🐧 Ultimate Guide to Semi-Retirement

Why 2020's are Different, My Money Journey, Why Semi-Retirement, How to Calculate Your Semi-FIRE Number, Downsides
June 2, 2024

Today, in 10 minutes or less, you’ll learn:

  • 🕹️ Why the financial independence game is changing in the 2020’s
  • 🗺️ My journey to semi-retirement, what is semi-retirement, who is a good fit for semi-retirement, and why consider it
  • 🔢 How to calculate your semi-retirement number, plus the downsides

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🏝️ Ultimate Guide to Semi-Retirement

Early retirement is overrated.

While I appreciate some of the values behind the FIRE community, I’m not a huge fan of early retirement.

One reason: I actually enjoy working.

I also see high-achievers obsessively chasing a FIRE number, which comes at the expense of fulfillment during the journey.

Contrary to popular belief, you can unlock financial independence sooner. But not in the way you might think.

The new game? Semi-retirement.

These days, heaps of online writers talk about FIRE, but not many talk about Semi-FIRE. Yet, it offers a practical alternative path to building a wealthy life.

In this newsletter, I’m going to break down what semi-retirement is, who it’s a good fit for, why semi-retirement, and how to calculate your own semi-retirement number.

The financial independence game is changing 🕹️ 

Over time, I realized each financial independence pathway is a different game you can play (with different rules).

In the 2010’s, the popular games were:

  • Work 9-5, climb the corporate ladder, and retire at 65 with a pot of gold
  • Play the startup lottery in your 20’s and 30’s, hit 1 jackpot, and transition to investing in your 40’s
  • Work a normal job in your 20’s and 30’s, but save and invest 30%-50%+ of your income to FIRE in your 40’s

Now in the 2020’s, I expect the number of games people play to explode due to the rise of part-time work, remote work, and adoption of AI technology.

Let’s discuss the game of semi-retirement.

I’ll share my experiences first:

My journey to Semi-Retirement 🗺️ 

To be honest, I stumbled upon semi-retirement by accident on my journey to financial independence:

  • For the first 10 years of my adult working life, I focused on growing my tech product management career.
  • During this time, I accumulated an investment portfolio, which I don’t touch and let grow. (Although, I recently discovered it generates enough income to cover 60%+ of my living expenses in Mexico City.)
  • In 2019, I took a travel sabbatical, which gave me a taste of flexibility and freedom. I was hooked. I sought to integrate this flexibility into my work and life.
  • In 2023, I left my last full-time role and started my entrepreneurial journey. Since then, I’ve offered product consulting, 1:1 coaching, cohort-based courses, ads, and affiliates. This covers all my expenses, while I save and invest the rest.

The good news is that after running the numbers, I discovered that I will not need to return to a full-time tech job if I maintain my current lifestyle and expenses.*

I can continue working on what I enjoy: teaching, coaching, and consulting.

*Caveat is future expenses, including kids and health expenses. I’m working out a plan that factors in these costs.

What is Semi-Retirement? 🤩 

This is how I define semi-retirement:

Semi-retirement is where you “retire” from a high-earning profession, but continue working part-time or on things you enjoy.

This lifestyle is made possible by growing an investment portfolio that generates enough income to cover partial living expenses, while the rest is covered by your semi-retirement working income.

Here’s the trade-off:

What you give up

  • Income
  • Status
  • Time to “Retirement”

What you get

  • Time to enjoyable work
  • Make “fun money”
  • Do things you enjoy

One popular version of semi-retirement is Barista FIRE, which is where freedom-seeking professionals switch to a less stressful job (eg Starbucks baristas) that generate income and covers health insurance expenses.

While I’m skeptical that former high-skilled professionals will enjoy a service job, I know many who would like a creative role or their own business.

(Nothing wrong with service roles—my mom owned a restaurant—but I just haven’t seen this transition happen.)

Here’s who I think would be suited for semi-retirement:

Who is a good fit for Semi-Retirement? 👫 

Semi-retirement is a good fit for a person or couple who:

  • Wants to experiment with retirement, but isn’t sure if full retirement is right for them
  • Live in Tier 2 global city (Austin, Melbourne, Mexico City), which is lower cost than a Tier 1 global city (San Francisco, Singapore, Sydney)
  • Has a working spouse (with the goal of semi-retiring both people)
  • Has no kids or they’re old enough to have moved out of the house (since kids are expensive)
  • Work as a remote consultant, freelancer, or entrepreneur

In other words, semi-retirement is a good alternative for someone who realizes they would keep working in retirement—albeit on things they actually enjoy (while managing costs).

Now let’s talk about why semi-retirement:

Common mistakes made by Early Retirees 🙅

I’ve observed that early retirees tend to make a few common mistakes:

  1. Turning financial independence into another rat race - this is especially true for Type A, competitive types who turn FIRE into their own ego-driven gauntlet (when it’s meant to be a personalized journey):
  1. Losing a sense of purpose after achieving FIRE - A quick search on r/FIRE turns up tons of posts like this, this, and this. The common pattern is that people who obsessively chase their FIRE number at all costs feel lost after they achieve their goal.

Semi-retirement helps to address some of these pitfalls by:

  1. Accelerate pace towards a retirement vision that includes purposeful work - When I talk to many highly-motivated people, it’s clear that working on something they enjoy is a big part of living a purposeful life. The biggest challenge for them is their desired work may not pay well and right now they don’t have enough time or money to give it a go.
  2. Bridge the time and money shortfall with semi-retirement - Semi-retirement can help you replace an income stream, give you back 20 hours/week of free time, and provide a sense of purpose by working on something you enjoy.

Hence, Semi-FIRE is a practical alternative to FIRE.

Instead of killing yourself to attain your FIRE number at all costs, why not switch gears to working on things you enjoy sooner (while reaching your actual FIRE number later)?

Let’s walk through the math behind calculating your own Semi-Retirement Number:

How to calculate your Semi-Retirement Number 🔢 

First, you calculate a traditional FIRE number:

  • Assume you withdraw 4% of your assets per year after hitting Financial Independence
  • Then for $4,000 per month in retirement spending, you’ll need $1.2M in net worth ($48,000 / .04 = $1,200,000)

Next, you calculator your Semi-FIRE number:

  • If you can generate $1,000 in semi-retirement income each month, this would reduce your required net worth to retire by $300,000 ($12,000 / .04 = $300,000)
  • Hence, if you spend $4,000 per month in semi-retirement, but also make $1,000 per month from your semi-retirement work, then you will have reduced your FIRE number from $1.2M to $900,000.

Furthermore, you can create projections to see what age you can go FIRE vs Semi-FIRE.

Here’s how this looks for my case (for illustrative purposes):*

  • Downsized my expected annual income in semi-retirement by ~40%
  • At my current spending level, this pushes my official FIRE date (”retirement”) back by 10 years
  • BUT I get to work on businesses that make me “fun money” starting now

*You can use this Barista FIRE Calculator to calculate your own Semi-FIRE vs FIRE dates.

Finally, it’s not all sunshine and rainbows:

Downsides of Semi-Retirement 👎️ 

Semi-retirement is a strategy, and it’s not a good fit for everyone’s goals.

Here’s a few downsides:

  • If you want to retire early, you’ll need to reduce your withdrawal rate of your investments so they actually grow. If you’re withdrawing 4% and earning side income, then the math says it’s likely you’ll need to continue earning some income to cover part of your costs indefinitely.
    • My suggestion: Try to cover ALL your expenses through your semi-FIRE work, while reducing your withdrawal rate to 3%.
  • Your semi-FIRE job may not be more enjoyable than your previous, high-paying job. You might have a fantasy of being an artist, content creator, or work in a chill service job. But you may end up hating this type of work, especially if you were a high-achiever for all your life.
    • My suggestion: Test out the waters first before you go semi-FIRE. Start a side hustle or project while you’re still in your previous job.
  • Regular FIRE may only require a few more years of working your previous job vs semi-FIRE. Depending on the math, full FIRE may be within reach in only 1-5 years of working your high-paying job. Contrast that with if you switch to a semi-FIRE job, that might delay your FIRE date by 10 years.
    • My suggestion: This is a deeply personal choice, but I would consider your age and emotional context. Is sacrificing your time in the next 1-5 years worth the financial payoff? While this may not ideal for a couple who wants to spend time with their kid who is about to leave the house forever, it may be OK for a late 20’s single person.

In summary 🫡 

FIRE is not the only retirement option available.

Semi-FIRE offers a practical alternative that enables you to start working on things you enjoy sooner.

It requires some personal reflection and careful planning, but has substantial potential to help you take control of your own work and life.

🌐 Beyond your borders

🇹🇭Thailand expands visa stay for tourists, students and digital nomads (link)

🗺️ Be wary of geoarbitrage (link)

🧀 I quit a 6-figure job to take my kitchen-table side hustle full time—it made $379,000 in sales in 2023 (link)

🏠️ Do You Need Alternatives to Get Rich? (link)

🌏️ What are the downsides of becoming an expat that people don’t talk about? (link)

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Dexter Zhuang

Dexter is the founder of Money Abroad, a website focused on financial independence for professionals abroad. He has 10+ years of experience building products and teams at companies like Dropbox, Xendit, and startups. He's lived and worked across the US, Asia Pacific, and Latin America. His work has been featured in global publications like Business Insider, CBS, US News & World Report, and Tech in Asia. He graduated from Dartmouth College.

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