This differs from another separate trend among younger professional workers, dubbed FIRE, or “financial independence, retire early,” whereby personal expenses are radically reduced so that upwards of 75% of income is saved for retirement.
While the microretirement trend is relatively rare, nearly 80% of new college graduates said they were interested in taking time off from work to pursue personal projects or volunteer, according to a survey from job-search app Handshake.
What happens when they return to work?
Taking microretirements in one’s 20s and 30s can entail a drop in retirement savings and difficulties landing a job quickly. For Dana Saperstein and her fiance Ben Pecher, who paused their careers to hike the Pacific Crest Trail, landing a full-time job afterward took longer than expected, Ms. Saperstein told the Journal.
A career break can also mean losing ground on savings for retirement, given that money in a 401(k) compounds over time, the Journal wrote.
For example, a 30-year-old who invests 15% of their $90,000 salary with a 5% raise each year worked could end up with $600,000 less in their investment balance at age 65 if they took a year off work once a decade, compared to if they did not, Julie Everett of Financial Finesse told the Journal.
Those interested in taking a mini-retirement should set aside more than 15% for retirement earlier in their careers, Ms. Everett said. Someone interested in retiring by 67 should have double their annual income saved by 35, according to Fidelity Investments.
