What’s the ideal lifestyle: Early retirement vs Never vs Mini Retirement?
By 3pm, Monday to Friday, it was as if my muscle couldn’t bear my weight anymore. My left hand propped up my chin, as my body slumped half over my desk while my right hand worked at the mouse.
Right click, align, left click, and wall goes 90 degrees up to meet this one. 3.25 metres long. Some days I’d feel nauseous from the boredom.
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While retirement was once a black and white proposition – work your whole life and suck it up if you don’t like your job, mortgages need to be paid princess – luckily, it turns out there are many more shades of grey.
And over the last decade, I’ve tried many of them.
Yes, you can call me the good life connoisseur. Because really, lifestyle is at the heart of why we all talk about retirement in the first place.
The question is, which type of retirement offers the best lifestyle? And which one is right for you?
You’ve tracked every cent you’ve spent on baked beans for the last ten years and invested every dollar you found on the sidewalk into your low cost index fund. You walk into your boss’ office, resignation letter in hand.
You’re done working.
You’ll never experience that foggy feeling of your beeping alarm interrupting a vivid dream about flying over the Amazon river. Unless of course, it’s to catch a flight to Brazil. Hello, early retirement Australia and the world.
How much do I need to retire early?
Around $1,000,000 in assets that generate an income.
How long will it take to reach early retirement?
At least a decade.
You’ve reached financial independence and have your entire life to do what you want. You can choose to keep working, or you can throw yourself into your passion projects. Or travel around the world.
And read that gripping thriller until 2am when you can barely keep your eyes open anymore.
You’re trading away the next decade of your life for the future reward. You need to make as much money as you can now and cut your expenses as far as possible.
Most guidelines suggest you’ll spend less in retirement than while working, which I’ve always thought was odd. After all, you have more time to do fun stuff. Turns out, I’m not totally off the mark, with some financial planners suggesting you might actually spend 20% more than during your work days.
Also, you never know what life is going to bring and while you might be able to live comfortable on $50,000 a year now, will that be the case in 10 years’ time?
What if one of your children shows a great talent for swimming or classical piano or tennis? How will you stretch your budget to cover the costs of tuition at the elite level?
How about if in your spare time you take up a hobby. You give mountain biking a go, love it and are itching to try some of the best trails in the world. Especially in Canada, Nepal and New Zealand. Does your budget accommodate this?
Finally, do you know the things you want to do in retirement? That’s not as stupid as it sounds. The days are long, the rest of the world will still be working and there is a dark side to early retirement.
If you’re someone who’s driven and focused enough to achieve early retirement when half the population can’t stump up $500 in an emergency, will hobbies, volunteer work and travel be enough of a challenge?
You’ve shown up at your desk rain, hail or shine for 4 years. Everyone along your commute knows you by name, even the weird guy who’s always at the train station, next to the second pillar.
On the first day of each new month, you’ve downloaded last month’s transactions and checked how much you’ve spent on food, Amazon shopping and wine.
You’re ready for a break.
Say, 6 months exploring South East Asia. Or a full year of finger painting, play do and dress ups with your kids.
Welcome to the mini retirement which was introduced by Tim Ferriss in “The 4 Hour Work Week.” Instead of saving up retirement until your twilight years, you space a whole lot of shorter breaks into your working life.
Academics like to call these breaks ‘sabbaticals’. For the rest of the world, let’s stick to mini-retirement.
How much money do I need for a mini retirement?
$10,000 – $50,000 depending on what you plan to do and how long your mini-retirement is.
How long until I can take a mini retirement?
1-5 years approximately – as soon as you’ve saved enough to cover your living costs.
You don’t defer your dreams until you’re retired, early or otherwise.
Taking regular breaks from your job gives you a fresh perspective and allows you to enjoy each of the seasons of your life.
The possibilities of what to do with your mini-retirement are endless. You can travel, start a business, dive into freelancing, stay home with kids, or work on a passion project.
Travelling in your 20s is very different from getting away with children or later in life. With a mini-retirement, you get to experience each of these.
You need to keep working for longer because you end up spending most of what you save for the time you’re not working.
You’ll have periods when you aren’t earning, so you’ll be saving and investing less overall.
Not every employer or career path will accommodate taking longer stints of time off. In Australia, if you stick it out with your employer for 10 years you’re entitled to 3 months long service leave. This is perfect for a mini-retirement now, don’t save it up!
Your investments are returning solidly, but your dream retirement involves wine from bottles, not goon bags. While having more time would be great, you’re not quite ready to jump into retirement.
Having a job feels safe. And it gives you someone to talk. You worry you might be one of those people who bails up random strangers to have a chat.
Think of it as the test driving your retirement lifestyle.
How much money do I need for a partial retirement?
Around $500,000 in assets to generate a $20,000 annual income.
How long until I can partially retire?
10-15 years depending on how aggressively you save and invest.
If you’re prepared to keep working, you don’t need to smash your savings. You’re not as committed to earning and saving as much as possible in as short amount of time as possible.
You might enjoy things like travelling now, instead of waiting until retirement.
You need to keep working and with a reduced income there won’t be as much to save and invest.
Not every employer or career path will accommodate part time working conditions.
You wake up every morning before your alarm and silently shout ‘hooray’ – you don’t want to wake up your partner. It’s Tuesday, you scroll through your inbox while drinking your morning latte and realise you might be the luckiest person in the world.
Yeah, some days your to-do list is chock full of the stuff you’ve been putting off doing all month because it makes you very, very sleepy. But overall, you spend your days doing something you like and you get paid for it.
What’s there to retire from?
I know a few people who have no plans for retirement. And they impress the hell out of me.
How much do I need to never retire?
Technically $0, although a risky option. In Australia you’ll always have retirement savings through the Super guarantee.
How long will it take?
You spend your life doing something you find satisfying and get paid for it. You’re living for now, rather than deferring your life until you’ve saved enough to be financially independent.
There’s no need to curtail your lifestyle trying to save a set amount of your income, because you never plan on relying on your savings.
Money flows into your life with relative ease, because it’s not the focus of your job.
Working is good for your mental health.
Not everyone is fortunate enough to find a career they never want to retire from right from the word go. You can spend years training in an industry only to discover it’s not the right fit.
Jobs and industries change. The job you love now might disappear if management changes or conditions deteriorate. Or of course, it could disappear completely. Hello robots taking over our jobs.
So Which Retirement Lifestyle Is Ideal?
Mini retirements are an awesome lifestyle and your surest best for not deferring doing the stuff that makes life worth living. They’re great for helping you figure out your priorities. One of the most valuable lessons I learnt from taking several mini retirements is that I never want to retire.
The never retirement lifestyle wins hands down. Why wouldn’t you want to design a life that you don’t want to retire from?
The Problem Is With Our Idea of Work
Contrary to what I thought, the solution to a lifestyle you don’t like or a job you hate isn’t to eat beans and rice for ten years, while working 28 days in a row out of every 30 to then retire. It’s our idea of work and retirement that is wrong.
Work is good. Beyond a pay check, it gives satisfaction that an easy life doesn’t.
But here’s the catch. In this day and age, that doesn’t mean you have to love the first career or job you picked. It also doesn’t mean working for someone else for 35+ years if that doesn’t float your boat. Ditching the 9-5 is a totally valid and a growing trend for young professionals.
You’ve got options.
You can retrain. I’ve met more 30 something apprentices with a mortgage and kids than I have fingers and toes.
Personally, I’ve retrained in a field that’s tangentially related to architecture and I can see myself being involved for life.
Or you can start your own business. Learn how to make money online. Thanks to the internet, if you want to be a digital nomad, there’s nothing stopping you.
And then there’s always the freedom of freelancing. Find your specialty and join the 20% of Australian employees that are contractors or consultants.
Whichever retirement option you choose, you’ll need to do something to fill your time. Even the early retirees agree. Sixty odd adult years on this planet is a long time to fill, one day at a time. It makes good sense to get paid for whatever you use to fill that time.
First we often assume that what we want now, is what we’ll want in 10 years’ time. It’s especially easy at 20 something to think you know what you’ll want in the future, based on your experience of adult life to date.
Second, we see decisions as being binary. There’s option A or option B and whichever one we choose we’re stuck with for life. It’s not true, you can always change your mind and do something else.
Thirdly, we don’t realise that we probably won’t work continuously for the next 40+ years anyway. Realistically, most of us cycle through full time work, part time work, unemployment, parental leave, long service leave and random extended leave or mini-retirement.
And It All Starts With…
Financial security. This gives you the option to make choices, whether that’s taking a break or starting a lifestyle business.
Find the sweet spot between your living expenses, savings and investments and you don’t have to wait until you’re financially independent to do what you want.
Choose to do it now. Your life is waiting.
Which retirement option are you aiming for?
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