Young Professionals Opt For 'Microretirements,' Sacrificing $600K In Future Retirement Savings

An emerging trend among young professionals is microretirements – the idea of taking an extended sabbatical to travel or relax during one's younger years rather than waiting until retirement. The biggest concern among financial experts is that this break could cost individuals upward of $600,000 in future retirement savings, among other sacrifices. 

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As the Wall Street Journal (WSJ) puts it, those taking microretirements are "borrowing years of freedom from their future selves to enjoy some of their retirement while they are still young.”

This trend is particularly prominent among individuals in their 20s and 30s. Instead of banking their earnings toward a distant retirement, they want to take a break now, while they're young and may be able to enjoy it more. 

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The American Psychological Association (APA) reported that the average stress level among 18- to 34-year-olds is six out of 10, compared to those aged 65 and older, who reported stress levels of 3.4 out of 10. Younger generations, with high stress levels, are more prone to burnout, which fuels the desire to take a microretirement and recharge. 

WSJ spoke to a 31-year-old marketing professional, Dana Saperstein, who exemplifies this trend. Saperstein left her job to hike the Pacific Crest Trail for six months. “If I keep working myself to the bone until 60 years old, I might physically never be able to hike the 2,650-mile Mexico-to-Canada trail,” she told The Journal. 

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Saperstein and her fiance saved $60,000 for their trip. During that time, she suspended her retirement savings and car insurance and sublet her apartment to cover the rent. She said she'd rather prioritize spending money and time on experiences than buying a home they are tied to. 

Saperstein's experience highlights some of the sacrifices microretirees are committing to. Beyond missing out on contributions and the compounding effects of retirement accounts during that time, these individuals may also miss out on salary growth. Not all jobs will allow employees to take a six- to 12-month break (or longer), meaning they may need to find new jobs at lower salaries or miss out on promotions. 

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According to Julie Everett from Financial Finesse, taking multiple breaks throughout one’s career could result in about $600,000 less in retirement funds by age 65. This estimate is based on a scenario where a 30-year-old earning $90,000 annually, contributing 15% to a 401(k), takes several career breaks and then returns to work at the same salary.

These financial implications could also lead to individuals needing to delay retirement and work longer to get the savings required for full retirement. 

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Despite the financial risks, individuals like Saperstein believe the benefits outweigh the costs. An extended break from work can provide much-needed time to recharge and focus on what one wants from life. It may even propel some toward a new career path. 

Experts recommend careful planning for those considering microretirements. It isn't something to take lightly, especially if you don't have the financial means. Important factors to consider are ensuring that debts are paid off and that you have a financial cushion to cover your expenses during your break. 

Consulting with a financial advisor can help you navigate these decisions and balance your immediate and future financial goals. 

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