The big break

More Canadians look at ‘mini-retirement’ to rejuvenate, reset, set new course

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Heidi Unrau didn’t think of losing her full-time job as an opportunity this past winter. It was a source of stress at first for the married, 37-year-old mother of two young children.

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Opinion

Hey there, time traveller!
This article was published 12/10/2024 (372 days ago), so information in it may no longer be current.

Heidi Unrau didn’t think of losing her full-time job as an opportunity this past winter. It was a source of stress at first for the married, 37-year-old mother of two young children.

A financial journalist, she freelanced for a few months and then a light bulb flicked on.

“What if I took my foot off the gas for the summer, because I’ve always been working two jobs throughout my adult life and so I could be more present with my kids?”

Mateuxz Dach / Pexels
                                Experts say, out of necessity, all Canadians should create a source of liquid savings that can get them through several months of no income.

Mateuxz Dach / Pexels

Experts say, out of necessity, all Canadians should create a source of liquid savings that can get them through several months of no income.

She and her husband are dedicated budgeters, so running the numbers wasn’t difficult. They found Unrau could likely take six months off to recharge rather than just the summer.

“It hit me in the spring that I had been burnt out for a long time and the layoff was a blessing in disguise,” says Unrau, who lives in Winnipeg and is the lead administrator for the Facebook Group F.I.R.E. (Financial Independence, Retire Early) Canada, with more than 33,500 members.

The family could manage on one income while making adjustments to discretionary spending and, if necessary, they could dip into their emergency savings account — which had enough for a year’s worth of expenses.

Unrau may not have been planning it, but she is among a growing number of Canadians engaged in what’s called ‘mini-retirement,’ involving taking time off to recharge, reset and potentially chart a new career course.

“I didn’t know that mini-retirement was a thing, but I guess I am actually on it in a way,” she says.

Financial counsellor Jessica Moorhouse says mini-retirement is a trend in Canada, most popular with generation Z (adults ages 30 and under).

“Gen Zs are looking at millennials thinking, ‘I don’t want that,’ seeing that trajectory of graduating university and then working non-stop with maybe two to three weeks of vacation a year,” says Moorhouse, host of the More Money Podcast.

That’s further fuelled by seeing their parents’ retirement experience, recognizing if they retire at age 65, they might — if lucky — have about 10 years to travel before their health gets in the way.

Wanting to explore the world is indeed a motivator for younger Canadians, says Moorhouse, speaking on behalf of Wise — a fintech company that provides online banking with lower currency exchange charges.

She, too, sees mini-retirement as a possibility to take a break and reset. Moorhouse and her husband quit corporate jobs almost a decade ago. Both started working for themselves, though she admits it’s been more work and less play than they imagined.

“We thought we would do more travelling, but we haven’t because it’s harder to do than we anticipated.”

In turn, she recommends anyone thinking about mini-retirement should plan for it as much as they can in advance to build up the necessary savings to accomplish the goals they hope to achieve.

Certified financial planner Sam Lichtman, co-founder of Millen Wealth in London, Ont., has similar advice for millennial clients seeking to take a long pause from the rat race.

“In the tech sector, many people work very hard for 10 years, making a ton of money and then they get burnt out and decide to take a year or two to figure out what comes next.”

Few are spending a year of beach life in the tropics. Some pursue new career paths that may not pay as much or require a lot of overtime. Others go back to school.

One strategy Lichtman offers is using RRSPs through the Lifelong Learning Plan, allowing withdrawals up to $10,000 from their RRSPs per year to pay for full-time post-secondary.

Regardless of the reason why Canadians are taking mini-retirement, a sabbatical or whatever they want to call it, it’s also common among 40- and 50-year-olds, says Paul Seipp, regional president for the Prairies central region at BMO.

“We see it amongst our colleagues and our clients.”

Whether it’s deliberate, unplanned (i.e. a layoff) or never happens, all Canadians should create a source of liquid savings that can get them through several months of no income.

To do this, they need to budget, adds Seipp, based in Calgary. “It’s not a best practice; it’s a necessity for everyone — mini-retirement or not.”

For those taking extended periods off work, though, detailed budgeting “helps find a balance between their financial capabilities and how much time they can realistically take off,” Seipp says.

It’s not just the near-term finances to consider, says Shelley Smith, an investment adviser at TD Wealth in Toronto.

“Clients sometimes forget about the hidden costs associated with long breaks, including missed job promotions, lost pension contributions and reduced health care benefits,” she says. “All of which can impact future financial goals like retirement.”

Having the time to save for mini-retirement is critical to mitigating some of these impacts.

“A longer savings time frame allows you to save for multiple goals” including saving for a home, Smith says.

None of this is lost on Unrau, who administers the Facebook group whereby members try to save 70 per cent of income to retire as early as possible.

Early retirement is less likely now, but mini-retirement is indeed her reality. “I wouldn’t say that I planned for it as much as I would have liked.”

Her advice to others thinking of doing the same is their success lies in the details.

“You really need to … know exactly where every penny is going otherwise it’s too easy … to deplete your savings.”

Joel Schlesinger is a Winnipeg-based freelance journalist

joelschles@gmail.com

History

Updated on Saturday, October 12, 2024 9:32 AM CDT: Fixes photo caption

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