Reset and Recharge: The Growing Trend of Micro-Retirement
A new concept is gaining traction in the world of financial planning and modern work culture called “micro-retirement.” This idea involves stepping away from the workforce for an extended period to pursue passions, travel, recharge, learn new skills, and essentially hit the reset button on life. The trend has especially resonated with Generation Z—those born from the mid-to-late 1990s through the early 2010s. Micro-retirement has sparked so much interest within Gen Z that other generations are starting to take notice and join the conversation. But before you decide to take a break from your career, let’s explore the potential benefits and drawbacks.
Three Advantages
Improved Well-Being
Micro-retirement presents a powerful opportunity to enhance emotional, mental, and physical well-being. In today’s fast-paced world, many people face burnout from long hours and rigid work schedules. Add to that the constant pressure of comparing oneself to others’ curated lives on social media, and it’s no wonder many feel overwhelmed or inadequate. Stepping away for a micro-retirement can offer much-needed relief, allowing individuals to recharge and reconnect with themselves before diving back into their careers.
Travel, Passions, and Community Involvement
For those considering taking six months to a year off from work, travel often becomes part of the conversation. People in their 20s, 30s, or 40s typically have more freedom and mobility than they might later in life, making it an ideal time to explore the world. Travel preferences also tend to evolve with age—backpacking and staying in hostels might be more appealing in younger years, while older travelers may gravitate toward cruises or more comfortable accommodations. Both styles offer unique experiences worth enjoying at different life stages.
That said, a micro-retirement doesn’t have to involve travel at all. It’s also a chance to dive into personal passions—whether that means volunteering, spending more time with family, or exploring a potential career change. The beauty of a micro-retirement is in the flexibility it provides to reset, recharge, and refocus—whatever that looks like for you.
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Budgeting and Tax Strategies
There are a few key financial benefits to consider when taking a micro-retirement. First, it offers a chance to build discipline around budgeting without the cushion of a regular paycheck. It encourages a mindset shift toward living with less and being intentional with spending. That said, it’s crucial to have a solid financial foundation in place beforehand—this includes risk-averse savings and a detailed budget that outlines expected expenses and a realistic timeline for returning to work.
Second, a micro-retirement often comes with a temporary drop in income, which can open the door to strategic financial moves. For example, lower-income years may be a great time to perform a Roth IRA conversion, potentially paying taxes at a lower rate than in higher-earning years. Additionally, if you fall within certain tax brackets, you may even be eligible to realize capital gains at a 0% capital gains tax rate—a smart way to optimize your investments while taking a break from the workforce.
Three Disadvantages
Loss of Steady Income, Healthcare, and Benefits
One of the most immediate and significant downsides of taking a micro-retirement is stepping away from your full employment package. That means no regular paycheck, no employer-sponsored health insurance, and no access to the usual benefits that come with a job. As mentioned earlier, having a well-thought-out budget is essential, and the reality is that not everyone has the financial flexibility to take extended time off.
Healthcare is a major consideration. You’ll need to secure coverage independently, either through the Health Insurance Marketplace ® or directly from an insurance provider, which can be costly. Additionally, missing out on benefits like retirement contributions, tuition reimbursement, childcare support, and wellness programs—even temporarily—can have a lasting financial impact.
Missing Out on Valuable Time for Compound Growth
One of the biggest financial advantages younger investors have is time—more specifically, time for compound growth. As Albert Einstein famously put it, “Compound interest is the eighth wonder of the world.” And many financial experts believe it’s a concept that deserves far more attention in education.
Consider this example: a 35-year-old earning $150,000 annually who invests 10% of their income—$15,000 per year—as part of their long-term financial plan. With a 7% annual return over 40 years, that single year’s contribution could grow to roughly $224,000 by the time they reach age 75. Taking time off during peak earning years, especially without continuing to invest, means losing out on potentially decades of compounding—something that can be incredibly hard to make up for later in life.
No Guarantees on Career Reentry
Before taking a micro-retirement, it’s essential to carefully consider what reentering the workforce might look like down the road. With rapid changes in many industries, the skills that were once relevant may become outdated, making it more challenging to jump back into the same field. Some hiring managers may also prefer candidates with a more consistent, linear career trajectory—potentially viewing a career break as a red flag rather than a reinvention.
If a career change is part of the plan, it’s important to ask: What new skills will I gain during the time off? and How will those skills align with future job opportunities? Without a clear sense of direction or purpose during the break, transitioning back into a fulfilling and financially sustainable role can be more difficult than expected.
At Savant, we understand that everyone’s journey—both personally and professionally—is unique. While a micro-retirement can offer meaningful rewards, it also comes with its share of risks and trade-offs. If you’re thinking about whether this kind of break fits into your financial plan, we’re here to help you explore the possibilities.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.
Jonathon D. Merickel
Portfolio Advisor
CFP®, MBA