Zara Lim, 30, recently took an 18-month 'micro-retirement' to travel around Europe and Asia, but she said it won't suit every worker.
Melbourne woman Zara Lim recently took an 18-month micro-retirement to travel around Europe and Asia. (Source: Supplied)
A young Aussie has shared how she took an 18-month micro-retirement, quitting her job to travel around Europe and Asia. The trend is growing in popularity amongst younger generations who no longer want to wait until they are 65 to enjoy the fruits of their labour, but there can be major financial risks involved.
Zara Lim decided to quit her full-time digital marketing job in mid-2023 to take a micro-retirement, which is a shorter, self-funded career break. The 30-year-old Melbourne woman told Yahoo Finance she had spent the pandemic period working and saving as much as she could, and was eager to travel once things opened back up.
Over the 18 months, Lim used her savings and took on occasional freelance work to fund her trip. She was able to see the cherry blossoms bloom in Korea and catch a glimpse of the Northern Lights in Norway.
Having a really long break allows you to do the things that you just normally wouldn't be able to, she said.
Having that flexibility to stay longer and to experience the thing you actually wanted to go there to experience is very, very privileged and I'm very grateful to be able to do that.
Lim returned from her micro-retirement earlier this year and has now secured another full-time digital marketing role, having started putting feelers out while she was still travelling.
She hopes she'll be able to take more career breaks in the future, with the ultimate goal to be work-optional by the time she is 40. She has been building a property and share portfolio to help support this.
I think that the younger generation, in a way, is just a lot more impatient. We do want to see gratification earlier and we just don't want to wait until we're 65 to have our retirement and to travel, Lim said.
There's so much to our lives outside of work that we want to experience, and I think having that time off lets us do that.
Aussies rethinking traditional retirements post-pandemic
Gareth Croy, founder and managing director of Your Future Strategy, said he had noticed more interest in micro-retirements amongst his clients with the trend emerging post-pandemic.
Once upon a time, people would have called it a gap year, but it's not necessarily off the back of school, Croy told Yahoo Finance.
People are going, look, I'm young, I want to go and backpack through Africa, I want to get a campervan and travel around Australia.
Those things that we might have considered to be the first things people do when they retire later in life, they're saying, 'look, I want to do it while I'm young and able'.
Croy said younger workers usually took micro-retirements to help quench a burning desire for a sense of adventure.
But he has also seen those in their 40s and 50s taking micro-retirements when they have a career or industry change.
Warning to have strategy in place before taking micro-retirement
Croy said it was important for people considering taking a micro-retirement to have a financial strategy in place that suited their circumstances.
Otherwise, they could be left in a worse financial position down the track.
The impacts can be huge, with calculations finding a 26-year-old who took a year off each decade could end up with 20 per cent less super by the time they retire. That's a hit of around $105,000.
By taking time out without contributions that will affect your balance later in life, Croy said.
But if you've got a strategy around that, then you can still get to where you need to be, but it's an awareness rather than sort of a surprise.
That could include considering additional contributions when you return to the workforce or doing it beforehand, along with taking advantage of the five-year carry-forward rule for unused concessional contributions.
Your Future Strategy founder Gareth Croy said micro-retirements were becoming more popular but it was important to have a financial strategy in place. (Source: Supplied)
Croy said it could be worth building up a capital base, such as property or other investments, so there is the ability for that capital to continue to grow and generate income while you are taking time out of the workforce.
Clients of ours I've seen successfully build up quite deliberately a capital base, but rather than using that to cover their expenses while they're on a micro-retirement, all they're doing is setting themselves up to then use, like we would in retirement, he explained.
Switch gears, use the capital to generate income and use that income to fund their micro-retirement so they're not actually chewing through their capital base.
Then being able to come back, re-engage with that capital to continue with whatever they wanted to do through to long-term retirement.
Croy added that clients who had planned adequately usually tended to enjoy their micro-retirements more and felt more comfortable with their spending while they were on their break.
Aussie shares plans to retire at 40
Lim owns multiple properties, which are either positively geared or neutral, including the home she lives in, which she rented out during her micro-retirement.
She bought her first property as an investment when she was just 22, a two-bedroom apartment for $130,000 in rural Victoria, which she purchased with a $26,000 deposit.
She started investing in the share market during the second half of her micro-retirement and now regularly invests in ETFs.
Self-retirement or work optional by 40, that would be the ideal, Lim said.
So when I'm working, I'm making sure every dollar is working for me, I'm investing it, I'm going to try and get to that goal.
Croy said he was seeing a shift of people being more active with their retirement plans, with some actively looking to retire early like Lim.
Even just being more aware as to what retirement is going to look like and am I on track to achieve what I need for retirement? he said.
Lim said micro-retirements won't be for everyone and it helped that she was able to do some freelance work to supplement her funds while she didn't have a full-time job.
Really knowing and understanding your budget and being able to forecast it for however long you want to take off is probably the most important thing, she said.
If you don't have emergency savings saved up or you have many, many responsibilities, I'm not sure it would be the right move.
I was fortunate enough [that] I don't have any kids, I don't have my own giant home mortgage, I don't have to care for elderly parents or anything.
I thought this was the perfect time because I don't have any responsibilities other than myself.
https://au.finance.yahoo.com/news/young-aussie-hoping-to-be-work-optional-by-40-seizes-on-micro-retirement-trend-despite-105000-super-risk-190001002.html
