Micro-retirement: Introducing the fresh face of retirement

The traditional retirement roadmap—work continuously until 65, then enjoy your golden years—is being rewritten by a new generation. Enter micro-retirement, the practice of taking extended career breaks throughout your working life, which is gaining traction globally and resonating strongly with young Hong Kong citizens. 

The logic is simple: Rather than deferring all rest and experiences to the end of your career, why not enjoy life as a journey when you're physically energised?

What makes micro-retirement different from traditional retirement planning is the shift from linear accumulation to making way for periodic pauses without sacrificing long-term adequacy, which means that retirement planning will look very different. 

However, as we always say, financial planning doesn’t have to be complicated. In this article, we explore the trade-offs and how one can make intentional choices about the way you manage your finances and time for micro-retirement.

What is micro-retirement?

Micro-retirement (also termed mini-retirement) is about taking extended career breaks—typically 6 months to 2 years—during your working years rather than waiting until the end of your career.

First coined by Timothy Ferriss in The 4-Hour Workweek, it's about cycling between periods of work and intentional rest throughout your career, allowing you to enjoy life experiences during your younger years.

Fundamentally, the rising popularity of micro-retirement shows that priorities are shifting among young Hong Kongers, who are now choosing experiences over material possessions, spending time on their own terms rather than being confined to a  9-to-6 job, or seeking alternative career paths beyond the conventional linear path. Consequently, the way we look at retirement planning should also evolve along with this shift.

Read more: How much do you need to retire in Hong Kong?

How much money do you need for a micro-retirement in Hong Kong?

To find out how much money you need for a micro-retirement, it is best to look at your recent spending habits to make an estimation. Here’s how you can break down your fixed expenses by category, and aggregate them to the length of your planned micro-retirement with other variable costs:

Fixed monthly living expenses

6-month micro-retirement budget with variable expenses

Using these estimates, one may need about HK$198,000 – HK$342,000 for a 6-month mid-career break. Again, these are estimates and it is important to compute your own expenses accurately based on your usual spending patterns.

Read more: Manage your personal budget in five quick steps

Optimise your expenses during micro-retirement

Choosing regional travel destinations over long-haul trips can keep your activity budget manageable. Taking on occasional freelance work or short-term gigs during your break can also lighten the load on your wallet. Work holiday visas have been especially popular for exposure to another culture while still earning an income.

Potential unexpected expenses to account for

Falling sick can be costly. Without employer-sponsored insurance coverage, you will have to pay for clinic visits. Most importantly, ensure that you have enough to service your health insurance premiums to avoid hefty medical bills. And if you are planning extended travel for your micro-retirement, ensure that you purchase travel insurance as medical services can be hefty for non-locals depending where you are. 

The above expense estimations also do not account for other emergency needs, including that of your loved ones. It will help to err on the side of caution, being more conservative in your own calculations.

The hidden “costs” of micro-retirement in Hong Kong

Beyond your immediate living expenses, micro-retirement carries the hidden cost of “lost” MPF (Mandatory Provident Fund) contributions and the associated tax benefits.

If you are a regular employee in Hong Kong, your employer is required to contribute 5% of your monthly relevant income (capped at the current statutory limit). For someone with a monthly salary of HK$30,000, that is HK$1,500 per month that your employer would otherwise be adding to your retirement nest egg.

This calculation excludes the compounding returns you could have earned on those contributions over time. In a well-diversified MPF constituent fund, those "missing" monthly amounts could represent a significant portion of your future terminal wealth.

However, taking a micro-retirement doesn't have to derail your long-term financial security. Upon returning to work, you can give your savings a boost through Tax-Deductible Voluntary Contributions (TVC). These allow you to catch up on lost years while enjoying a tax deduction of up to HK$60,000 per year (shared with qualifying annuity premiums). Alternatively, you can make Voluntary Contributions through your employer to accelerate your wealth accumulation and get back on track. 

5 steps to build your way to micro-retirement

Step 1: Calculate your "micro-retirement fund"

As shown above, estimate your fixed and variable spending across the duration of your micro-retirement, and set buffers for worst-case scenarios.

Micro-retirement fund = (Monthly expenses × Duration) + Variable costs and buffer

Step 2: Build a financial plan for your micro-retirement

Your micro-retirement fund requires different considerations than your long-term investments. If you need this money within 1-3 years, capital preservation and liquidity take priority over growth. Saving, or even investing in low-risk, money market funds may be suitable for a short-term goal like this.

If you have a longer time horizon, such as more than 5 years, for your planned micro-retirement, you may wish to allocate more towards higher risk investments like equities. 

The key principle is matching your asset allocation to your time horizon and risk tolerance.

If you are planning for multiple micro-retirements, you can simply create separate goals within your Endowus app, each with different asset allocations that are based on the time periods that correspond to your planned micro-retirement milestones.

Step 3: Protect your long-term "core" portfolio

The harsh truth of retirement is that it is not a matter of choice for everyone. It is still important to save and invest with the mindset that your income from employment may eventually cease.

While you build your savings for micro-retirement, you can still allocate some of it to your long-term core portfolio. The beauty of compounding is that the earlier you start, the less you have to do later on.

Where possible, continue contributing to this long-term portfolio throughout your micro-retirement(s) —small, consistent contributions will help to build discipline and benefit from time in the market at the same time. While you're enjoying your micro-retirement, these investments will compound quietly in the background.

Step 4: Consider building passive income streams

Generating income during your break reduces reliance on drawing down savings. While building meaningful passive income takes time, even modest cash flow helps extend your runway.

It may not replace your full income but can be useful in offsetting some expenses. Even HK$1,000 - HK$3,000 monthly from passive sources can extend your runway significantly and take some emotional weight off you.

Step 5: Plan your career re-entry

Before you resign, give proper notice, complete thorough handovers, and leave on good terms—you may want to return to this employer or need them as a reference. Request recommendation letters while your contributions are fresh in your colleagues’ minds.

During your micro-retirement, you can continue to expand your professional knowledge, skills, and network. The narrative you construct around this career gap can improve your employability when you’re ready to return to the workforce.

Lastly, set a target for when you aim to start and complete your job search. Be realistic, so that it is less stressful if the job search inevitably is prolonged, and make sure you have some financial leeway.

Common micro-retirement mistakes to avoid

Delaying long-term planning. While retirement is no longer just a singular goal at the end of your career, it is still important to factor in the involuntary loss of income due to layoffs or medical conditions at old age. You should continue to grow a pot of money that will support you through old age.

Inadequate job search buffer. Job searches can take several months. You may consider budgeting at least 3 months of essential expenses after your planned break ends.

Poor professional positioning. Treating your break purely as vacation without purpose may be perceived as a red flag for potential employers. You may have to be prepared to explain why you chose to micro-retire.

Is micro-retirement right for you?

When we see peers on social media going on sabbatical leaves and micro-retirements, what we don’t see are the sacrifices and anxieties that tend to arise from taking a path less travelled. 

Micro-retirement can work for you if you plan, save, and invest sufficiently for it. Having one less thing to worry about will surely make your well-deserved break a much restful and fulfilling one.

Start your investing plan with Endowus today.

Have questions about planning your micro-retirement? Our team of SFC-licensed client advisors is here to help you navigate your unique financial journey. Whether you're calculating your runway or optimising your MPF strategy, you can schedule a 1-on-1 advisory call here or reach out to us at support.hk@endowus.com.

Read more:

• FIRE: Financial independence, retire early in Hong Kong
• Financial planning through life stages
• 5 Moves to build your financial resilience against recessions in 2025

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