How About Partial Retirement?

Peter's picture

Does your retirement feel like it is miles away? Have you crunched some numbers and found that you'll have to work thirty more years before you've saved enough to be able to quit your job? Maybe you need to bring the finish line a bit closer. Maybe you need to consider Partial Retirement ...

My Creative Interests

Ever since I was a kid I've been interested in being creative. I've always had a strong interest in music and art. In fact, I think one of my all time favourite books is Hobbies & Crafts by which provides tips and techniques for just about any topic from pottery to jewellery making to bonsai to wine making. I used to dream of being able to try them all! Even today, I would like to try my hand at some of the projects listed in that book.

Of course, these would be evening and weekend projects these days. However, it would be great to be able to work on these sorts of hobbies all the time!

But Would It Pay The Bills?

Not really. I'd have a pretty tough time making mortgage payments from the proceeds of a home-based bonsai business. It seems that my creative interests aren't in line with those of the larger economy. So instead I work away at software development, which I also enjoy, just not as much. But I do it because it pays better.

Investment Income

In the end, my goal for retirement is to have enough income generated by my investments so that I won't have to work for a wage. This income will be in the form of dividend and interest payments from the stocks and other investments that I own. Once I've got enough invested, I'll be able to pursue my less lucrative interests and I won't have to worry about how well they pay.

The downside to this strategy is that I'm still quite a few years away from being able to support my family using only my investment income. So in the meantime, I still need to work.

But what if I could cover some of my needs, or even half of my needs, through my investment income? I wouldn't be able to retire, but maybe I could do the next best thing.

Partial Retirement

Let's say that by keeping track of my monthly expenses, I've determined that I need an annual income of $22,000 to make ends meet.

Firstly, I'm pretty certain the market for bonsai trees in Ottawa isn't large enough for my home-based bonsai tree business to support me.

Secondly, if I could get a 5% yield on my investments, I'd need a $440,000 nest egg to get that much income. It'll be a while still before I can save that much.

However, I'd only need a nest egg half that size to get $11,000 annually. What if I could earn the other half by pursuing my more creative, though less lucrative, endeavours? Could my home-based bonsai business bring in $11,000 each year? Maybe it could.

Something To Consider

The point is, you don't have to look at retirement as an all-or-nothing venture. Once you get your investment income to a certain level, you might be able to afford to work at a job that is much more enjoyable but doesn't pay as well. Your passive income can pick up the slack.

Suddenly, that thirty year road to full retirement becomes a fifteen year stretch to partial retirement. Instead of working at a job that you don't enjoy until you can retire, you'd work only half as long and then spend the rest of the time working at something you'd enjoy. Let your money work a bit for you now, instead of only when you're old and grey.

One final note: even though you are partially retired, you'll need to make sure that you're earning enough to keep saving for your full retirement, otherwise you'll be stuck growing bonsai trees forever!

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