Since the beginning of the New Year I’ve been rolling around the idea of semi-retirement in my head. It’s an option that I can say that I haven’t done too much work on before and I’m starting to understand why. In normal retirement type planning you have a lot of variables to deal with like how much you spend, savings rate, inflation rate, rate of return, when you want to retire….you get the idea. All of this items require some thought and decisions about each variable. When looking at semi-retirement a lot of those values become less firm. I’m asking myself new questions like: when do I want to start semi-retirement, when would I like to switch to full retirement, how much should I assume I make during that period, does my wife want to work at all during this…the list goes on and on. The problem is semi-retirement can be just about anything or everything you want.
So trying to define a scenario has so far been a much bigger problem than I initial thought possible. Yet out of this infinite possibility matrix I’m starting to define some rough guidelines to help me hash out a scenario. So in no particular order here are some of my initial guidelines:
- I can start semi-retirement any time once the mortgage is paid off, so in three years time. Yet I would like to have a cash reserve to cover most of our basic expenses (~$18,000/year) so I will likely work for a few years beyond that. Also I’ll need to build up a bit of a cash reserve that I’ll need for regular full retirement later on. So I’m thinking about three or four years of work beyond that which would put me at about 38.
- I want to keep my ‘required’ working salary in semi-retirement to a lower level (~$10,000/year) so if one of use can’t work for some reason that we won’t end up with a major problem down the road. We just deal with having less money for those extra things in life.
- My wife wants to keep working a bit once we switch to semi-retired. She would likely just stop taking new young kids and focus only on the older ones so as they age she will slowly get out of the business as the kids get older and no longer need care. The implication of this decision is we won’t even consider a move to a smaller house until our youngest son is in high school, which is about when I turn 44.
- Our full retirement will not start until I turn 60 or if we end up with the money to do it sooner. So if we earn more than we need in the semi-retired phase it can be rolled over to accelerate the full retirement date if we want.
- My work in semi-retirement will likely be more than just a single job and will depend heavily on what interest me and what opportunities come up. I’m currently not planning on doing any additional engineering work, but I suppose I could consult a bit if I want. It would depend on the project and who I would be working with.
So perhaps a good question to ask here is why bother with looking at semi-retirement at about 38 when you can early retirement at somewhere between 43 to 45? Well the reality is I’ve always planned on working a bit post early retirement, by going semi-retired I’m just actually putting in that income into the plan for the first time. So by considering that concept I just take advantage of that income to leave my day job a bit sooner.
So have you ever considered a semi-retirement? Is so, what did you include in your scenario? Or what would you change about my guidelines above?