WSJ Your Money Briefing - How Some People Work Mini-Retirements Into Their Career

Episode Date: September 4, 2024

More workers in their 20s and 30s are considering taking extended breaks from work for travel and other pursuits. Wall Street Journal personal-finance reporter Oyin Adedoyin joins host J.R. Whalen to discuss how to best prepare financially for taking sabbaticals from your career track. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

First, the bad news. SAP Business AI won't generate amusing holiday cards, but it will personalize career paths for your people and let you know which suppliers are best so you can be ready for the next opportunity. Revolutionary technology, real world results. That's SAP Business AI. Here's your money briefing for Wednesday, September 4th. I'm JR Whalen for the Wall Street Journal. A lot of us are just back from a nice summer vacation, but some workers are already planning

their next break, a long break that's more like a mini retirement. These are people who are maybe in their late 20s, early 30s, who see long careers for themselves and want to just take more frequent breaks and mix in a bit of that retirement, borrow those years from their later selves to enjoy that fun now. Our personal finance reporter Oyin Adedoyin has been looking into how to get your finances in order to take an extended break. We'll talk with her about it after this much shorter break. best to help you roll out your plant-based packaging in Southeast Asia, or identify the training your junior project manager needs to rise up the ranks, and automate repetitive tasks while you focus on big innovations, so you can be ready for the next opportunity.

Revolutionary technology, real-world results. That's SAP Business AI. Some workers in their 20s and 30s have a new view on retirement. Do it early and often. Wall Street Journal personal finance reporter Oyen Adedoyan joins me. Oyen, retire in their 20s and 30s? What, do they win the lottery? No, not exactly. These are people who have saved up as much money as they could maybe

for a year or so and are spending that money a year later. Something like a small retirement? That's exactly why we're calling it a micro retirement. It's not the full thing that happens after you've finished your career. These are small, maybe six month to a year long gaps in your work where you're just taking that time off to maybe travel, see family, have different and new experiences and recharge and figure out where you want to go in your career next. What sorts of things do people do in these micro retirements? I spoke with one couple in California who decided to take six months off to hike the entire Pacific Crest Trail. It's this trail longer than 2,600 miles or so, and it spans from Mexico to Canada.

They both quit their jobs and pretty much just hiked this trail, and she said it was an amazing experience. I spoke with another woman who lives in Florida who did this when she was in her late 20s and she just backpacked across Europe. She stayed on this kangaroo farm for a length of time. Where was this? In Australia, naturally. She jumped down waterfalls in Bali. She went on a safari in Sri Lanka.

She just had these really amazing, colorful experiences. And what she said was that it was really empowering for her as a young woman to travel on her own and do these things while she still could. It almost sounds like a sabbatical, which is pretty common among people in academia. When did people in other fields start considering this, and how common is it?

It's been a thing in other fields in recent years at least. According to the Society for Human Resource Management, about 6% of employers offered paid sabbaticals while 8% offered unpaid ones. And that's as of this year. So some employers see this as an employee retention mechanism. A lot of the people that I spoke with for this story who were taking these breaks actually had to quit their jobs in order to do so.

We've talked on the show about the fire movements, which is short for financial independence, retire early. Is this different? These aren't people who are living below their means, living frugally in order to save up as much as they can to retire in their 30s or 40s, like you said. save up as much as they can to retire in their 30s or 40s like you said these are people who are maybe in their late 20s early 30s who see long careers for themselves and want to just take more frequent breaks and mix in a bit of that retirement borrow those years from their later selves to enjoy that fun now. How many of these many retirements do people think about taking? Well it varies. Some of the people I spoke to are thinking about penciling this in maybe every 10 years or so in their career. So if you think about

working until you're maybe 65, that could be three mini retirements if you're 30 now. Other people are thinking about maybe spacing them out a little bit more and doing two along their career. All right. I want to talk now about the financial side of making something like this happen. What do financial experts say about the idea of a mini retirement and the math behind it? I spoke to a lot of financial advisors for this story, and surprisingly, they weren't

pulling any alarms on this idea of micro retirements. They were saying that if people are saving properly for this and really mapping out their budget and how much money they would need over the course of the entire thing, this could actually be a really good thing for people who are maybe trying to ease into retirement or people who are trying to figure out what they would like to do when they officially take that time off. So financial advisors recommend that people first pay down all of their debt.

If you owe any student loans or if you've got any huge mounting credit card debt, you definitely want to pay that down before you even think about taking one of these micro retirements. They also suggested that people take a look at how much money they usually need in a month and then maybe tack on a few more months past the expected amount of time they want to take off. That is some buffer time that gives you room to apply for jobs and get

yourself settled before you run out of money. Now you said earlier that people are borrowing from their future to take these many retirements but your colleague Anne Turgesson recently wrote about people being overly optimistic about how long they'll actually work until they retire for good. How does that factor into this? It's the classic idea that people are very present minded. A lot of the people that I spoke with for this story are in their late 20s and early 30s. They're not even thinking about retirement. They're just thinking, I know that maybe by the time I retire, I won't have the energy

to backpack across Europe or hike the continental US. So they want to do things that might take a little bit more energy now while they're working and have the money and could potentially recoup those losses later. In addition to paying off your bills and getting yourself in a good financial situation before doing this sort of thing, what do financial experts say people should do regarding how much money they're putting away into their retirement accounts before doing this? They say that people should be maxing out as much as they can contribute to their retirement account.

So that might look like putting anything from 15% of your take-home pay into that retirement account. And this has a couple of benefits. One, if your employer offers a 401k match, then that could really boost some of those savings. Another is that for a lot of young people especially, they get to benefit from compound interest, which means that the more money you're putting into a retirement account early,

the more that money has putting into a retirement account early, the more that money has potential to grow decades later. You spoke to people who did these micro retirements and put their savings and put their income generation on hold. What do they say about delaying financial milestones along the way later on in life? Well, they're definitely not naive. They know that they're going to have to make some sacrifices later on in life? Well, they're definitely not naive.

They know that they're gonna have to make some sacrifices later on to take these long stretches of time off. A lot of the people I spoke with said that they're willing to delay home ownership. They're willing to even work a few more years into their retirement if it means getting some of that break now. A lot of the people I spoke with have lost loved ones early

before they were able to use their retirement. And so seeing that, they have this idea that tomorrow isn't promised. I'm going to at least enjoy some of the hard-earned money that I've made. That's WSJ reporter Oyin Atedoyin. And that's it for your Money Briefing. This episode was produced by Ariana Ospirou with Deputy Editor Chris Zinsley. I'm JR Whalen for The Wall Street Journal. Thanks for listening. SAP Business AI won't generate amusing holiday cards, but it will personalize career paths for your people and let you know which suppliers are best, so you can be ready for the next opportunity.

Revolutionary technology, real-world results. That's SAP Business AI.