How I View Mini-Retirements as a 40 Year Old Pursuing Barista FIRE

In recent years, the concept of mini-retirements has gained traction, particularly among younger Millennials and Generation Zs, as discussed in this recent report.  Rather than following the traditional path of working continuously until retirement, they take extended breaks (sometimes months or years) to travel, pursue hobbies, or simply enjoy life.  These young professionals see mini-retirements as a way to avoid burnout, gain new perspectives, and enjoy life while young.  While this idea sounds appealing, my perspective as a 40-year-old working towards Barista FIRE (Financial Independence, Retire Early) in Singapore is a bit more nuanced, as challenges like financial planning remain key considerations.  For a start, I would like to conclude that I personally prefer a more aggressive attitude towards work in my twenties and early thirties, and transit towards a more work-life balanced approach in my late thirties and early forties (which is my current state), followed by Barista FIRE and subsequently FIRE before my fifties, hopefully.  However this is just my perspective, which is probably possible due to my life choices such as living life simple and choosing to remain single and definitely not applicable to everyone.

Personally I think the perspectives and attitude towards working life has evolved throughout the years.  In my father's generation, working hard and climbing the corporate ladder to improve earnings will be the main priority.  This is because times were harder in the past, and for my father, who is the sole bread winner, he will have to push himself hard to achieve the unachievable just to provide for his family.  However, this also meant that the earlier generations tend to slog their whole life without much work-life balance.  Looking back, I feel sad for my father because when he was nearing retirement, illness struck and he passed soon after, only with minimal time to enjoy his fruits of labour.  

Looking back as an early Millennial, I wish for a change.  I do not want to slog my whole life like my father, not knowing whether I will get to see sunrise the next day.  As such, I geared towards more work-life balance, with more personal time for reflection, health and wellness.  As a private tutor, my time is flexible.  I still work 7 days a week, but I take more frequent short trips to neighboring countries on solo travels to recharge and chill, starting in my late thirties.  After doing that since 2022, I feel more energized and motivated to return to work.  This is probably because with frequent short trips planned, I constantly have something to look forward to, and that makes my life a little less mundane in my journey towards Barista FIRE.  My ultimate goal is to be able to achieve Barista FIRE status by 42 and practice it in stages, where at 42, my dividends will cover around 20% of my current income, with the remainder covered by my active income.  I hope by 45, my dividends can cover 80% of my current income, with the remainder covered by my active "part-time" income.  Beyond 45, I hope that I can achieve FIRE, where I can fully be financially free, and I can totally opt to continue with part time work or rest with more flexibility.  

Overall I think I am comfortable transitioning to this current state because I have built up a small but comfortable amount in my investment portfolio generating dividend income, with Basic Retirement Sum (BRS) and Basic Healthcare Sum (BHS) stashed away in my Central Provident Fund (CPF).  Although this is not a large sum, it provides a basic financial safety net for myself.  However, if I am younger with no substantial sum kept away, I would feel flustered and insecure, and I believe I will not be able to pursue such 'mini-retirements' with the following concerns in mind:

1)     Practicality versus Ideality

Many younger Millennials and Gen Z view mini-retirements as a way to “live life” earlier.  Why wait until one is old before enjoying yourself?  While I appreciate this mindset, I also know from experience that taking breaks comes with financial trade-offs that are often underestimated.

Younger folks may tend to believe they can always pick up where they left off.  However as someone who has seen economic downturns, shifting job markets and inflation, I know that getting back into the workforce is not always seamless.  In addition, salaries do not necessarily increase after a break, and switching industries may require retraining or worse, a pay-cut.

2)     Financial Trade-offs of Mini-Retirements

While taking a long break sounds liberating, we need to recognize the hidden financial costs involved:

a)     Loss of CPF Contributions: CPF grows significantly due to compounding interest.  A few years without contributions can mean tens of thousands less in retirement savings.

b)     Investment Compounding is Disrupted: Every year spent outside the workforce means less money being invested and compounding.  Delaying investing by just five years can have a substantial impact on long-term wealth.

c)     Difficulty Re-entering a High-Paying Job: Career gaps do not always translate well on a resume, and industry advancements may make returning harder than expected.

For someone like me, who is methodically working towards financial independence, these trade-offs make mini-retirement a tough sell unless it is well-planned or if one is practicing Coast FIRE.

3)     FIRE versus Mini-Retirement

The difference between FIRE and mini-retirements is crucial.  FIRE focuses on building sustainable passive income that allows financial freedom for life.  In contrast, mini-retirements are about pausing work without necessarily achieving financial security first.

I prioritize FIRE because I want my dividends and investments to sustain me, rather than relying on savings that will deplete over time.  Younger folks opting for mini-retirements may make the assumption that they can return to the workforce at the same or higher salary, but this is not always guaranteed.

4)     Evolving Job Market & Re-employment Risks

Gen Z is growing up in a gig economy, where flexibility is key.  They are more open to job-hopping, remote work, and freelancing. This makes them more comfortable with the idea of quitting and rejoining the workforce later.

However, as someone who has worked for two decades in both tradition employment and a semi-gig industry (tutoring industry), I noticed that job security is shrinking.  Industries evolve rapidly, and skills become outdated.  Returning to the workforce after a long break is not always easy, and higher-paying roles often come with expectations of uninterrupted career progression.  Even for tutors, change is constant, as Ministry of Education adopt changes to the syllabus and the education system frequently these days.  I, for instance, will have to constantly update myself with these changes, so that I can better understand the scope and boundaries when helping and tutoring my tutees.

5)     CPF & Housing Considerations

Many Gen Zs do not fully grasp how powerful CPF is.  In Singapore, besides retirement, CPF can also be utilized for housing, healthcare, and investment options.  Taking extended time off means losing out on employer CPF contributions, which impacts future financial security.

Additionally, property prices continue to rise.  Younger individuals may believe they can take breaks and still afford housing later, but as someone who has witnessed Singapore’s real estate trends, I believe the earlier one settles for Build-to-Order (BTO) flat or resale flats, the more savings they may reap in the long run.

While I respect younger generations’ pursuit of freedom and adventure and I understand the appeal, I would not choose to take mini-retirement breaks (which last for months or even years) when I am in my twenties or even early thirties because for me personally, stopping tuition may mean the long term loss of students, and returning back into the industry may require me to start from scratch and look for students all over again.  However I will be more open to this trend when I enter my forties as a single (I believe this will not be possible for individuals with children), which is my current stage  as I find that having a balanced approach is more sustainable and workable for me now.  Mini-retirements work well if planned strategically, but they can be risky if taken impulsively.  For me, I think my approach is more progressive and systematic, which involves building a certain level of financial safety net first (not necessarily at financial independence level), then proceed to a work-life balanced mode (Barista FIRE), and finally progress to enjoying life without worrying about money (FIRE).  Barista FIRE, here I come...!