You’ve probably heard about FIRE (Financial Independence and Early Retirement).
It’s a movement that appeals to a lot of people. I like it too.
What’s fascinating is how personal finance experts can have radically different opinions on the FIRE lifestyle. Look at these two quotes:
“I hate it! I hate it! I hate it…Almost every one of them says, ‘I’m older, I just got cancer’; ‘I’m older, my child was just in a car accident.’ They’re all about how they had money… and before they knew it, all the money in their 401(k) they had to take out.” –Suze Orman, a personal finance celeb
“FIRE is complete freedom to be the best, most powerful, energetic, happiest and most generous version of You that you can possibly be.” –Mr. Money Mustache, a leader of the FIRE movement, in response to Suze Orman
While Suze Orman may come off as a bit negative, she has a point about the financial risk of the FIRE lifestyle. If you aim to retire at 40, you should have a substantial amount of savings and a strategy to make income off investments. Even still, a stock market downturn or medical emergency could deplete your net worth.
But that doesn’t mean you should abandon your dream of quitting work and traveling the world. What if you could address the financial risk AND embrace the FIRE lifestyle?
I have a solution: Semi-retirement.
What is Semi-Retirement?
The best definition for semi-retirement is:
A period of life before full retirement where you work part-time and enjoy your days as if you were retired
Whether you semi-retire at 40, 50, or 60, this type of FIRE lifestyle is designed to take the financial pressure off attempting to fully retire early and travel the world. It’s about doing the things you love and escaping the stresses of the cubicle. The work you do should be enjoyable, while giving you enough income and time for other pursuits, like travel, hobbies, and time with family.
The definition of semi-retirement is broad, but that’s because it can look different for lots of people. The beauty of the semi-retired lifestyle is that it can be customized for anyone.
Why You Should Semi-Retire Instead of Retire
Full early retirement can go wrong in ways you’d least expect. I have a friend that retired to the beaches of Thailand in his early 30s. Money issues didn’t end his retirement after one year.
Feeling like a zombie did.
My friend’s solution? Working again. But only on things that he enjoyed or challenged him. He’s now happily semi-retired, working about 20 hours per week and still traveling the world.
Now, you may think semi-retirement is a half-measure. I guess it depends on how you look at things.
But the reality is: When you semi-retire, you get the best of both worlds. You can engage in meaningful work and do all the activities you want to do in retirement.
The benefits of semi-retirement abound. For instance, you can:
- Ensure positive cash flow
- Spend more time with family and friends
- Have the freedom to travel the world
- Keep your mind active with enjoyable work
- Actually do work you like
- Live where you want
Compared to early retirement, semi-retirement offers a more viable financial, social, and emotional path. You can leave the daily grind—and take on much less risk.
Why wait to retire when you can semi-retire at 55, 40, or even younger
Getting to semi-retirement takes less time and fewer savings. So that you can better visualize this, let’s talk about Lee, a 34 electrician who makes $60,000 per year, has $40K in savings, and wants to retire at 50 or a few years after 50.
See how much faster Lee could semi-retire than retire:
|Lee’s finances||Semi-Retirement Track||Retirement Track|
|Savings rate||30% ($18K per year)||30% ($18K per year)|
|Investment growth rate||~8%||8%|
|Years to reach goal||~10 years||~20 years|
By opting to semi-retire, Lee could enjoy the FIRE lifestyle as early 44, instead of working full-time for another 10 years.
Now, you may think semi-retiring so early will ruin Lee’s planning for full retirement, but it doesn’t. By working part-time and staying cash flow positive, Lee can let his $350K nest egg grow. If it continues to achieve 8% returns, he’ll be a millionaire by 57 or 58. And he’ll still be enjoying the FIRE lifestyle.
How amazing is that?
How You can Semi-Retire Early
The FIRE lifestyle emphasizes living life on your terms. For most people, this doesn’t entail doing nothing.
It involves doing the things you love.
So, what steps do you take to semi-retire? Like any goal, you need a plan. Below, we lay out all the financial considerations you must address before and during semi-retirement.
1. Make Money Now
You need a good deal more income than you spend in order to even get on a path to semi-retirement. For the vast majority of us, that means having a full-time job.
Not every job is perfect, but you don’t have to compromise and do something you hate. Do something that will bring you fulfillment. Or, at the very least, find a gig that will keep you mentally stimulated.
If you love art, that could mean taking a graphic design job that pays well. If you can’t get enough of traveling, work as a tour guide or flight attendant. Or if you feel at peace writing code, get a programming job at a company you like.
To retire early and travel the world, you must work hard today—plain and simple. You could even add a side hustle to get there quicker. From bartending to writing, there are all sorts of things you can do to make extra cash.
2. Calculate What You Must Save Each Month to Semi-Retire
Before we go further, let’s just say this: Saving to semi-retire doesn’t have to be painful. You don’t want to eat rice and beans for every meal in your 20s and 30s just so you can semi-retire at 40 (unless you love rice and beans!).
Simply put, save and live below your means. But make sure to enjoy today.
So, how much should you save if you want to retire early and travel the world?
The answer is it depends. Obviously, the more you save, the better.
Since you’ll work during semi-retirement, understand your savings should function as:
- A protective cushion in case you have a personal or medical emergency.
- A foundation for full retirement (which means it should be invested and growing)
So you can better calculate your savings number (and get motivation), consider the following example:
- You wish to semi-retire at 55 and travel the world for 15 years before entering full retirement.
- You’re 40 and currently have $30,000 in savings.
- After calculations, you decide you’ll feel comfortable to semi-retire if you reach $275,000 in savings.
- To reach $275,000, you’ll need to invest $6,700 per year over the next 15 years (assuming an annual return of 8% on average).
Do you see that? You only need to invest $6,700 per year in this example. This is doable if you manage your money well and maintain a full-time job—a necessity for most everyone who plans to retire early and travel the world.
The point is this: To successfully semi-retire, create an exit plan that involves steady, smart investing. Decide how much you need to set aside each paycheck and put it on autopilot. And enjoy life in the meantime.
3. Invest Wisely and Diversify Your Asset Portfolio During Semi-Retirement
Your money shouldn’t sit there, collecting dust in a low-interest savings account. It should be out there working for you.
Just remember: Don’t put all your eggs in one basket. Your semi-retirement can get derailed if you’re overexposed to one stock or asset.
So, what should you do with your money?
You could take the advice of Warren Buffett and invest in diversified index funds, such as mutual funds that follow the S&P 500. The average annual return of the S&P 500 is 9.8% (way better than savings accounts). By investing this way, you can benefit from growth in certain industries and markets while having protection against declines elsewhere.
Want to picture how this works?
Let’s go back to the example of you having $275,000 and choosing to semi-retire at 55. With careful financial management, you could continue to build your nest egg in semi-retirement—even if you’re only working 10-20 hours per week.
Here’s how you could do that:
- You make enough to save $6,000 more each year in semi-retirement.
- You get an 8% average annual return on your investments.
- After 15 years, you’ll have more than $1.04 million in your retirement portfolio.
That sounds awesome, right?
Of course, risk tolerances vary. Consider how many years you’ll spend in semi-retirement before you fully retire. If desired, you can get more conservative with your investments as you approach the end of your semi-retirement and enter retirement.
Tip! Read our guide on investments for your semi-retirement.
4. Make a Detailed Budget for Semi-Retirement
First, strategize how you’ll use your savings.
Many experts advocate a 4% savings withdrawal rate for retirees, but semi-retirement withdrawal rates depend on your income and savings. Your withdrawal rate should be lower, especially if you make decent money in semi-retirement. As mentioned above, you could even continue to save money in semi-retirement (and your nest egg could grow and grow!).
You should also think about creating investment income for yourself. For instance, if you semi-retire at 55 with $500K and put $200K into a real estate investment trust (REIT) that offers 12% annual returns, you’ll have $24,000 in investment income each year. You can let the other $300K grow untouched.
Second, think about what you want to do and where you want to go. This will not only give you motivation and direction, but also enable you to answer the important questions, such as:
- How much money will I need per year?
- How can I maximize my budget?
- How much should I put away for potential medical emergencies and unexpected expenses?
- How often will I be switching locations during semi-retirement?
- What semi-retirement jobs are available where I plan to go?
As you can see, those able to retire early and travel the world successfully get down to specifics. As you get closer to semi-retirement, you have to accurately estimate your income and expenses.
So, ask yourself:
How much will you make from local or online work?
If you do remote work in your field, you should have a good idea of what you’ll make working part-time. If you plan to work in your new hometown, check out expat salaries. For instance, if you go to teach English in Japan, you can expect to make around $1500 – $3,000 per month, depending on how much you work.
Do you have the ability to work remotely?
See if you can get any remote gigs in your field. If you’re lucky, you may not even have to apply for semi-retirement jobs. You could continue working remotely with your company in a part-time or freelance capacity. That could make your transition easy and ensure you’re making at least half of what you were when you worked full-time.
What’s the cost of living where you’ll stay?
If you want to semi-retire at 55 and spend your first two years in Cusco, Peru, you may consult a resource like Expatisan to figure out you’ll need around $800-$1,000 per month to live comfortably. There are plenty of other great budget-friendly destinations where you can semi-retire, like Costa Rica and Bali.
How much will health and travel insurance cost?
Health and travel insurance are necessities. Having insurance means you won’t go broke if you become ill or have a bad accident. Look at policies with reputable providers like World Nomads and Allianz.
Once you have estimates, you can build a budget. Analyze your cash flow and make sure the numbers make sense. Then, commit to that budget while leaving a little wiggle room for spontaneous adventures. You are semi-retired, after all.
Tip! Read our digital nomad housing guide so you can get the best bang for your housing buck while living abroad.
What Kind of Semi-Retirement Jobs Offer Great Work-Life Balance?
Don’t get down about having to work. Because studies show that working prevents cognitive decline. You don’t want to turn into a zombie!
Moreover, working keeps us connected to others. As Harvard research on happiness attests, good personal relationships boost mental and emotional wellbeing.
When it comes to semi-retirement jobs, you don’t have to compromise to make money. You can do what you love.
You can even begin your semi-retirement job while you still work full-time. This will allow you to hit the ground running in semi-retirement.
For example, you could:
- Start a passion project. If you always wanted to start your own travel blog, you can start writing while you’re still working and saving for early retirement. This will give you time to produce content and build an audience. And by the time you semi-retire, you could already have income from travel writing.
- Do side work you like. Make extra money doing contract work you enjoy, tutor subjects you like, start an ecommerce store, and more. This will make the transition to semi-retirement easy, as you’ll have a job in place.
- Learn a new skill. Are there any skills you’ve always wanted to learn? You can obtain that skill while you’re still saving for semi-retirement. Worthwhile skills for digital nomads include a second language, coding, and graphic design. Having any one of those skills will make finding remote semi-retirement jobs easy.
The best semi-retirement jobs align with your passions and interests, while still offering a way to make money. Moreover, they provide flexibility in terms of hours and location.
If you’d like to work in a traditional setting, some good examples of semi-retirement jobs that allow you to travel include:
- ESL teacher: Love education? Travel the world and teach English.
- Park ranger: Passionate about nature? Work at national parks.
- Hospitality jobs: Get a working holiday visa for countries like Australia, and work in tourism and hospitality.
You could even work at local businesses where you live. You can choose work that’s low-stress and enjoyable for you, and you can meet and interact with people. For instance, if you love gardening, get a part-time job at a garden store.
If you plan to travel a lot and therefore need to be able to work from anywhere, consider digital nomad jobs like:
- Travel writing: Check out all of Frayed Passport’s travel writing tips.
- Software development: Build apps and solutions that you’re passionate about.
- Digital marketing: Help businesses fuel their online growth.
Where to live in semi-retirement
Location. Location. Location.
It makes all the difference if you’re to achieve a sustainable semi-retirement and live the FIRE lifestyle.
No matter when you plan to retire early and travel the world, plenty of great destinations await. We’ve written about the best digital nomad cities and many of these towns make great places to semi-retire, such as:
- Budapest, Hungary
- Buenos Aires, Argentina
- Auckland, New Zealand
- Taipei, Taiwan
- Montreal, Canada
When you semi-retire, the whole world is at your fingertips. Where you go ultimately depends on your interests, preferences, and needs.
Looking for a place with a lot of history, access to good healthcare, and great food? Consider a destination such as Madrid, Spain.
Looking for an affordable beach destination? Look no further than Ko Samui, Thailand.
Hoping to lose yourself in nature? Get swept away by the magic of the Himalayas in Kathmandu, Nepal.
Remember: Semi-retirement isn’t a vacation. It’s the FIRE lifestyle. Generally speaking, it’s financially wise to stay in each spot for at least a few months. It not only gives you time to understand a place more deeply, but you also get better deals on housing and save on transportation (two of your biggest expenses).
No Longer Worry if You can Retire with 200K or a Million
In the book Work Less, Live More, Robert Clyatt makes a powerful case for semi-retirement. He attests that it’s a safe lifelong withdrawal plan. If you’re suffering from burnout but fear you don’t have enough money to retire, you can semi-retire and, as the book’s title says, work less and live more.
In short, semi-retirement provides a path away from the madness of overwork. It’s your chance to reclaim a proper work-life balance.
Considering that money concerns are the primary reason Baby Boomers delay retirement, you probably have worried if you can retire with 200K, 400K, or a million. You may have asked yourself, “Will this be enough to sustain me for the rest of my life?”
When you semi-retire, you remove those concerns. While it benefits you to have more savings, you can semi-retire with much less money than you need to fully retire. That’s because work keeps cash flowing into your accounts.
Simply put, not only is semi-retirement more feasible, but you can also get there faster.
Only one question remains: Are you ready to begin your journey to semi-retirement?
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Disclaimer: This article is intended for informational purposes only. Please DO NOT consider any content as investment, financial, legal, tax, or other advice. With any investment, past performance does NOT guarantee a certain future performance. Seek advice from an independent financial advisor before making any investment decisions.