Taking the semi-retirement plunge without drowning in debt

After spending months working 60 or 70 hours per week, realizing that life is all too short, and preparing for our kids to come home, it's time for a new financial paradigm of my own: I'm semi-retiring.

I had always been perplexed by those who, say, retired early to travel to exotic locations. I like working and don't really like traveling, so my dreams involved some sort of fulfilling employment until I couldn't work anymore. I'm the life of the party, I know.

But then two or three years ago, I read about a guy who took a year off from full-time employment and I thought, what if?

What if I (or my husband) could take a year or two off from full-time employment? Or work part-time for a few years? Or work six months out of the year? Is that possible and would we want to?

Maybe and probably.

So over the last 2.5 years, my husband and I crafted a plan to send at least one of us, if not both of us, into temporary, semi-retirement once our kids arrived. Ideally, we would be financially independent with no need for earning monthly income, but… yeah, we knew that wouldn't happen. So what we needed was a job (or jobs) with very flexible and part-time hours, jobs that would allow us to help our kids transition to a new culture, and jobs that paid enough to keep the lights on.

The First Laps

Before you dive into semi-retirement, take care of the basics.

1. Decrease debt load. The more debt you have, the more money you will need to have in semi-retirement. By now, any non-mortgage debt is a distant memory. Our monthly mortgage payment is significant, so our semi-retirement income needed to be at least four times our housing costs.

2. Increase savings. Because you're taking a break from full-time employment (and perhaps from IRA or 401(k) contributions), you need to be creative with retirement savings. On the other hand, if you get used to living on less, maybe you don't need as much in full retirement. We've been contributing to Roth and traditional IRAs for over a decade. Plus, we have an emergency fund. If we didn't have those things, decreasing our income would require more radical sacrifices.

3. Increase income. Before you semi-retire, earning more can help you decrease your debt and increase your savings. Earning more is not always possible for everyone, but this is the reason we are able to semi-retire.

The Middle of the Race

The next step is to calculate how much money you'll really need in semi-retirement. Some expenses (like transportation costs and work clothes) will decrease. Others (utilities and health insurance) will increase. Once we knew how much money we needed, we started looking for the money to replace our full-time income.

We don't have real estate and with very little investment income, we knew that money must come from part-time employment.

I first sought opportunities as a subject matter expert so I could maximize my income-earning potential. But I also wanted jobs that matched our new lifestyle goals: something that could be done mostly at home with very flexible hours. Fortunately, I found a side job that fit all those criteria.

While we still had some lifestyle inflation with our increased income, having a goal kept us mostly on track. As I mentioned, our goal was to stop full-time employment when our kids come home. (We are still waiting on paperwork approval. Hopefully soon!)

The Finish Line

As of today, we are making enough “semi-retirement” income to pay our bills, not counting our full-time incomes. It does mean that our 2014 income will be closer to our 2005 levels, but we are okay with that for a couple of years or more. We are confident that we can do this because we're already living close to the semi-retirement income level.

Even though this means we'll have to be very careful with our spending, we're still excited. The best thing is this opportunity allows us more flexibility to spend time with our kids. We've missed out on too many years of their lives already. We should also have more time to do DIY projects on our little farm and start that business I have always wanted.

I'll be honest with you, though. The last couple of years have been stressful in many ways. I've spent a lot of time with my laptop and not as much time with my husband — and I know it's time that I can't get back. Our lives felt out of balance, and there were times when I wondered if our goal was worth it.

And I had other questions, too. Did I want to quit my job? I have never had a job I loved more. Were we creating more stress by cutting our salaries… even though we would have more time to spend with our kids? What would an indefinite break do to my career? We would be leaving behind company-provided benefits like a retirement plan and health insurance. The real question? Are we crazy?

The Next Race

Maybe we are crazy, but if we don't enjoy semi-retirement, we have options. I'm leaving my job on good terms, and it's possible there may be a similar job opening there in a couple of years. Or, because I'm a specialist, I should be able to find a similar job at another institution if necessary.

Semi-retirement isn't for everyone. But having your financial ducks in a row gives you options. Maybe you can cut your schedule to four days a week. Maybe you can take six months off to travel. Or take a job that pays less but you love more.

In the meantime, I'll test the semi-retirement water for you.

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Sophie
Sophie
7 years ago

Those kids will be lucky to have parents who love them more than money! Seems like too many people have their priorities mixed up, good on you for wanting to be there for your children instead of working crazy hours for a more expensive lifestyle.

Tim Huntley
Tim Huntley
7 years ago

I totally understand your point “retired early to travel to exotic locations.” That’s just not in my DNA. I have been semi-retired since 2002 and have had a small micro-farm and done several advisory and board gigs with some local high-tech startups. It is what makes me happy now that I am “not working.”

Josh @ Live Well Simply
Josh @ Live Well Simply
7 years ago
Reply to  Tim Huntley

Tim, I like your approach. Most people I know don’t really want to ‘retire’. They just want to be able to afford to do the things they really want to do (including working on something they can be passionate about). 🙂

Siegfried
Siegfried
7 years ago

Hello! I am 34 and I am trying to get out of the rat race and become less dependant on third party jobs, even if it means smaller income. I do love travel and I am thinking about moving somewhere warmer – england is too cold imho 😀
Best Regards

Paula
Paula
7 years ago

Lisa;
What a sane person you are. Working at home part-time has been my life for the past 6+ years and I like it just fine. For the previous 30+ years before that, I was no stranger to overworking and being out-of-balance. It took a huge toll on my health.
Spend more time doing what you want and the $ issues will be dealt with satisfactorily by you.

Eric J. Nisall - DollarVersity
Eric J. Nisall - DollarVersity
7 years ago

Count me among those who don’t understand the desire to constantly travel. I bought, and spent lots of time making my condo into a “home” so I would have a place that no matter what, is always a place that is perfect for me. Many others do it as well, and probably spend a hell of a lot more time, effort, and money than I did. So, if that’s the case, why on Earth would anyone want to spend so much of their time away from that sanctuary? Of course, it’s great to get out and experience the world and… Read more »

nicoleandmaggie
nicoleandmaggie
7 years ago

We took a year off for a sabbatical and were able to take some chances about it (in the end I ended up replacing my full salary, but DH took his entire salary off) because we’d saved up 100K for the year in order to do that. In the end we didn’t even spend it all and made a nice cut to our mortgage once we got back. DH is quitting his job in May ( http://nicoleandmaggie.wordpress.com/2012/09/03/september-mortgage-update-changing-plans-help/ ) and will be working on self-employment options. We can go quite a while without him bringing in any money because we have… Read more »

M
M
7 years ago

Lisa, A wonderful change for you! My DH took the plunge two years ago after leaving a very stressful corporate job to build custom cars. He’ll get “rich” (aka break even) VERY slowly. I supported his decision because his previous job was impacting his physical/mental health but honestly, being fully responsible for earned income scared the bejeebers out of me since I’m not a high income earner. But if I may share my experience: 1. Kill all debt if possible. 2. Live on less. It’s actually fun. 3. Be patient: it’s taken me > 2 yrs to figure out a… Read more »

Sheryl
Sheryl
7 years ago
Reply to  M

My husband did the same thing a few years back, except to work on motorcycles. One of our best decisions was to start to live on the estimated new budget about six months before he made the change. He also left on great terms and has kept in contact with his old colleagues, which has opened the doors on a lot of freelance opportunities which are great income supplements.

M
M
7 years ago
Reply to  Sheryl

Exactly what we did! Living one one income for awhile helped ease the transition. My spouse also left one good terms with his employer, although he ran and never looked back:)
Now if I could just get him to stop drying engine parts in my oven…

Sandi_k
Sandi_k
7 years ago
Reply to  M

🙂

When we bought a house, I only had one rule: no motorcycles in the house. I had engine parts in the dishwasher, and carburetors on the coffee table, but the motorcycle, in the main, stayed in the garage.

Elizabeth
Elizabeth
7 years ago

I love stories like this because they show all the possibilities that are open to us if we carefully manage our money. Good for Lisa! Is it just me, or does anyone else wonder why so many things fall under the umbrella of “retirement” or “semi-retirement” these days? I’m just curious — I don’t think any of my friends who are working part time to spend time with their kids consider themselves “semi-retired”. Most of my friends who took time off to travel went on a sabbatical, not temporary semi-retirement. I’m not judging anyone — I’m just a bit of… Read more »

lmoot
lmoot
7 years ago
Reply to  Elizabeth

I got renewed excited about my future plans reading this article. I agree though about the possible mis-use of semi-retire. I guess it comes down to opinion, so my opinion of semi-retirement, is that retirement is intended to be the next step in the near future. If there are plans to eventually go back to full-time work, or to work part-time for an unforsee-able amount of time, I wouldn’t consider that to be semi-retirement (otherwise everyone with a part-time job would be semi-retired! And I doubt most folks with PT jobs consider themselves such). Good luck to you with everything!… Read more »

Carla
Carla
7 years ago
Reply to  Elizabeth

I’ve always wondered that myself. In years past people just “took time off work” to raise children or to take a break – now we call it “retirement”. Some people in my circle claim that I’m semi retired because I work part-time but they forget disability put me in that position and not because I did soooo well in my 20s that it was an option for me.

LeRainDrop
LeRainDrop
7 years ago
Reply to  Elizabeth

I’m surprised no one’s posted this yet. It’s MMM’s response on the term “retirement”: http://www.mrmoneymustache.com/2013/02/13/mr-money-mustache-vs-the-internet-retirement-police/

broncobilly
broncobilly
7 years ago

You could say I’m semi-retired but I’m only 26. I work as an offshore engineer and work a 3 wk on/3 wk off schedule. I work 12-14 hour days while on the ship but when I’m off, I’m off. This causes quite a disturbance in my home/social life. I miss special occasions often but whenever my girlfriend is off we take mini-vacations often. I live on much less than I earn and I’m less than 10K away from being completely debt free! Its been my goal since July ’11 when I was hired with my first company after college with… Read more »

Marsha
Marsha
7 years ago
Reply to  broncobilly

My husband considered a job as an offshore engineer when he graduated from college 30 years ago. The pay at that time was about twice that of a newly minted engineer’s salary and it was a 2 week on/2 week off gig. I told him if he took the job, I would find an additional husband on the opposite shift. That way I’d always have a husband at home and four times the money. Maybe I should have a talk with your girlfriend?

(My husband didn’t take the job.)

broncobilly
broncobilly
7 years ago
Reply to  Marsha

I was looking for a smiley face or lol but never found it so I’ll assume you were quite serious. It definetly takes a special woman to put up with the home/not home part. The search has been difficult to say the least. LOL. As far as pay goes youre spot on (started at 75k now at 130k) and she could have another boyfriend I wouldn’t really know. Trust is incredibly important.

Michelle
Michelle
7 years ago

We’re really working on paying off all of our debt and working on increasing our extra income (http://www.makingsenseofcents.com/2013/03/5983-in-february-extra-income.html). It’s hard at times but it is well worth it whenever we accomplish a goal. Student loans are almost gone!

Matt Blood
Matt Blood
7 years ago

More power to you. I love the idea of semi-retirement early. So are still contributing to your IRAs?

That would be hard for me to give up as I like having the government add to my retirement savings (by way of the above-the-line federal income tax deduction).

William Cowie
William Cowie
7 years ago

We don’t hear enough success stories like this, showing how feasible it is to pursue a lifestyle out of the rat race. Well done, and keep us posted!

Janette
Janette
7 years ago

Semi retirement instead of at home parent? Does one carry a different stigma? Is it because you are older (assumed since you do not say your ages)? We made the choice to have one parent at home through the twenty years our children were growing. We switched off, depending on the age of child and type of position out there. We did not save specifically for those years, we did save for retirement throughout. We both always had some type of small job while we were “at home”. It kept us up on our professions. We are now retired with… Read more »

Elizabeth
Elizabeth
7 years ago
Reply to  Lisa Aberle

I think it’s a sign of the times that we don’t have a term for this yet. Like I said, I’m a language geek and I find it interesting how we’re trying to apply old labels like “retirement” and “semi-retirement” to different career trajectories. (Not to mention the reactions of the “retirement police” to people like MMM!)

It’s a good thing that we’re asking these questions and having these discussions. Career trajectories just ain’t what they used to be 😉

Barb
Barb
7 years ago

Love the article overall, but to me this is not about retirement, but rather choosing to have a non working parent in the house. As a stay at home parent for almost twenty years, that wasnt retirement from my perspective.

Jane Savers @ The Money Puzzle
Jane Savers @ The Money Puzzle
7 years ago

I am too late to the retirement savings game so the most I can hope for is semi-retirement until I am no longer physically or mentally able to work.

Good for you to have worked so hard to be in a position to work less and enjoy life more.

Mike Holman
Mike Holman
7 years ago

Good for you to plan for some time off work.

I find the terminology a bit confusing on this post. You make reference to your “kids coming home”, “once our kids arrived” – where are they now? Are you talking about having babies? Adopting?

As for the semi-retirement term – I honestly have no idea why you call it that. You even say it’s temporary.

A better way to refer to “taking time off work” is to call it something like “taking time off work” or maybe “stay home with the kids”.

Mike Holman
Mike Holman
7 years ago
Reply to  Lisa Aberle

Thanks for clarifying about the adoption. I see now that the link you provided does answer that question which I didn’t realize from the post title.

Good luck with the kid(s)!

Pauline
Pauline
7 years ago

I took a year off just after graduation and it has been hard to go back to “normal” after that. Financially, because I am on the move, I own less stuff and have less needs, so it works out well. But it is a whole new kind of life from which it is hard to part and resume life as it was before once the set period ends.

Juli
Juli
7 years ago

Being a SAHM has never been an option for me, much as I would love it to be. But when my oldest starts Kindergarten in 2014, I have already told my husband that we WILL find a way to have at least one of us at home with him both before and after school. Not sure exactly how that will work – I’m going to try to work out a part-time schedule, but might possibly mean I work early and he works a little later. But I don’t want him to have to spend an hour in before-school care and… Read more »

Nick @ ayoungpro.com
Nick @ ayoungpro.com
7 years ago

Great post and good luck! I have dreams of a semi-retirement wherein I am a part-time college professor.

krantcents
krantcents
7 years ago

I have been in semi or retirement for 28 years. It is great to do what you love to do without thinking about how much you earn. The best part is I enjoy what I am doing. I am a teacher earning a reasonable salary for the hours I work and I will get a pension when I am done in 5 years. Sounds like a win/win!

Matt
Matt
7 years ago

I would say congratulations are in order, being able to enter semi-retirement is a great feeling and one that I hope my wife and I will be able to achieve someday. For me retirement isn’t about working or not working its about the need to work in order to pay the bills. Working because you want to work on a project or with a company is something completely different than having to work in order to put food on the table.

Simple Economist
Simple Economist
7 years ago

I enjoyed the post. I’m 28 and my wife and I are planning our exit from the working world in the next few years. We should have all our debt and house paid off in the next year and we live on a small amount that could easily be earned in almost any kind of simi-retirment type of job.

I think we’ll both spend more time with our kid but I’ll probably continue to earn some sort of income because many of the things I enjoy generate revenue.

My Financial Independence Journey
My Financial Independence Journey
7 years ago

Since I am interested in semi-retiring or achieving any other form of financial independence far before traditional retirement age I would offer the following advice:

1) Stay out of all non-mortgage debt. And refi your mortgage to get it as low as possible.
2) Don’t waste your time with retirement accounts. Focus on regular taxable accounts that provide passive income to cover as much as your expenses as possible.
3) Minimize expenses to the greatest extent realistically possible.

John
John
7 years ago

I’ve spent the last 10 years on the road, turning around 2 failing businesses. On 6/7/13 I’m walking away from the grind. My plan is to gradually build up a consulting practice. The emphasis is on GRADUALLY. It’s going to be a great summer.

Nihongo Dame Desu
Nihongo Dame Desu
7 years ago

When my husband retires from military service, it is unlikely we will be able to retire from all work for good. But we are hoping to have a year or so between jobs so that we can do some travel (yes, we want to travel to exotic and not-so-exotic locations!) and maybe spend time on shared hobbies. We should be in a position to swing it, but my fear is that if he doesn’t start looking for work until, say the 8-9 month mark, what happens if it takes him 2 years to find a job? We would probably be… Read more »

Holly@ClubThrifty
7 years ago

Lisa,

I am so happy for you that your children will soon be with you. Congratulations!!!!!!!!!!!!!!!!!!!!

Deb
Deb
7 years ago

What troubles me is that I see you preparing well for the expenses that you and your husband have routinely incurred and that you’ve taken steps to reduce or eliminate those expenses. What I don’t see, however, is the realization that the kids themselves will bring on a huge amount of unplanned expenses. Raising kids in and of itself is expensive! Is that factored in?

Sandi_k
Sandi_k
7 years ago
Reply to  Lisa Aberle

Will you have medical coverage for your family in this planned semi-retirement/partial sabbatical world? That would be the biggest challenge I would worry about…

Andy
Andy
7 years ago

I’ve been trying to set myself up to semi-retire. I make, what I consider, a small income on my own, away from my 9-5 job. No debt, including a paid off mortgage. My fear is healthcare. I’m terrified to give up my health insurance benefit from my employer. Hitting that 40 year old mark, I’m afraid not to have health insurance and afraid of the cost of paying for it myself. Any suggestions?

J
J
7 years ago

It’s common that people who are truly great at what they do, they become what they do (if they aren’t already). However, for the vast majority of us, we’re working because we need money to pay the bills more that out of any love for the job. So it’s less a question of “what will I do when I retire” than “how soon can I be independent and do what I want”. For me, personally, semi-retirement isn’t retirement. As soon as I can meet all my reasonable expenses (and a few unreasonable ones) without answering to another person for a… Read more »

Babs
Babs
7 years ago

Nice article Lisa. You were able to 1)identify your goals 2) make a plan to reach your goals and 3) execute the plan.

Good luck with your commercial/domestic employment shift.

lmoot
lmoot
7 years ago

Just some more thoughts on the meaning of semi-retired (we need a post on this!). I don’t think one person in a marriage can be semi-retired. It seems that if one person needs a full-time job to keep the lifestyle going, the other person just becomes a stay at home, or partimer. In an even stricter sense it may not even be sufficient to say that someone who can spend the rest of their working life surviving on part-time pay, and still have money in retirement would be considered a semi-retiree. I’m gonna go hardcore on this one and say… Read more »

Cat
Cat
7 years ago

That’s awesome! I doubt you wont like semi-retirement! There are plenty of people out in the world just living and working. I think it’s a great choice! Good for you! I just recently left my full time job to move to Hawaii and now I am getting job offers back home and I am weighing my options, but life just works out. It always does.

Hill Roger
Hill Roger
7 years ago

Well retirement plans depends obviously upon the companies policies. I was just thinking when it would be suitable for me and my company to have my retirement?

DG
DG
7 years ago

Great post. Interesting that you used the “race” theme…I’m sitting here in a B&B overlooking the beach in NZ, as my wife recovers from Ironman Taupo. We decided last year that it was time for her to take a well-deserved break from work, so she took a leave of absence in order to come down here and realize her dream of completing a full Ironman. Semi-retirement, spouse-supported sabbatical, or a new form of job-sharing (one of us works while the other does something fun, and then we switch). Don’t put off doing what you want. “Someday, maybe” never comes! My… Read more »

bob jackson
bob jackson
7 years ago

I am ready to make the same jump.. however, I have been experimenting with a plan my cap told me to try. Keep working for as long as you can but spend everything you make. That way you don’t touch your retirement funds but you have all this money to spend as you like.

I have to say though, after 6 months of this I am still tired of working full time..even though we have paid off the bills and replaced old items/appliances in the house.

Cat
Cat
7 years ago

@DG that rallying sounds like fun!

David Bressler
David Bressler
7 years ago

It’s interesting to think about semi-retirement. I read an interesting book about deep bell diving that gave me insight into what it used to be like to be wealthy (at least in one segment of the population). It seems like it was a permanently semi-retired state – where they might do a lecture tour in Europe for 9 months (remember, travel took much longer) to fund a project they worked on, and so on. It’s attractive to me, not because I don’t want to work, but because I’d like to break the need to maximize income from my desire to… Read more »

Alana H.
Alana H.
7 years ago

Hi there,

Thanks for the resourceful post; it gives me a blueprint of sorts that I can work with when I decide to go into semi-retirement. I think having a source of passive income is the best thing you can do for you and your family; something that makes you money without your having to actively manage operations. Just my two cents 🙂

Alana

Connie K
Connie K
7 years ago

My idea of semi-retired would be someone who has worked with a company long enough to draw full retirement with that company (which is about $500 less than their bring home pay)But they are only 47 and too young to actually retire but get a part time job to make up the difference. That is what I am trying to decide right now. I could retire with one place and work part time bringing home the same pay or more pay a month. What should I do? Can anyone help me decide what is best?

Sumflow
Sumflow
6 years ago

I worked six months on, six months off for decades. The most important thing was to always have assets working, and increasing amounts of income earning assets.

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