Finding Freedom in Semi-Retirement: Balance Work, Life, and Passion
Semi-retirement presents a balanced lifestyle, where individuals can scale back their working hours while still engaging in meaningful work. This approach allows for the flexibility to explore personal passions, travel, or spend more time with family, all while continuing to earn an income. Your nest egg can continue to grow thanks to the power of compound interest as you’ll be drawing less on your savings because of your continued inflow of cash. It's an ideal way to embrace both financial security and personal fulfillment.
In his book Work Less, Live More, author Bob Clyatt presents a plan to achieve semi-retirement and enjoy it:
Clarify Your Motivation: Reflect on why you desire to work less. Common reasons include health concerns, a diminished interest in career advancement, or a yearning to pursue passions outside of work.
Live Below Your Means: Semi-retirement can mean reducing your working hours at a young age — such as in your ‘50s. To plan for this, adopt a lifestyle that prioritizes savings and reduces unnecessary expenses. The older you plan to be when you semi-retire, the more time you’ll have to prepare, but living below your means is always advantageous and recommended.
Implement the 4% Rule: Determine your annual living expenses in retirement. Remember that you may have different expenses — for example, your mortgage may be paid off, but you may be paying for health insurance if your semi-retirement income doesn’t provide benefits and you’re not old enough to qualify for Medicare. From your retirement investments, plan to withdraw 4% from your total investment portfolio in the first year of retirement, adjusting for inflation in subsequent years. For example, if you have saved $1,000,000, you can withdraw 4% (or $40,000) in the first year of retirement. This strategy helps ensure the longevity of your savings.
Understand Tax Implications: Educate yourself on tax benefits available to early retirees and develop strategies to minimize tax liabilities. This knowledge can significantly impact your financial planning. A financial planner can help you with this step during the preparation phase as well as throughout your semi-retirement.
Enjoy Your Freedom: Clyatt explains that semi- retirement offers a unique opportunity to explore new avenues, and it’s essential to embrace this phase with intention. Seek out fulfilling work or volunteer opportunities, travel to broaden your horizons, and discover hobbies that bring joy and purpose. It’s important to navigate the challenges of retirement as well, such as managing boredom and adjusting to changes in your sense of work identity, all while maintaining healthy relationships. To make the most of this time, prioritize your physical, mental, and emotional well-being, have fun, and devote time to activities that truly matter, ensuring your retirement is both meaningful and rewarding.
By following these steps, individuals can transition into semi-retirement with confidence, enjoying the benefits of reduced work hours while maintaining financial stability.
