Micro-retirement may be a trend started by Gen Z and Millennials but it may benefit you, too.
These days, retirement doesn’t automatically mean going from 100 to zero overnight. And needn’t be a fixed, clearly defined period at the end of your working life.
Instead, micro-retirement offers the opportunity to take a temporary break from your career for a few months, or even a year.
Benefit from carefully planned periods of rest and personal development
Micro-retirement involves taking an intentional career break at planned intervals throughout your working life.
It isn’t about abruptly walking away from your career when you’ve had enough. In fact, it often involves negotiating with employers or structuring your work in a way that integrates breaks without having to abandon work altogether.
Some micro-retirees plan to work for around three years at a time and then travel for a year, before returning to work for a year, on a rinse-and-repeat cycle.
With no work to occupy your time, you too could use your micro-retirement to travel. Alternatively, you might want to take up a new hobby, get involved in the local community, or volunteer abroad.
Micro-retirement could help to improve your work-life balance and boost your retirement savings
As you might imagine, micro-retirement could do wonders for your work-life balance. The approach gives you the opportunity to pursue personal interests.
Not only could it help to restore your energy levels, rekindle your spirit, and rebalance your wellbeing, but it could also allow you chance to boost your retirement savings.
In fact, according to analysis from Standard Life, you could boost your pot by as much as £42,000.
UK calculations reveal that if you began working at age 22 on a £25,000 salary and immediately began paying the minimum monthly auto-enrolment contribution (5% employee, 3% employer) to your workplace pension, by age 62, you could accrue a retirement pot of £163,000.
If you took a 12-month micro-retirement at age 30 and retired at 62 you could end up with £4,000 less in your pot. But take the same year-long micro-retirement and work for a few more years, to age 68, and you could retire with a pot of £205,000 – £42,000 more.
Naturally, the sums and currency may differ for your reality, but manage your micro-retirement well, and the outcome could be positive.
And if it’s not the right move for you, it may be something your children or grandchildren may benefit from.
Micro-retirement could be good for your health and wellbeing, and your long-term finances
While taking a micro-retirement may mean also taking a temporary pause in pension contributions, people who feel fulfilled and happy tend to stay in work for longer.
According to research from Standard Life’s Retirement Voice Report 2024, across every generation, people expect to retire later than they would like to. 40% of Gen Xers want to retire between 50 and 60, but only 20% think they will be able to.
Since you tend to reach your peak earning potential later in your career, saving for a few extra years right before you retire could make a substantial difference to your pension pot.
With life expectancy increasing, you may need to fund your retirement for decades. So, finding balance by taking early career breaks, and then working until later in life, could put you in a stronger position to fund your lifestyle throughout retirement.
Read more: Why you need to plan for a 100-year life
With the right support and planning, micro-retirement could help you enjoy a longer working life, and increase your future financial security.
Micro-retirement needs careful planning and budgeting
Since a micro-retirement break typically requires a period of little – or even no – income, it’s important to think ahead and plan your budget with care to make sure you can support yourself.
Unlike a short vacation, extended career breaks without a steady income could create challenges – especially if you encountered an unexpected emergency.
Another factor to consider is that of potential hidden costs when you return to work. For example, you may find you need to retrain, update your equipment, or take a lower position than you previously enjoyed.
If you’re interested in exploring more about micro-retirement or other non-traditional retirement alternatives, we can help you understand all your options and how they may influence your ability to reach your long-term goals.
