Maxing Out Your Life with a Mini-Retirement

While the One for the Money podcast focuses primarily on retiring early on a permanent basis, this episode explains the planning needs to retire even earlier via a mini-retirement. A mini-retirement provides the opportunity to test-drive a full retirement, allowing the individual to travel, volunteer, and pursue new hobbies or other interests. In the tips, tricks, and strategies portion, I share some strategies that could mean massive tax savings during a mini-retirement.In this episode...Taking a temporary break [01:11]Self-funding mini-retirement [03:53]Health insurance [06:29]Tax savings in mini-retirement [10:44]Tax gain harvesting [13:15]<br/>Sabbaticals aren’t just for professorsThe idea of a mini-retirement isn’t new but is often associated with professors. Nowadays, a sabbatical is a periodic break from work. This tradition started at Harvard around 1880, but other professions, such as scientists, physicians, and lawyers, also take sabbaticals. According to a survey by the Society for Human Resource Management, only 17% of companies offered a sabbatical policy to their employees in 2017. That means most people won’t work for a company that provides a sabbatical. However, with some planning, people can create their own sabbatical via mini-retirement and enjoy the benefits themselves.This episode is just an introduction to the planning considerations of a mini-retirement. Sadly, far too many people have consigned themselves to a life of working from 9-5 until age 65, not realizing that many retirements are even possible. But, with the right kind of planning, they certainly are. Often such mini-retirements will have only a little or limited effect on one’s goals for retirement, even an early one, and a delay of a year or so is more than worth it. Taking care of your healthHealth insurance needs in mini-retirement can be met in the same way as in early retirement, which I discussed in episode 5. For a U.S.-based mini-retirement, employer retirement healthcare benefits can be utilized for an additional 18 months of coverage. This coverage was made possible via the Consolidated Omnibus Budget Reconciliation Act of 1985, also known as COBRA. However, most times, the full cost of the health care plan will need to be paid, plus an additional 2%. The extra cost is worth it for a domestic-based mini-retirement. Another option is the public market established under the Affordable Care Act. This legislation enables people to obtain coverage, even with a pre-existing medical condition. While the cost of these plans can vary widely, the recently enacted American Rescue Plan provides even more generous subsidies based on income. These are solutions for U.S.-based mini-retirements. International mini-retirements require other planning. However, travel supplemental insurance is often an option. Travel health insurance is also an option for those traveling abroad for a short time. For extended periods, many countries allow foreign nationals to purchase health insurance from the government or private firms within that country.Factors to consider when planningOne of the most significant factors to consider is the length of the mini-retirement, which will determine the level of planning required. If the plan is for one to three months, the amount needed for expenses can be saved up in advance. The plan must include home and location expenses if time is spent in another location. Taking a mini-vacation for six months to a year would require considerably more planning. Homeowners need to consider if they plan to keep or sell their homes. Selling would simplify the math, but keeping could mean potential rental income.Once the duration of the mini-vacation has been determined, monthly expenses are the next thing to consider. While income may stop during mini-retirement, expenses certainly will not. Covering those