Semi-Retirement offers amazing benefits. It is a great alternative to full retirement and allows you to design your ideal lifestyle long before you reach Financial Independence.
I often talk about the ins and outs of (Early) Semi-Retirement and the alternative FI strategies (like Coast FI/Barista FI and Flamingo FI) that allow us to semi-retire and still reach Financial Independence at some point in the future. I’ve also written about our own plan and how we are coasting to FIRE now that we are finally semi-retired.
I am a pretty analytical, numbers-focused person, so I haven’t spent a lot of time writing about all the awesome benefits a semi-retired life offers. We firmly believe that as a lifestyle, Semi-Retirement beats full retirement (the RE part of FIRE) hands down.
What Does It Mean to Be Semi-Retired?
Semi-Retirement is a step between your full-time career and full retirement. When you are semi-retired the income you generate becomes a secondary consideration. Instead, the focus is on a good work-life balance, a low-stress environment and work you really enjoy. Semi-Retirement isn’t simply a synonym for working part-time. While most people will likely choose to work part-time in Semi-Retirement it would also be a completely valid option to work full-time in a relaxed job that might not pay much but that you find fulfilling.
In the context of Financial Independence, we often refer to Semi-Retirement as Early Semi-Retirement. With this version of Semi-Retirement, you save and invest (like anyone wanting to achieve FIRE would), but once you have saved enough to secure your future retirement, you start to downshift from your full-time career. All you need to do now is to cover your monthly living expenses. You are done saving and investing.
The Amazing Benefits of (Early) Semi-Retirement
Early Semi-Retirement is not an alternative to FIRE, it is a step along the way. However, it isn’t just a means to an end. It’s a phase that offers a fantastic lifestyle. This is the reason Mr. Flamingo and I are in no rush at all to move on to the next phase of our FIRE plan. At this stage, we expect to stay semi-retired for at least the next 15+ years.
Below I’ve listed the main benefits of Semi-Retirement as a lifestyle. There are, of course, many more advantages, but here are the seven things we love the most about the semi-retired life:
Semi-Retirement Offers Flexibility
Keeping a foot in the door makes you flexible. When you are semi-retired, scaling the amount of work you do up and down is pretty simple. Because you haven’t cut your ties with the workforce completely, you can easily move from a part-time position to a full-time role if your situation and financial needs change. Or, if you’ve been working as a freelancer or contractor, you could simply take on some more clients to generate more income.
I like to think of work in Semi-Retirement as a slider control with full-time work (think your typical career job, the 9-5, the rat race, corporate hell) on one end and full retirement on the other end. Once you are at the point where you can leave your full-time career and semi-retire, you can simply move the slider where you want it. It’s a flexible scale, so you can move it to the left and to the right as you see fit.
Early Retirement, on the other hand, is a bit like a dramatic mic-drop. You quit your job, you are done. It may feel good in the moment, but when you retire completely, you give up your flexibility. Circumstances change and you may find yourself in a situation where the FI math you based your decision to retire on no longer works.
Take the author of the excellent blog Living A FI for instance. After reaching FIRE in 2015 he quit his job and retired. However, things didn’t go to plan for him. Over the following few years, his relationship ended and he was diagnosed with a costly medical condition. His living expenses increased because he was now single and incurred extra costs. He needed to earn money again to supplement the income from his investments. So he found another job. He was lucky because his new employer didn’t mind the gap in his resume. This is a classic example of how people’s situations can change. Things happen. Relationships break up.
Of course, you could also always find another job if your circumstances change. However, depending on your qualifications and how long you were out of the workforce finding a new job may or may not be easy.
I much prefer the flexibility of a semi-retired life. I don’t have to worry about whether we will be able to find another full-time job if our expenses increase for whatever reason or one of us can’t work because of medical reasons.
You may now say that most people who reach FIRE continue working in some capacity. And that is, of course, true (and I’ve written about this many times). But why did they waste all those years working towards FIRE if they could have semi-retired and enjoyed more freedom a long time ago? Exactly.
Semi-Retirement Offers the Perfect Work-Life Balance
In 1930, the English economist John Maynard Keynes predicted that by 2030, we would all be working no more than 15 hours per week. He was even worried that we would have so little to worry about financially and so much free time that we won’t know what to do with all this freedom:
Thus for the first time since his creation man will be faced with his real, his permanent problem-how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.John Maynard Keynes
Well, it’s not 2030 yet, but I think we all know that the 15-hour workweek certainly won’t be the norm nine years from now. What happened? Basically, consumption and unequal distribution of wealth got in the way.
It seems that we still have a long way to go on a societal level. But that doesn’t mean we as individuals have to wait. With the principles we discuss on our blog, you can create your own 15-hour workweek (or whatever number of hours you are comfortable with as long as it pays the bills). While society is still catching up to the idea of a shorter workweek, you can create the work-life balance you want thanks to the magic of Semi-Retirement.
I feel that three days per week might offer the perfect work-life balance for me personally. Mr. Flamingo, on the other hand, wouldn’t mind working four or even five days per week if the work is very low-stress. His secret dream is to be a handyman or gardener at a country club!
Side note: Interestingly, there is research that suggests that in a typical 8-hour day, the average worker is productive for less than three hours! The rest of the time is spent reading news articles, chatting to colleagues, making coffee and snacking.
Semi-Retirees Enjoy a Smooth Transition to Full Retirement
Another great benefit of Semi-Retirement is that you don’t need to worry about falling into a mental abyss. Adjusting to retirement is a challenge for many people. Losing one’s daily routine can be tough, especially when you go from a demanding 40+ hour job to zero. There is a reason it’s said that the most dangerous years of your life are the year you are born and the year you retire.
Going part-time as part of a semi-retirement strategy is completely different. You could, for instance, simply reduce your hours and work three days instead of 5 for a few years – either in your current job (if you enjoy it) or a new job or business. From that point onward you could simply keep dropping a day every few years until one day you decide you are ready for full retirement.
My dad retired last year after a long public service career. He is doing ok, but I can see that the abrupt change came as a bit of a shock to the system. A smoother transition to retirement would have been much better for him.
Semi-Retirement Strengthens Your Sense of Purpose
Meaningful work offers a sense of purpose. Semi-Retirement is the perfect opportunity to find work that is in line with your values and goals. Because how much money you can make is secondary in Semi-Retirement, you can focus on doing something that fulfils you (and consequently won’t feel like “real” work).
In my late 20s, I left my corporate job to become a freelancer. However, it wasn’t in a field that I was passionate about. This lack of passion combined with the loss of routine was detrimental to my mental health. I learned the hard way how important a sense of purpose really is. You can read all about my experience here: Our Story Part 2 – Mulled Wine and Online Gambling
Retirees often struggle with the loss of purpose, especially when their career used to be the focal point of their life. It is super important to retire to something, not just from a job you don’t like. The ability to design a lifestyle you enjoy and that gives you meaning and purpose is a really important benefit of Semi-Retirement.
Avoid One-More-Year Syndrome By Semi-Retiring
The dreaded one-more-year syndrome is something most people face once they have reached full Financial Independence. Hanging up your boots when you are 65 is one thing, doing so in your 30s, 40s or even 50s is quite another. Stopping work completely during your peak earning years, when everyone around you is still climbing the career ladder is scary. “What if I haven’t saved enough?”, “What if the markets crash the moment I resign?” are common thoughts in this situation. We tell ourselves that we’ll just keep going for one more year, just to be on the safe side. And one year can easily turn into two, three or even five years.
Semi-Retirement, on the other hand, doesn’t feel like you are jumping off a cliff. You can simply drop a few days per week in your job (if you enjoy it), or take a little break and then find a new part-time job, start your own business or become a contractor. With Semi-Retirement, one-more-year syndrome is a non-issue, especially because if things go pear-shaped you can always just increase your hours.
The Practical Advantages of Semi-Retirement
Most of the practical elements of being a member of society are a lot simpler when you still work (at least in some capacity). Here is a list of things that are easier to manage as a semi-retiree:
- Getting a home loan: As long as you have some kind of regular (active) income, you will probably be able to get a home loan. Lenders are very wary of potential borrowers who don’t have paychecks or proof of business income, no matter how much money they have in their savings account.
- Rental agreements: The same is true when you are renting. Most landlords will choose a tenant with a regular income from a stable job, even if it is just part-time. As a semi-retiree, you won’t have too many issues securing a rental compared to someone who is fully retired.
- Investments: You probably won’t be adding much to your retirement nest egg when you are semi-retired. However, you might still have an investment property with a loan that you are paying off. Unless the property is positively geared (creating a surplus), paying off the loan requires additional cash flow. So some extra income from paid work will be very handy.
- Health insurance and social security: In countries like Australia and the UK, everyone benefits from universal health cover, regardless of one’s employment status. Things are a bit different in most European countries (like Germany) and the US, where your health insurance cover and social security is usually tied to one’s job. So holding a part-time job, even if it is just for a few hours per week, makes things a lot easier in this respect.
- The “What do you do?” conversation: When you are semi-retired, you can simply tell people you are working part-time or working as a freelancer/contractor/starting your own business – because it is the truth. No awkward, jealousy-inducing “I’m retired” conversations. As a semi-retiree you are just a normal productive member of society, you just take things a little easier than most.
- Finding a job: I’ve talked about this above but it deserves another mention here. One of the most practical advantages of Semi-Retirement is that you won’t have any gaps in your CV. If for whatever reason, your situation changes and you want to or have to find another “proper” job, it won’t be a big problem.
There you have it, seven reasons why Semi-Retirement is the best of both worlds – freedom and work. We are pretty passionate about this topic as you can probably tell.
Is there anything you want to add to the list? What do you love most about the idea of semi-retiring (early)?