Gen Z plans micro-retirement when they’ve barely started working 

Generation Z has now come up with another new term you’ll be hearing more about, it’s called “micro-retirement.” The concept of “micro-retirement” is to take time from work while you are still young, rather than deferring all your future leisure plans to the later years of life.  

Some people just call this being unemployed for a while. Others call it taking a sabbatical from work. This new trend is sweeping through Generation Z and are they on to something smart or is this going to create an even more cratering financial effect on their financial future? 

Meet Brittney 

OK. I must make a confession. At 55 years old, it’s hard to get my head wrapped around needing a big ‘break from work’ in your 20s. 

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Brittney Foley, 26, is a woman who is opting for a micro-retirement. She explained that taking smaller career breaks earlier in your life is perfect when you don’t have kids as you can quite literally do whatever you want. This is assuming you can afford it. Although, with national credit card debt at a staggering $1.2 trillion and the average credit card balance soaring past $6,000, can Generation Z really afford it? 

Brittney said, “With other people my age, there’s so much pressure to chase promotion cycles and raises, and everyone is so burnt out.” Burnt out? At 26? 

This generation has decided to flip the script of how they view their own financial plan, which is live for today and don’t worry about tomorrow.  

There is a much more cynical view from people in their 20s that they will be able to afford a home, retire comfortably and reap the benefits of Social Security. So, we are witnessing a counterculture of younger people turning the retirement script upside down with this idea of having three- to six-month breaks in between their next career move. 

A very close friend of mine has a daughter who left Google recently at the age of 30. She had done very well there, rising through the ranks and building an income of almost $300,000. But, feeling the passion to live for today, she quit the job and is currently living for four months in Hawaii and then off to two months in Bali before she figures out her next career move. Is this something that Boomers and Gen Xers should have done when they were younger? 

The financial consequences 

The phrase micro-retirement was first described in “The 4-Hour Workweek,” a self-help and careers guidance book published by the entrepreneur Tim Ferris in 2007.  However, most young people may not fully think about the financial consequences of these mini-retirement decisions. 

Your 401k/retirement savings: For Gen Z workers, they need to look closely at the matching and profit-sharing contributions from their company. Often, these contributions made by the employer have a vesting schedule and it could be a horrific financial move to walk away from unvested money that could have a substantial impact on your retirement balances over the long haul. 

Your ability to earn the same income … or more: The strategy of micro-retirement assumes you’ll be able to re-enter the workplace quickly and at the same income or more. Part of growing your income, bonuses and potentially company stock is often tied to your tenure with a company.  

It’s unknown yet how employers will view someone who has two, three, or four breaks in their resume to micro-retire and whether they will want to hire that person knowing they could quit in a couple of years after the employer invested tons of time and money training that new employee. 

This generation has decided to flip the script of how they view their own financial plan, which is live for today and don’t worry about tomorrow.  

Your Social Security: While some Gen Z workers believe they will never see a dime of Social Security, it’s important to account for how a break in your income will affect your long-term Social Security. It’s likely the full retirement age for those in their 20s will be past the age of 67, but having gaps of income could make your overall Social Security lower down the road and impact your overall retirement. 

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Debt: What’s most worrisome aspect of this new trend is the debt that younger workers in America may take on to achieve a mini retirement. Most people in retirement aren’t jet-setting around the world and often these micro-retirement breaks are partnered with exotic vacations or luxury travel which could increase the debt load on younger people. 

Is Gen Z just soft or do they have it right? 

This new trend that emerged on TikTok sees Gen Z workers from around the world vowing to take periodic breaks from the office to protect their “mental health” — despite being several decades away from the retirement age. 

On one hand, I’ve done financial plans for many people in their 40s and 50s who are seeking an early retirement to start to enjoy their hard-earned money and savings. However, many of those people often worry about running out of money, so they’ll extend the amount of time they work another five or 10 years to be sure they have enough retirement savings to do whatever they want to do in retirement. In some cases, health issues that arise like a bad knee or hip or something even more consequential may stop them from fully enjoying the assets that they have saved up. 

You could say it’s irresponsible to not focus on saving and planning for your future to just enjoy every nickel and more that you have in the bank today. 

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You are not only applying a much narrower window of achieving retirement success with micro-retirement, but it could also cost America billions of dollars to take care of people who didn’t save because they wanted to spend their money today. Are you ready to bail out people for their future retirement like people got bailed out for college loans? 

So, who has it right? Those of us that toil away, max out our 401(k), pay down our house quicker and save that bucket list for when we retire? Or does Gen Z have it right with the attitude that tomorrow is never promised, who knows when we will have a COVID-19 like event again? You should just sit back, assume you’ll work forever, and soak up as much fun as you can when you are in your 20s and 30s? Time will tell if this is another fad, or it will become a staple of how people live in the future.  

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