Work as we know it is evolving. Whether it’s a business, side hustle or traditional career, how we earn, build wealth and eventually retire is changing with the passage of time, new technology emerging and different mindsets about work within each generation.
Gen Z, in particular, has adopted a different view of work and has pushed back against traditional beliefs about career advancement. Gen Zers have different priorities, and a new trend seems to be emerging called “micro-retirement.”
This nontraditional approach to work means more sabbaticals, less work and more flexibility in building future financial independence. Taking breaks from work is important to avoid burnout and can lead to better work-life balance and mental health. However, the question arises about whether micro-retirement is a good idea for long-term financial security.
Here’s what you need to know about micro-retirement, Gen Z’s newest financial independence strategy, and whether this work and retirement strategy could thrive long-term.
Micro-retirement explained
The premise of micro-retirement is a practice in which one takes sabbaticals from work for a few weeks or longer. These are intentional breaks to power down from work, pursue personal passions and travel. The goal is to mimic the freedom you’d experience in a traditional retirement.
This mini-retirement can be done if you’re a business owner, have side hustles or have a flexible arrangement with your employer. Your ability to micro-retire will depend on your working arrangement, if you have leave or vacation time at workand your financial position.
Benjamin Fields, a member of Gen Z, public school teacher, entrepreneur and Ph.D. student at the University of California, Berkeley, practices micro-retirement and says he’ll never stop.
“I strategically picked academia, or education, as an industry because it gives me such large amounts of time off, especially during the summer,” he says. “What really means a lot to me during the summer is going to Europe…. It’s something that I just don’t think I could really live without…. I don’t view that I’m the type of person that can just live in one place and never go anywhere or do anything except for, like, a two-week break that I had to save up all my PT time for…. I’ve etched this micro-retirement aspect into the fabric of my life… I’ll never stop doing it.”
His advice for Gen Zers thinking about micro-retirement is to learn as much as possible and be meticulous about planning. He says being informed is the key to micro-retirement without negative consequences.
“When it comes to micro-retirement, [I know] every single thing about all my commitments. I know in and out[s], I know all the rules, I know all the timelines, the dates, the stipulations around what I’m allowed to do, and then I can plan accordingly,” Fields says. “[Be] intentional about knowing everything in the sphere of what you want your micro-retirement to be and planning it meticulously.”
The benefits of micro-retirement
The idea is to take breaks from work to reduce burnout, enjoy a better work-life balance and preserve one’s mental health. For some, it allows them to pursue personal goals outside of working and making money. Taking time off can be refreshing, and taking off every 12 to 18 months might be a way to reset your mindset and desire to work.
Taking time off from work can help relieve stress, as 77% of Americans reported being stressed out by work, according to an American Psychological Association (APA) report.
“Running a business as well as leaning into micro-retirement is something that [might] not be the most straightforward to balance initially, but I find that by striving to reach certain KPIs, whether that be every quarter or twice a year, I like to reward myself with a travel experience abroad, and so I incentivize myself and reward myself for reaching the benchmarks that I set for my company,” says Gen Z business owner Joshua Charles, CEO of Frontier Dominion.
Charles takes a sabbatical from work every 12 months. He thinks about his future retirement alongside his micro-retirements, so he maximizes his Roth IRA and invests in index funds. He says the breaks help. “The micro-retirement breaks really contribute to my mental stability…. When I travel for, let’s say… two weeks in Europe every summer, that is a way for me to de-stress, unplug from the grinds and then recalibrate, intentionally thinking about what [I would] like to achieve,” Charles says.
How does taking breaks affect future finances?
The concern with taking micro-retirements is how they affect earning potential. There’s also a concern with the rising amount of debt Gen Z is accumulating, the increase in costs of living and the uncertainty of what the future holds with a job or business.
“I like the idea of the mental health break. The problem is the realities of stopping your work history, stopping the ability of consistently contributing to retirement, building up an emergency fund. Every time that they are stopping for the mental health break, they are in a situation where they could be resetting their ability to retire truly in comfort,” says Jayson M. Thornton, CFP® EA and founder of Thornton Financial.
Thornton says the biggest asset of any investor is their time in the market. “How long have they been invested and how often can they consistently contribute to retirement when they’re taking breaks? That means that they’re taking breaks from the contributions,” says Thornton.
He says most people, if they are not financially strong, will dig into their savings or even have to withdraw from their retirement to take a micro-retirement.
“Ultimately, they can end up in a situation where they do not have the right amount of retirement assets when they really get to retirement age, which will actually put them in a more stressful mental space,” says Thornton.
Paula Nangle, CFP, senior wealth advisor at Marshall Financial, says the key is to find a balance that allows for personal growth and well-being without compromising long-term financial security.
“I think they would need to understand the pros and cons of taking off from earning an income intermittently,” says Nangle. “When you’re in your twenties… it’s very difficult to think that far in your future about permanent retirement. If they’re practicing micro-retirements… do it in a way where they’re not taking on debt and they’re not completely depleting their future retirement savings.”
Gen Z is embracing a different approach to life and work
Fields says he’s not concerned about not having enough money later in life. “It’s not a concern at all,” says Fields.
“I really like the system that we have here in the United States. It’s great that we have these tax-advantaged accounts…. I really think that [retirement is] not something that is a big worry.… I’m starting young.… As long as I have a house paid off by that time, then I should be OK.”
