6 Financial Considerations Before Taking a Mini-Retirement

Andrew Weber is senior director of Planning Philosophy, Research and Guidance at Northwestern Mutual.

With employee engagement declining and burnout on the rise, more professionals are pausing their careers and taking an extended break. Enter the “mini-retirement,” a pre-determined period designated for recharging and reassessing priorities for anyone at a pivotal life stage.

Unlike a vacation, a mini-retirement allows for in-depth exploration of passions, skills, and potential future lifestyles away from the daily grind, with the expectation of returning with renewed purpose. And unlike a phased retirement, most mini-retirements entail a complete break from work.

It’s akin to a strategic planning session for yourself, where you can think intentionally about what you want out of life. It’s a revelation of your personal values, rooted in where you are now and what you want to do next.

Sounds idyllic, doesn’t it? But before you prepare to march into your boss’s office announcing, “I quit,” it’s important to take a thoughtful approach to your finances and the potentially large effect a mini-retirement could have on them. Here’s what to consider.

Do you need a mini-retirement or just a vacation?

Before quitting your job, you may want to consider why you’re considering a mini-retirement. If you are feeling overwhelmed or stressed out, taking a vacation first may help you reset and recharge. If the burnout continues after vacation, at least you have a little more clarity as to what the issue is—be it your purpose, company, role, work, or the people around you.

It is important to find the root cause of the problem. Once that is identified, then you can move forward.

Examine your proposed day-to-day finances

The next step is to determine if your finances are as up to the break as you are. You want to have enough runway to afford your life while you’re not working. The best plan is to save for your expenses in advance, with an additional cushion that functions as an emergency fund.

These steps will help:

• Determine how you’ll spend your time: A concrete plan, with a time frame, will help you identify the amount of money you’ll need. Are you planning to hike the Appalachian Trail? That will have a defined amount of time and budget, which is better than a vague decision to take a few months off. Knowing how you’ll use the time makes it easier to backfill the expenses.
• Create a budget: To adequately plan for your time off, analyze how much you’ll need by assembling a detailed budget that includes all the regular bills you’ll still have to pay, like rent/mortgage, utilities, insurance, and food, along with additional expenses you’ll incur, if any, from your mini-retirement experience.
• Consider creative offsets to cover expenses: Some people can replace a large part of their income with lifestyle tweaks. For example, you may decide to relocate to a state or country with a lower cost of living, downsize your home and belongings or rent out your house. Look for ways you can live more frugally by reviewing and evaluating your regularly reoccurring expenses. Maybe you could cut six streaming services down to two, sell your Peloton, or rethink conveniences such as a regular grocery or dinner delivery. It’s always easier to cut expenses than make more money.
• Look at side hustles: Side gigs and part-time work doing something you enjoy can supplement your mini-retirement lifestyle while still being way less strenuous and stressful than your full-time career. They may also encourage you to pursue a career change when you return to work.
• Rethink your giving: If philanthropy is part of your core values, consider giving time rather than money.

Plan for healthcare

Many people don’t realize how much of their healthcare costs are subsidized by their employer’s health insurance plan, an expense you’ll now be shouldering. See if it’s feasible to get on a partner’s plan, and if not, begin lining up other options before you take your break. These could include going to a private healthcare provider in your state; accessing COBRA, which allows you to continue on your employer’s health plan for up to 18 months; or finding a plan on the healthcare exchange at Healthcare.gov. If you’re planning to temporarily relocate, check the provider list to make sure you have ample coverage.

Take advantage of potential tax benefits

With your income eliminated or limited, you may drop to a lower tax bracket, which can offer advantages to consider. You could use this opportunity to potentially realize investment gains at 0 percent (for single filers with less than $48,350 of taxable income from 2025, rising to $64,100 if you include the $15,750 standard deduction for those under age 65) instead of the 15 percent to 20 percent you would normally pay on long-term capital gains.

It’s also a chance to consider a Roth conversion. In a traditional retirement account, such as a 401(k) or IRA, your contributions are untaxed when you make them, and you owe taxes upon distribution. With Roth accounts, the taxes are paid today, and the money is withdrawn tax-free. When doing a Roth conversion, you generally pay taxes at your ordinary income tax rate, which may be lower during a mini-retirement.

Assess the impact on your long-term financial plan

When determining whether you can financially swing a mini-retirement, the goal should be to continue to contribute to your retirement accounts, which can impact your long-term goals. The consequences can be high: If you deplete your accounts, you lose the amount you’re withdrawing along with potential gains it could have made over time and the accompanying compound interest. In addition, you will owe a penalty for early withdrawals, although you may benefit slightly, as the withdrawals will be taxed at your ordinary income, which, again, may be lower.

Discuss the options with your financial advisor. It’s probably better to withdraw funds from a traditional brokerage account than a retirement account, for example. You may also want to discuss whether it makes sense to avoid Roth IRA withdrawals while you are in a lower tax bracket, since the benefit of tax-free withdrawals may be more valuable in higher-tax years.

Ideally, you’ll want to avoid draining your accounts if you’re not earning income, which can put you a year or more behind your initial retirement plan.

Use the time to think about your financial future

Since the goal of the mini-retirement is often to add clarity to your goals for your remaining work years, don’t neglect the financial impacts of any resulting career pivots or lifestyle changes.

You might decide you like living in the lower-cost area and need less income to fund your living expenses. On the other hand, you might realize you missed certain comforts you’d cut from your budget or that you want to continue regular travel. These discoveries could spur you to find a career with a higher salary or lead you to decide to start your own business in search of more flexibility.

Once you’ve made some conclusions about your future, have another meeting with your financial advisor to ensure these changes are reflected in your long-term financial plan.

With a plan, anything is possible. Building a plan with a trusted partner can help you feel confident you’re taking steps toward your long-term goals, so you can make decisions with confidence today.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP^®, CERTIFIED FINANCIAL PLANNER™ and CFP^® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

This information is for educational purposes only and should not be construed as tax or legal advice. Northwestern Mutual and its Financial Representatives do not provide tax or legal advice. Consult with your tax and legal advisors regarding your personal circumstances.

Frequently Asked Questions

How do you financially plan for a mini-retirement?

Start by estimating how long you'll be away from work and creating a detailed budget that covers both everyday expenses and any costs tied to your plans, such as travel or relocation. Save enough to cover those expenses plus an emergency cushion, and make arrangements for health insurance before leaving your job. It's also important to understand how the break could affect your retirement savings, taxes, and long-term financial goals.

How can I plan a mini-retirement in my 30s?

A mini-retirement in your 30s works best when it's tied to a specific purpose, such as traveling, developing new skills, testing a career change, or preventing burnout. Define what you want to accomplish, determine how much time and money you'll need, and save in advance. Before taking the break, evaluate the impact on your career trajectory, benefits, and long-term retirement strategy.

What are the pros and cons of taking multiple career breaks or mini-retirements?

Taking multiple career breaks can give you recurring opportunities to recharge, avoid burnout, pursue personal goals, and reassess what you want from your career and lifestyle. They can also provide valuable time for travel, skill development, or exploring new careers that may ultimately lead to greater satisfaction.

The downside is that repeated breaks can interrupt income, slow retirement savings growth, and reduce the long-term benefits of compounding. They may also create challenges around maintaining health insurance, rebuilding workplace momentum, and staying on track with long-term financial goals.