Mini-Retirement: How a long-time reader is making it work (and so can you).

Mini-Retirement: How a long-time reader is making it work (and so can you).

Mini-retirement defined: With traditional retirement, you save the good stuff for that 20-year period at the end of life.  The idea of mini-retirements takes some of that 20-year period (say 5 years), breaks it up into 1-3 month chunks and spreads it out over your working years.  A mini-retirement is longer than a vacation, but shorter than retirement.  It may involve part-time work, depending on the length of time away.

I recently received this email:

I’m not usually one to write a note like this out of the blue, but I somehow feel compelled the day after my wife and I booked one-way tickets halfway around the world.  I just wanted to say a simple thank you for being inspiring to me for the past few years …And now we’re only a couple months away.  I started reading your site after the newspaper had your column about mini-retirements.  Since then we have talked about trying something like it.  Now, both age 51, we are taking leaves of absence for 8 months and moving into rural New Zealand.  I have secured a job there with less time commitment (and less income) than my current job, and my wife has a work visa so she will have the ability to find something once we arrive if she is inclined.  This is a bigger chunk of time than the mini-retirement you wrote about.  But we are both lucky enough to have employers who have agreed to allow for a longer leave and hold a spot for us — though we decided it would be worth it even if we came back and had to look for work.  I don’t want to make this a long story, so…just to say–I know you put a lot of time and heart into your writing.  Please know that you have fans out here who appreciate your insights. You are inspiring us to learn and grow, and to be intentional.   Kia Ora!

As you might imagine, I responded right away.  First, I just wanted to thank him for the kind email. Seriously, my heart grew three sizes that day.  Second, I wanted to ask him if I could interview him for Intentional Retirement. My articles about mini-retirements are some of the most popular at the site, but even so, I think many people still dismiss the idea of mini-retirements as “fun to think about, but that would never work for me.”  We can all learn something from someone who had all the same excuses we have, but made it work anyway.  Pay particular attention to the answers to question 8 below.  As someone who has helped people plan for and live in retirement for more than 20 years, I can tell you that the answers to that question are full of lessons, takeaways and insights (both financial and non-financial).

Just a quick note.  In the Q&A that follows, I edited portions of the answers for length and also removed the names and other identifying information because the person wishes to remain anonymous.

1. Tell me a little about the mini-retirement you have planned.

My wife and I will be taking 8 months off our current full-time jobs to move to New Zealand where we will live and work in a small community.  I will work there as a general practice physician, and my wife plans to work part-time remotely with her current employer.  I will say I’m having a little trouble with using the term “mini-retirement” for this endeavor. Maybe there’s not an official definition of the term, but I think of mini-retirement as period of time without working at all.  That said, when we read your pieces on mini-retirement that came out a few years ago, it helped nudge this dream into a plan for us.  As far as terminology, maybe “trial semi-retirement” fits better since we will both be employed, and afterward, we plan to return to our current full-time jobs.

2. What prompted the trip?  Why not just wait until retirement?

At 51 we are both still healthy and active.  We want to do this while we can still enjoy many of the outdoor activities that New Zealand offers.  We are empty-nesters and our kids are getting settled into their lives, but no grandkids yet.  It may be harder to do this in a few years when we may have even more family ties to keep us closer.  Our kids are young and active too, so it is also a great opportunity to bring them along for a visit in the middle of our stay to share the experience with us before they have families of their own.

3. Were you and your spouse on the same page from the beginning or did it take some convincing?

We were totally on the same page because we really enjoy travelling together and learning about the world away from home. When we go to a new place, we like to get outside the tourist areas.  We try to immerse ourselves in the local culture as much as possible, though opportunity is limited during the traditional one-week vacation time.  This is our chance to go for a longer period of time and immerse into the culture.

As a physician, I see a lot of advertisements about practices that need some extra temporary help.  We have talked for a long time about the possibility of trying some of these locum tenens positions.  These are short-term positions usually because a doctor is temporarily absent, or it may be after someone retires and the practice is searching for a replacement. The most challenging part for us was finding the time to go that would work for both of our careers while also making sure it worked with our family’s life.

4. How did your employer respond when you talked with them about it?

I can’t imagine any employer is very happy about an employee asking for 8 months off, but both our employers have been gracious about this.  When we decided to set this plan in motion, we both felt it was the right time. If our employers were not able to hold our positions until we returned, we would deal with the job search when we returned to the U.S. Fortunately, both employers feel we are valuable enough to hold our positions for us. There will obviously be some changes since our duties have to be covered while we are away.  We know we will come home to find the job we return to is different from the job we left.  Looking through an objective lens, the duties we are both doing now are different from what we were doing 1-2 years ago as things naturally evolve.  Ultimately, we knew this would be an adjustment with some potential regrets, but a greater regret might be not going.  Neither one of us wanted to say later in life, “I wish we would have taken off on that adventure.”

5. What were the toughest hurdles to overcome or logistics to work out?

One of our biggest challenges will be missing friends, family, and our pets.  We talked about taking our dog to New Zealand. Unfortunately, the hoops to jump through for a dog to go were more onerous than for us humans to get work visas.  Also, she would have to spend a long time in the plane cargo hold and quarantined after arrival.  We decided that it would be too hard on her even though we would like to have her there.

We bought our kids airline tickets as their present for the holidays, so we’ll get to see them for a while at Christmas, and we also have some friends planning to visit.  Also, communication is much easier now with social media and video chatting, so we’re hoping that helps us stay close electronically.

As far as work challenges, I feel a lot of guilt leaving for that long with the expectation of returning to my current position.  In doing so, I am asking my co-workers to cover for me for such an extended time that I’ll never really be able to pay it back.  My wife has already hired her replacement for a job she loves and knows that her position will be different when she returns.  Those are the most difficult personal and career challenges.

6. How did you pick your destination(s)?

Years ago, we started discussing trying a locum tenens job as a “someday” thing to do in later years prior to retirement.   Mostly we considered staying in the US, but noticed a few positions were available internationally.  New Zealand is among the few countries that will accept a US medical license as means to obtain a permit to practice there.  Rural New Zealand, like much of rural America, has a shortage of primary care doctors.  The practice I will be joining has used temporary doctors for years, but all the while they continue to search for someone to take a permanent position.  So, there is the sense that I’ll be helping fill a need in the community there, while also integrating as a local New Zealander more than a short vacation would allow.

7. Anything special you need to do or plan to do with your house while you’re gone?

Fortunately, we will have family who will live in our house in the US and take care of our pets.  Their availability to house-sit for the year really helped us choose when to take this time away. Before we secured a house sitter, we were asking ourselves other questions such as, “Is it time to downsize and sell our house?” but “What if it doesn’t sell or sells too quickly?”  We also considered renting it for a year and the uncertainties of a being a landlord from overseas.

8. What are two or three things that you hope to see come out of the trip?  This could be something you learn, a particular experience, a relational outcome, or whatever.

Mostly, I hope this is an amazing life experience for us.  I look forward to the chance to learn about a new country and really get to experience the culture.  I hope to learn about the healthcare system and bring back a new perspective for myself. I hope to return refreshed and recharged with a new appreciation for my job, and maybe there will be some things to share and integrate within our office.

We hope to continue to grow as a couple. The good news is we really like spending time together! During this experience, like we also expect in retirement, we will spend even more concentrated time together.  As we watch retiring couples, that seems to have its pros and cons.  We’ll find out what it’s like to start fresh in a new place far away from home. We’ll learn if combining travel and work like this is something we might want to do again down the road or if it will be something we do only this once.

We will live in a more minimalistic way than we do at home where we have accumulated 30 years of stuff. We will each be taking only one piece of luggage plus a carry-on for an 8-month trip, so soon we’ll see what it is like to live without most of our possessions.  We will also both take a significant pay cut for the time we are gone, so we will find out how we manage living within a lighter budget.

Financially, this is a giant step backward in terms of saving for our eventual retirement.  Overall, we have prepared fairly well for the future.  We’re not in the category with some of the early retirement enthusiasts out there, but we currently have saved about 20x expected annual spending with a goal of between 25-30x by age 60.  Depending on how our perspective on expected annual spending changes after this experience, we may adjust the numbers or time frame a bit.  But it’s all a work in progress.  Regardless, we should get there if we continue to work full time and save as we have been.

To use some of the terminology from your writings, this is our version 1.0 of retirement for this decade.  We are certainly not done with our years of employment, but this is one iteration of what we are doing in our 50’s to prepare for that time.  For now, all we know for sure is that we choose to control this particular slice of our time and money in this way while we are healthy enough to enjoy it.

9. Any advice for others who are considering a mini-retirement.

Ask me that after we get back…

Hopefully, I’ll have an opportunity to check in again with them over the next 8 months and let you know how things are going.  Meanwhile, if you’d like to read more about mini-retirements, here are a few articles from the one I took a while back:

Be intentional,

Joe

Success secrets: Moving from vocation to avocation

Success secrets: Moving from vocation to avocation

As you enter retirement, the temptation to do nothing can feel pretty strong after years of drinking from the fire hose of daily life. Unfortunately, doing nothing is not a good strategy for long-term fulfillment. It can be rejuvenating for a while, but it will get boring.

Your goal should not be to do nothing. It should be to do what excites you. If you’re feeling spent and burnt out, by all means take some time off and recharge your batteries. But after that, you need a plan that will keep you challenged and provide meaning and fulfillment. You need something that will help you stay active and use your gifts.

During your working years, that “something” was, to one degree or another, your vocation.  Your job.  That thing you did every day between 8 and 5 in exchange for money.  But most people jettison their job once they retire.  And when you subtract things—work, obligations, commitments—you create a void in your life where those things once were. That void can open you to self-doubt, regret, lack of purpose and boredom.  The solution?  If you take something out, you need to replace it with something else.

What is that something else? Leisure has a role to play (travel, relaxation, sipping mojitos at the beach), but it isn’t enough.  As someone once said: “Leisure is a beautiful garment for a day, but a horrible choice for permanent attire.”  My suggestion?  Replace your vocation with an avocation.

A vocation is something you primarily do for money.  You do it because you have to.  An avocation is something you do because you want to.  Because you’re passionate about it and it gives you a sense of purpose.  It often has all of the positive aspects of a job—challenge, learning new things, social interaction, purpose—with one important exception: you probably won’t get paid.  That might sound like a bad thing, but it’s actually good.  First off, in retirement you don’t need the paycheck.  That’s being handled by your portfolio and other sources of income (pension, Social Security).  Second, when you remove the pay requirement, it opens the door to almost any hobby, activity or pursuit you can think of.  If I had to feed my family based on my ability to create and sell paintings, we’d all starve.  Remove the financial constraints, however, and I can paint for the pure enjoyment of it. I can take as long as I want to learn, practice, grow and develop without the pressure to monetize it.

History is replete with examples of people who pursued both vocation and avocation.  Copernicus was a cleric by day and astronomer by night. Sir Edmund Hillary paid the bills as a beekeeper, but you likely remember him for his avocation as a mountain climber and the first person to summit Everest.  Franz Kafka was an insurance assessor, but you probably remember him as a writer.  Tolkien was a philologist, but you probably remember him for his novels.  Harrison Ford pays the bills as an actor, but he moonlights as a pilot and a carpenter.

How about you?  What would you do if money weren’t an object? If getting paid wasn’t a precondition? Not sure?  Test some things out.  Start experimenting.  Maybe you want to go back to school or start a second career. Maybe you want to volunteer or start a small business. Maybe you want to learn to bake, paint, cook, collect something, write, garden, take photographs, draw, birdwatch, make pottery, scrapbook, sew, play a musical instrument or do woodworking.  Maybe you want to become an amateur dietician, actor, archeologist, beekeeper, computer coder or songwriter.  The possibilities are endless.

Again, the goal is not to do nothing.  That just creates a void. The goal is to do what excites you.  Yes, you may look forward to the day when you can quit your job, but just because you don’t want to work 60 hours a week anymore, doesn’t mean that you don’t want something that will give you satisfaction and a sense of accomplishment.  If you want your retirement to be remarkable, have a plan to replace your vocation with an avocation.

Be intentional,

Joe

Should I pay off my mortgage before I retire?

Should I pay off my mortgage before I retire?

Hardly a week goes by that I’m not asked the question: “Should I pay off my mortgage before I retire?”  The answer, of course, depends.  On math.  On your situation.  On your personal preferences.  Let’s look through some of the key variables to consider and then I’ll tell you what I’m doing with my house (spoiler alert: I’m a big proponent of retiring debt free) and give you some tips on how to retire your mortgage early, should you choose to do so.

Variables to consider

Interest rate.  What is the interest rate on your mortgage?  If you buy a $250,000 home and have a 30-year mortgage at a rate of 4%, you’ll pay $179,674 in interest over the life of that loan.  That same loan at 6% would cost $289,595 in interest, about $110,000 more.  The higher your interest rate, all else being equal, the more incentive there is to pay it off sooner.

Other debt.  Mortgage rates are typically lower than rates on other forms of debt like credit cards or car loans.  If you look strictly at the math, it makes sense to pay off your higher interest rate loans first.  If you carry a credit card balance or car debt, focus on those first.  Once those are gone, you can target your mortgage.

Investment alternatives.  Your house is an investment.  Whether you use available cash to pay it off will partly depend on the other investment opportunities you have for that available cash.  If your mortgage is 4%, but you have another investment opportunity that yields 8%, it might make sense to hold off on the house and invest the cash at the higher rate.  Just keep in mind that paying off your house offers a guaranteed return (the interest disappears), while alternative investments likely do not.

Income sources in retirement.  Think about your income sources in retirement.  Social Security.  Pension.  Income from your investments.  Add that up and then compare it to your retirement budget.  Is there enough there to easily service your mortgage without limiting your other plans for retirement?  If so, carrying a mortgage in retirement might not be a burden.  If not, it might make sense to pay it off early.

Nest egg.  Are you on track with your retirement savings?  Are you maxing out your 401k and IRA contributions each year?  If not, focus on those things first and then, if you still have some extra cash, consider paying down your house second.

Peace of mind.  The decision to pay off your house isn’t entirely numbers based.  I’ve had plenty of clients who could justify carrying a mortgage, but they paid it off anyway because they wanted the peace of mind of being debt free.  I’ve never had a single client tell me that they regret the decision to pay off their house.

How long will you live there?  Do you plan on downsizing to a different house or moving somewhere else in retirement?  If you only plan on being in your current house for a few more years, it might not make sense to pay it off.  If you plan on being there for a while, however, owning it outright would probably be best.

Tax considerations: Many people argue against paying off your house because of the “tax benefit.”  Recent changes to the standard deduction make this argument less compelling, but even before then, I think this argument didn’t hold water.  Consider a person in the 20% tax bracket who paid $10,000 in interest and got a $2,000 deduction.  They paid $10,000 to get $2,000.  Better to pay it off, spend a little more on taxes and save the $10,000 in interest.

What I’m doing and why.

As you’ve probably guessed (both from this article and others I’ve written on debt), I’m paying my house off early.  I thought through the math, but to be honest, that was secondary.  The three primary drivers of my decision are:

  • Peace of mind: I sleep better when I’m debt free.
  • Security: Debt adds risk and reduces cash flow. Both are bad for retirees.
  • Priorities: According to the Employee Benefits Research Institute, the average retiree spends 40-45% of their budget on housing. I have other plans for that money!  (For more, read The benefits of an extravagantly modest lifestyle)

A few tips to pay it off early.

Below are a few strategies I use:

  • Set a goal and re-run the amortization schedule: If you have 7 years until retirement and want to have the house paid off by then, re-run your loan amortization for 7 years and figure out how much extra you need to pay each month to reach your goal.
  • Make it automatic: Once you know how much you need to pay each month, make it automatic. Saving in your 401k is easy because it automatically comes out of your paycheck.  Set up your extra principal payments to do the same thing.
  • Refinance: Rates are still historically low. If you haven’t refinanced in a while, call your bank to see if it would make sense.  Just don’t refinance into another 30-year loan.  Keep the payback period as short as possible so more of your payments go to principal.
  • Stop escrowing: This is more of a mental trick. When I started paying off my house early, I got discouraged each month at how much of my payments went to taxes, insurance and interest.  So I called the bank and asked them to stop escrowing.  Yes, I still need to pay my taxes and insurance, but now those bills come separately.  Most of my payments go to principal and I’m forced to save extra to cover the taxes and insurance.
  • For more ideas, read How (and why) to retire debt free and Your biggest retirement expense (and how to get rid of it).

Be Intentional,

Joe

5 Fundamentals of an Intentional Retirement

5 Fundamentals of an Intentional Retirement

Quick Note: I’m having a limited time, 50% off sale on our flagship product, The Ideal Retirement Design Guide.  Read more at the bottom of this post.

At Intentional Retirement, we look at retirement a bit differently.  So do our readers (You’re awesome!).  Those differences are woven through our DNA and they show up in the things I say and do at the site, but once in a while it’s a good idea to have a refresher.  Below are a few of the fundamental ingredients of an Intentional Retirement.  It’s not a comprehensive list, but it contains a few big ideas that can radically reshape your retirement.

You need to be intentional.  One thing is more important than any other when it comes to having a meaningful retirement (and life). That one thing is more important than money, health, Social Security or any other retirement related building block.  What is it?  You need to be intentional.  Wanting a great retirement isn’t good enough. Everybody wants that.  You need to actually do something about it.  You need to decide what you really want out life and then be very intentional about making it happen.

Retirement is more than a math problem.  Yes, money is important, but it’s not enough.  You also need meaning (e.g. relationships, activities, challenges, pursuits).  Money will help you sleep at night.  Meaning will give you a reason to get out of bed in the morning.  You need both.  That’s why everything at Intentional Retirement—from the weekly articles to the products in our store—focus on both money and meaning.   We want to help you achieve financial security, but we also want to show, teach and model how to use that money to live a meaningful life.

Retirement is a pie chart, not a timeline.  Too many people buy into the false assumption that retirement can only happen once you reach “retirement age.”  Why should living the life you truly want to live depend on how many birthdays you’ve had or whether or not you punch a time clock?  How in the world has it become acceptable to defer your dreams and push the best things in life to the very end?  At Intentional Retirement, we don’t think of life as a timeline where youth equals zero to twenty, working years equal twenty to sixty-five and retirement equals sixty-five plus. Instead, we think of life as a pie chart that is divided into time you control and time controlled by others.  The more time you control, the more retired you are.

Intentional Retirement is iterative.  So if retirement starts as soon as you begin to control chunks of your time, what does that look like practically?  Think of it like software.  When Bill Gates founded Microsoft, did Windows come out fully formed, with all the functionality that it has today? Of course not. He started with Version 1.0 and then continued to build on in it and add more features.  That led to versions 2.0, 3.0 and so on.

What does this idea of iteration look like when applied to retirement? What if, instead of waiting until 65 to have the retirement of your dreams, you started with a Version 1.0 at 45 (or your current age)?  That version wouldn’t have all the “freedom and control” functionality of future versions, but it would allow some rich experiences nonetheless.  Then you could take what you learned and apply it to creating Version 2.0 in our 50s. With a little more money saved by that point and the knowledge and experience gained from testing and implementing Version 1.0, you could likely design a fairly robust “product” that included things like mini-retirements, travels and learning new things. Even though work would likely still be a part of the equation, it would be done in service to an existing lifestyle rather than as a prepayment of dues for a club you hope to someday join.  Then when you actually reach that stage in life where your savings and circumstances allow you significant control over your time you would be infinitely better prepared to implement a feature packed, real-world tested Version 3.0. Rather than struggling with inertia and trying to figure out what you really want out of life (and wasting some of your best remaining years in the process), you would be ready to hit the ground running.

Delayed gratification is overrated:  No, I’m not telling you to stop saving.  Delayed gratification is great if it’s allowing you to work toward something.  Where delayed gratification becomes a problem is when it is used as an excuse for life avoidance.  Rather than allowing you to work toward something, it is keeping you from something.  For example, it’s hard to decide what you really want out of life.  It’s risky to pursue big goals.  Rather than rising to the challenge, we often tell ourselves we need a little more time or a little more money.  Not yet, but soon.  Someday.  Here’s the thing.  The longer you wait, the less you believe yourself when you say “Someday.”  Your dreams begin to atrophy.  Your opportunities begin to vanish.  You aim lower.  You talk yourself out of things.  Before you know it, it’s too late.  So don’t delay.  Decide what you really want out of life and get after it.  Start small if necessary, but start.

Retirement is changing.  Gone are the days when retirement was an age based, non-working relatively brief and sedentary period of life that doesn’t look a whole lot different from your working years, save for having a little bit of extra time.  Intentional Retirement should begin much earlier (i.e. during the working years), last longer, and be totally unique to your plans, dreams and priorities. It will be intricately woven into your life now, rather than being some far-off time you hope to eventually reach. It should be active, fulfilling, challenging and exciting.  If that resonates with you, stick around.  There’s plenty more to come.

Be intentional,

Joe

Half off Sale on the Ideal Retirement Design Guide: For those of you looking to start planning your own Intentional Retirement, I created a guide called The Ideal Retirement Design Guide.  I’m launching an updated version of the guide soon, which means I’d like to clear out the existing inventory.  Translation: Time for a sale!  The guide is normally $159, but if you order now I’ve dropped the price to $79.  To sweeten the offer a bit, I’ll also include a free copy of my book The Bell Lap: The 8 Biggest Mistakes to Avoid as You Approach Retirement.  As always, no pressure to buy, but there is a limited supply so grab a copy if you’d like one.  Click here for more info and to order.

Two studies show how to boost your memory and extend your life

Two studies show how to boost your memory and extend your life

The biggest fear BEFORE retirement is money.  Pre-retirees worry about whether they’ve saved enough and if it will last.  The biggest fear AFTER retirement, however, is health. Once retired, people worry most about getting or staying healthy so they can do the things they want and have a good quality of life.  So, depending on where you fall on the retirement spectrum, health is either already a major concern of yours or it soon will be.  With that in mind, a few studies caught my eye recently that I want to share with you because they can help boost your memory and extend your life.

How blood pressure affects your memory.  A recent study by the National Institute of Health (NIH) examined whether more aggressive treatment of blood pressure could improve heart health.  The results were so impressive that they stopped the study early and lowered the systolic blood pressure recommendations from 140 to 120 (and overall blood pressure recommendations to no more than 120/80).  That more aggressive treatment reduced the risk of heart attack and stroke by nearly a third and death by almost 25 percent.  They did further research to see if there were any other benefits and last week they announced that bringing the systolic below 120 also reduced the risk of cognitive impairment by about 19%.  Cognitive impairment can lead to dementia which can lead to Alzheimer’s.  The takeaway?  Go get your blood pressure checked and if it’s above 120/80 you should talk to your doctor about bringing it down.

How relationships affect your health.  While I was reading about the blood pressure study, another NIH study caught my eye.  It summarized the growing body of evidence that shows how strong relationships and social connections can have a positive impact on your mental and physical health.  Here are a few of the findings:

  • Relationships have a cumulative impact on your health over time.
  • People with weaker relationships and social connections are much more likely to die prematurely.
  • Weak social ties are directly linked to a higher probability of developing conditions like heart disease, high blood pressure and cancer.
  • Once you develop those conditions, you’re more likely to die from them if you have weak social ties. For example, heart patients with weak social connections are twice as likely to die of cardiac arrest than patients with strong social connections.
  • Weak relationships also affect your immune function and your ability to recover from illness.

Why do relationships have such an impact?  One reason is that behavior explains roughly 40% of premature mortality and relationships have a positive impact on our behaviors.  You tend to take better care of yourself when you have people you care about.  Another reason relationships help?  Good relationships reduce stress and help foster a sense of meaning and purpose, both of which can help improve your mental and physical health.  The takeaway?  Work hard to foster meaningful relationships with friends and family. It can greatly impact your overall health, longevity and quality of life.

Money is an important ingredient to a successful retirement, but it’s meaningless if you’re not healthy enough to live life and do the things you want to do.  So work hard to get your finances in order, but take these words from Emerson to heart: “The first wealth is health.”

Be intentional,

Joe