In Singapore, and across the world, there is a growing trend towards what’s called “micro-retirement”. This is where younger workers take an extended break from work – similar to a sabbatical.
Instead of waiting till retirement to take time off and travel or learn new hobbies, these workers take mini breaks in between jobs.
Micro-retirement can last anywhere from a few months to a year so workers are able to recharge and prioritise one’s mental as well as physical health. This could mean going on a holiday, focusing on a new hobby or engaging in wellness activities. But in Singapore, where cost of living is on the higher end, one may wonder how much savings you will need to enjoy micro-retirement.
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What Type Of Micro-Retirement Are You After?
If you’re an avid reader of retirement topics, you may also be aware of the ”financial independence, retire early” (FIRE) movement, which involves committing to a strict budget and investment plans to achieve early retirement.
There are several variations to it. For example, lean FIRE is when an individual is happy to live on the bare minimum, with limited spendings, while fat FIRE is when one enjoys the finer things in life and wants to retire comfortably.
Similarly, that also applies to what kind of micro-retirement you want to enjoy. Depending on your lifestyle, the amount needed for micro-retirement will vary. For example, if you want to have a lean micro-retirement where you just want a break from the daily grind but are content with living on a basic, subsistence-level monthly income, then you may not require as large a fund as others who want a fat micro-retirement, where they can enjoy things that might cost more – without the worries of having to afford them.
Estimating How Much You Will Need
You can begin by looking at your current monthly expenses. Depending on how long your break will be and the type of micro-retirement you want, you can make an estimation of how much more you will need.
For example, the average monthly expenses of a single person in Singapore range from $1,391 – $4,076. If you plan to take nine months off and your monthly expenses fall in the range, you can multiply your monthly expenses by nine, which equates to $12,519 – $36,684. Additionally, if you want to travel overseas more frequently, eat out on a more regular basis and treat yourselves to more opulent experiences like a spa session, then you will need a larger cash pot.
Besides, if you already have a specific activity or trip in mind that you will be taking during your break and it will cost you a significant amount of money, you can also prepare a separate portion of savings for it. For example, if you have plans to learn diving or hike a mountain in another country, you can calculate the estimated costs and prepare for it separately.
Making Sure You Have Your Essentials Covered
When saving for a micro-retirement, you may want to be more conservative in planning and create a buffer as there could be unexpected events. After calculating how much you will need for your expenses, it is advised that you should save 1.5 times to 2 times more or add 20% more so you can have extra savings for events that may arise unexpectedly.
It is also recommended that you set aside a significant amount for your essentials like health expenses and insurance. As these expenses tend to make up a bulk of one’s spendings, you may want to prepare a larger amount of savings for it separately.
Other Financial Considerations
With careful planning, micro-retirement can have several advantages including preventing burnout and giving you refreshed perspectives. But you want to make sure that you have enough savings to support your micro-retirement plans otherwise, shortage of funds can lead to even more stress.
Aside from having enough savings, you also want to be in a certain financial situation to ensure a smoother experience. For example, you want to make sure that you’re free of commitments such as high interest debts that you need to repay every month. Also, you may want to adjust your portfolio accordingly to include more low risk investments.
Pursue Micro-Retirement On Your Terms
It’s important to remember that micro-retirement is more than taking a break but also being mindful of how you want to spend the time, whether it’s taking care of your health, spending time with family or going on a trip.
If it requires you to save a bit more for you to afford the type of micro-retirement you want, you can do so but with sufficient planning. You need to ensure that you have your essentials covered such as health insurance. Similarly, if you are happy with a lean micro-retirement, then that will make it easier to save for given the lower monetary barrier to that lifestyle.
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