

If you take a sabbatical, you still get to experience the pros of a mini-retirement. You get an escape from your job and get to take on some new adventures. It’s possible that after six months you will feel refreshed and reenergized to hit the ground running at your job. If not, then you can reassess what changes need to be made.

Verdict: Ideal

Option 4: Coast FI

There is a bridge between quitting completely and sticking out a job you dislike.

You and your wife both have monetizable skills that could be used in freelance work. You are well on your way to FI, so you can do what some people call “CoastFI.” 

Coast FI is the idea that you “coast” with enjoyable jobs that cover your expenses, which lets your portfolio compound in the meantime. Although this might mean longer years working overall, the journey is made much more enjoyable.

You have the leverage to design your life. You could shift to part-time freelancing, which could bring in enough to cover your current expenses while letting your portfolio continue to grow.  Programming is easy enough to take abroad, and your wife could try out tutoring online or try other freelancing gigs. 

This would allow you to try out van-life or a traveling lifestyle without completely dropping all sources of income.

Verdict: Ideal

With some planning and flexibility, you could try out van-life

Option 5: Stick It Out

I noticed that in your e-mail ‘sticking it out’ has less pros and one defining con:

“Ugh.  We really don’t want to keep working.”

Yes, you could continue working for a couple more years and hit your FI number. By the look of your current numbers, you are extremely close to FI. 

I plugged your numbers into the calculator Networthify to get a better idea. With annual expenses of $55,000 and annual savings of $115,000 (I left a large gap for taxes and other unknowns) you can retire in 1.5 years.

Screenshot from Networthify calculator

That is a lot faster than your projected 5 years! Just to be safe, we can assume you would be working 2-3 years to add a little padding. Does that seem more doable? 

Sometimes just seeing how close you are is enough to motivate you to the finish line. If your annual spending stays at $55,000 and you have $1.1M saved already, that means you just have to save:

$ 0
Dollars to save for retirement

Your portfolio should generate a large portion of that, and your large amount of savings should make up the rest. In the meantime, are there ways you can make your current job work for you? 

If you don’t have it in you to stay at your current job as it is, 

Here are some things to try :

1. Drop to part-time work. One friend of mine (a software engineer) only works Wednesday-Friday. Could you figure out a schedule that gives you room for longer weekend trips?

2. Join a different team. Taking on a new role might make things a bit more interesting and give you new people to work with.

3. Change the scenery.  If you can work from home more often, it might make all the difference to how you feel about work. Whether working from  coffee shops or an Airbnb in Santiago, Chile, it could be helpful to change things up without changing jobs.

4. If those don’t work, change jobs. You have the skills, experience, and salary– but your job is unfulfilling. It’s possible that you can find a job you really love for the next 2-3 years until you hit your FI number.

You have enough of a cushion to take some risks and design a life that works for you without sticking out a less-than-ideal lifestyle that burns you out. It is almost never worth it to ‘stick it out’ if your job is affecting your mental health, but there are steps you can take to make a change and find a more fulfilling, engaging role.

Verdict: TBD

computer with code IDE next to a cup of orange juice
A change of pace could be what you need.

Two Books To Read

In their book Designing Your Life, Bill Burnett & Dave Evans go into detail about how to find that balance of work and life. Whenever anyone is at a crux in their life, from graduation to empty-nesting, I would recommend checking out this book.

 

In Work Optional, Tanja Hester does a fantastic job covering the different options I discussed in this post, from mini-retirements to full on retirement. She also deep dives into healthcare, which is a critical piece to the retiring-early puzzle.

Conclusion

Based on your situation, I would urge you to try out a sabbatical. Negotiate taking six-nine months off to do either the Pacific Crest Trail or the Appalachian Trail. Hopefully this will give you the break you need, and it may rekindle some enthusiasm for work. 

If, after taking a longer break, you are still feeling restless, it would be good to explore “CoastFI,” where you find a balance of work you enjoy and the adventurous life you want to live.

Lastly, you are so close to FI on your current schedule. If your work life is making you miserable, it’s probably not worth just ‘sticking it out.’ However, there are ways to improve your current work situation, especially if it’s just for the next couple of years.

 

The Final Verdict:
  • Full Retirement
  • Mini-Retirement
  • Sabbatical
  • CoastFI
  • Stick It Out

Readers Weigh In

Dave wants your advice. 

Should Dave take a mini-retirement?

How can he make his current work-life better?

Is it a better idea to stick-it-out?

Share your take below!

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19 Comments

  1. Financial Independence is the most important but I think is better for you to get as much money as you can.
    If you can to semiretire do it, if not carry on.
    You don’t know what will happen in future.
    Even if you reach financial independence will be better for you to semiretire.
    This I would do.

  2. Oh man, this couple is so close – but also has a lot of unknowns. They’re selling thier house and buying a smaller one soon, and have 1 kid off to college this year and another next year. Since his wife is a public school teacher and the school year has just started I’m assuming that she’s committed to finishing out this year. It seems like a good idea to take the next nine months and deal with the big life changes that are already scheduled – house, kids leaving – and consider taking that sabbatical starting in June next year. This way his wife and kid at home could join him on any trips and they’ll have a better idea of what their new spending level is. Also hopefully the stock market rallies a little and they’ve pumped in another ~70k+ in contributions to bring up their investments closer to 1.3MM and guessing they cut at least 10-15k, from expenses post mortgage they might be right on the money.

    The next 9 months will be full of activities getting a house ready to sell and moving and maybe planning a big sabbatical trip that it should fly by and when they look at where they’re at in June, or before she has to commit to the next school year, they might feel confident not going back to work at all.

    1. I like that you considered the timeline based on Dave and his wife’s current situation. The timeline is definitely affected by her commitments to the school, and setting something 9 months to 1 year out give Dave and his wife some time to plan a sabbatical. Thanks for pointing that out!

  3. Hey Dave! I blog over at the Fioneers and the whole purpose of our blog is to help people take hold of the financial freedom that they already have along the journey! Instead of taking a full mini-retirement, I wonder if you could make some shifts right now into semi-retirement. According to the 4% rule of thumb, you could start to withdraw $40-44k/year without depleting your assets. This would leave you to only need to generate $20-25k of active income each year, if you wanted to figure out how to work part-time, work a portion it the year, take a sabbatical. Also, since your expenses are likely to go down, the amount of active income you need is much smaller. Maybe your company would allow you to do consulting or contracting for a portion of the year that would let you explore the world and do things you are passionate about in your free time.

    Best of luck! It sounds like a really exciting decision ahead! Everyone I know who has retired early tells me that they wish they had transitioned to something else much easier than they actually did.

    Best,
    Jessica

    1. Great thoughts, Jessica! These are great ideas to start Dave down the right track. Experimentation could be key for him and his wife to find the right balance.

  4. Im also a software engineer with 20 years on the job, but my kiddo is only 5. We started late. I feel the burn.

    I would suggest pushing hard for 2 more years, then do the sabbatical, and try for 1 or 2 more at your peak. That extra couple of hundred k savings could be huge. Also, a recession will likely happen in the next few years. The trick is to keep working until that drop happens. If you go out with only $1.5M, and lose a large percentage due to the market dropping, you will need to go back to work.

    It’s something to consider.

    1. Planning for a recession is a good idea. It would be helpful to run numbers through to see what would happen in a recession. It might not necessarily mean you have to keep working, but you may need to cut back on spending. Sequence of returns risk is definitely something to keep in mind before jumping ship!

  5. I like the Wednesday to Friday idea! 🙂

    An old employer of mine had a “forced” sabbatical. I don’t remember the exact details, but it was something like every five years they gave you 45 days PTO that you had to take in a chunk, plus the option of another 45 days unpaid to tack onto it.

    I’m no where near FI, but feeling the same pressures. I wish I could take a 3-6 month break, even if I had to quit, but at my age I’d be worried it would be hard to get a new job at or near my current level of compensation.

    If I were you, like FM above in her article, I’d try to negotiate a paid or unpaid sabbatical and then re-evaluate how you feel after that.

    1. Did you take the sabbatical from your old employer? That sounds like a lovely option. My friend in Sweden gets the entire month of July off for the summer every year. She said it’s common for everything to shut down for a month while everyone takes a month in the summer off. Wouldn’t that be nice!

      If you’re afraid of getting a new job at or near your current salary, you might want to try sending out your resume to a few places, to see what the market is like. You could even put a 6 months gap on your resume to see if it affects the number of replies you get. Then in your phone screens, shoot high with your asking salary and see what they say. It at least could give you an idea how difficult it might be, you might be surprised at the responses!

  6. I’m not sure if there’s one right answer, but I’m definitely not sold on the “sticking it out” option. I think this person makes some excellent points about health being a current asset – and because many of the activities they love rely on good health, now is the time to use that asset. I know I’m pretty biased here (because I DID quit my job to do more of what I wanted to do, and with a much tinier financial cushion in place!), but as someone said to me, money will always be there. Job opportunities will probably be there. The ability to get out and hike and be in nature might not.

    1. Good points! Health won’t always be there. I don’t know many people who regret their big adventures in their life, even if it set them back financially.

  7. I love this question and I am reading the replies with enthusiasm as I have more or less the this same conundrum right now.
    It sounds to me that “Dave” and his wife at least need to take a nice vacation and during this two weeks or so off, step away to think objectively. It is hard to make big decisions in the thick of life with heavy hours and two teenagers at home.
    They will either take a breath after the vacation and go back full time with renewed vigor or take a really deep breath and starting hiking – into the Appalachians and into the unknown

    Even better than the two week vacation I just suggested I actually think that they would do well to get an even greater perspective on life, the universe and everything if they both sign up to volunteer somewhere. I am talking Project Cure or a like-minded program. This only needs to be for a few weeks, not even a full 6 month sabbatical. Move out of the country, see how people live across the world and suddenly you will see life through a different lens.

    1. Signing up to volunteer in order to get a different perspective is a great idea! Some of my most impactful moments came out of volunteering in unfamiliar places like Uganda. I think you make a very good suggestion here because it’s easy to get caught up in our ‘normal’ but easier to reframe our choices after experiences outside our normal.

  8. My question to Dave would be this. If your wife has a teachers pension, when does that start? Dave will be able to draw down much less from his savings once that happens. This might make retirement at the end of this school year quite doable.

  9. Most of these options are not exclusive they can be enacted now or steps.

    Here is my thoughts on the risk model. Perhaps slowly trial the options until something works.

    Low risk options
    1. Reduce expenses
    2. Look for enjoyable work

    Medium Risk:
    1. CoastFI (what if the new jobs are not satisfying etc)
    2. Freelancing etc (especially if not established prior to quitting)
    3. Part time (signals to employer that they should prepare for your exit)

    High Risk
    1. Sabbatical / Mini Retirement (hard to negotiate – signal to employer)
    2. Full Retirement (without addressing the expenses)

    Notice the higher the risk the higher the return? 🙂

    1. It’s interesting to look at the different choices while weighing the risks. It would be nice to have some sort of algorithm that measured what percentage of risk generally is the best to take.

  10. I’ve had many parallels to your scenario over the last 5+ yrs. Basically, I’ve been living it. Similar net worth to you currently. I’m 53 now.

    I was an IT administrator for 20 yrs, with a dwindling salary due to more outsourcing and purposed underemployment so I could travel with my wife. Those opportunities dried up when I turned around your age of 47-48. I pivoted to a new section of IT/ Database administration / Online omni-channel retail, etc. However, starting over, at a much lower salary, and highly challenging bosses (i.e. screaming for being 5 mins late and reneging on promised raises) was a bigger challenge than I was willing to maintain.

    When some of my biggest life hurdles changed (aka I became technically an “empty nester” when my MIL passed away), BOOM, that was when my hip decided to give out at 50-51 and I was almost immobile. Walking the city I love, and even dreams of starting a walking tour business in NYC were a source of depression. I can’t tell you how many times I uttered, “I can’t believe this is happening to me.
    Not like this!” Which has never been “ME”.

    NOW…only now, I’ve recovered from my surgery (almost) but I still have some limitations.

    My wife has a decent job, that we make work, but it pains me to see her be the sole bread winner.

    That’s going to change, as I retool some skills to get back in, monetize blogging or do something part time. Possibly figure out how to better plan for her exit, but she’s not really interested in that yet.

    Here’s my observations, coming up on the end of my 4th year of “mini-retirement”.

    1. If I could have stuck it out, with a higher salary…I would have TOTALLY done that. That’s just me and that’s the attitude that allowed us to be in a position to take this time with no unemployment, disability or early pension.

    2. Don’t do anything, unless you can BOTH do it. It’s simply not as fun and messes with everyone’s ego and balance. Even though my wife works from home and has no commute, at the end of her work day at 5pm, she doesn’t have the energy to get pumped up and “go out to dinner” or cook dinner for that matter. (I only really do breakfasts)

    3. If you have “mad skills” and are confident about prospects…then figure out how you can write your own ticket for the job or work that works for YOU.

    4. If you have “physical” adventure goals that you really, really want to do, I wouldn’t wait on that. My Mom used to say, “real health problems don’t START until after you’re 40”, and I never really even thought about that. She lived to 88, and BOY was she right. While I’m so much more “pain free” now, and have a NEW outlook, I have limits that I didn’t have before. If you think you might be able to find other activities to replace those physical goals, that will satisfy you….then consider that, or look at cultivating them now.

    5. In today’s world….are the kids ever really “gone”? That’s a real consideration. We never had kids, but I have many siblings with kids, and they are all over the map…but some of them still dote on their 36 y/o kids like they were 12. I have neighbors that are the same. Don’t underestimate this fact as part of your future budget and time commitment.

    I’d work it hard for another year or 2, but that’s just me. You have options. If you’re worried about it after you pull the trigger, then don’t plan on treating your weekdays like weekends. Don’t waste a single minute of that time. I’d also work at getting much more serious about being frugal. One thing that I found toward the end was that, I’d work a job and/or get a raise, and then market fluctuations would wipe out my savings, back to square one. There is a good chance that will happen to you if you decide to stick it out. So either get super-frugal, or shift to a more conservative approach with your investments.

    Good luck in what you ultimately decide!

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