Semi Retirement: The Secret How To Semi Retire In 5-10 Years

A couple of years ago something happened in our family’s life. Then, we started considering semi retirement and Semi FI, short for Semi Financial Independence. Today, we couldn’t be happier with rethinking our initial early retirement plan.

Our family’s goal used to be traditional FIRE (Financial Independence, Retire Early). We wanted to retire EARLY. We were obsessed with saving more money to then invest more money into our investment portfolio (ETFs). In just 4 years we’ve built up a 100.000 Euro early retirement account.

In this post I will show you how to semi retire in 5-10 years more or less without pushing away your dream of EARLY retirement (when work becomes optional) too much.

Semi Retirement: How We’ve Got There

The pregnancy, birth and postpartum with my second daughter were surprisingly hard. I developed some health issues. I still remember the moment I asked myself if I will ever get and stay healthy again. So, I decided for a 2-year long parental leave with only a little money as parental allowance. I would never ever have imagined doing that at the beginning of my corporate career. But it was the right thing to do. Despite that, our FIRE journey felt like it froze up.

I stumbled upon some online content explaining the concept of semi retirement and Semi FI. This semi retired lifestyle almost seemed like the holy grail of a new FIRE movement. These FIRE folks chase an easier path and shortcut to financial freedom. But at one cost: you will not retire EARLY. Instead, you will continue working for a decent income BUT on your terms. Just perfect for us! We actually truly enjoy working and find deep fulfillment in our work, especially the part-time work we do now.

The Baseline For Semi Retirement: Your FIRE Number

Your FIRE number is the baseline for your semi retirement and Semi FI strategy, no matter which one you choose.

It is the amount of money you need to have saved up in your portfolio so that the passive income it generates can pay for your bills. Basically forever, without fearing to run out of money. That in itself depends on how much money you withdraw from your portfolio.

For example, let’s assume your annual spendings – you expect to have in (early) retirement – are 30.000. For a safe withdrawal rate of 4% you now multiply 30.000 by 25 and get your FIRE number with 750.000. If withdrawing 4 % annually you could take out 30.000 per year for up to 30 retirement years with a very high probability to never run out of money during those 30 years.

How To Semi Retire In 10 Years If Investing 1.666 A Month

The question is, when will your investment portfolio reach the point from where it will compound into your FIRE number in the back so you can retire earlier than average? Or in other words: How much do you need to save up in your retirement account before you stop investing? How big should your portfolio be? Before you can calculate this, you need to know your FIRE number, which is behind the 4% rule – presented in the post How To Retire Early With Kids: Your Guide To The Fastest Way.

Let’s say your FIRE number is 900.000 Euro according to the 4% rule. You start saving and investing 1.666 per month and 100.000 in 5 years. You are able to benefit from the growth of the stock market (with a 10% average return per year). After 5 years your portfolio will be worth almost 132.000. So 32.000 will be pure profit. If you continue like this for 5 more years you will have 346.000 in investments after 10 years. You can take advantage of our FREE Investment Growth Calculator to run the numbers.

If you stop investing now and leave your money in the market for another decade (with an average return of 10% per year), you will reach a portfolio value of almost 900.000! Meanwhile, you can afford to work less for 10 years because you don’t need to save and invest those 1.666 per month anymore. So, you can enter a semi retired life.

We remember, initially you only invested 200.000 of your own money: 1.666 per month x 12 months = 20.000 invested per year, after 10 years 200.000 invested. That is the power of compound interest. I like to encourage you to get your FREE Compound Interest Calculator and see what’s possible for your money.

How Our Family Plans To Semi Retire In 10 Years

Our Financial Plan For Semi Retirement

Our family lives in Europe/Germany. We started our FIRE journey in our mid-30s after getting our first daughter. Today, we’re about to turn 40. Our plan was to retire early in less than 15 years, at around the age of 50, while always working full-time. After getting our second daughter I discovered semi retirement.

But I want to achieve two financial goals before jumping into semi retirement and Semi FI. First, we want our stock market portfolio to be worth 50% of our FIRE number. The other is to become debt free. If we continue to prioritize saving and investing a large portion of our income, we can achieve this and semi retire at age 45/46. So our path to Semi FI would take about 10 years. Around 5 years less than with FIRE.

For our semi retirement years we plan to live off of 3 income sources as follows:

1. Around 3.000 Euro from part-time work (1.500 for each of us)
2. Around 700-800 Euro in social security benefits for our kids (child benefits)
3. Around 300-400 Euro from other income sources (tax refund, minimum tax-free dividend payments)

That would allow us to cover annual expenses of around 48.000-50.000 Euro per year which is 4.000-4.200 Euro per month. We expect this to be enough income to pay for our family’s living expenses in semi retirement because our mortgage would be fully paid off. So, housing won’t be an expense in our budget anymore.

Right now we happily live off of around 3.500 Euro per month or 42.000 a year (without including the mortgage). But back then when we started our FIRE journey, 2.700 Euro was more than enough income for our family. That has 2 reasons. One is that we now have more kids (instead of just 1) which comes with higher kids expenses. Another is that inflation rose dramatically after the Covid-19 pandemic hit, which raised our overall annual expenses too. It still feels like inflation is eating up our money. That’s why we expect our living expenses to raise again in semi retirement. Or at least we want to be prepared.

How Big We Want Our Portfolio To Be BEFORE Entering Semi Retirement

How large does a portfolio need to be so that you can stop investing and enter semi retirement as you know that it will compound in the back until you reach full retirement? There are different approaches to that. I have put together all of them in the blog post Pros & Cons Of The 13 Types Of Financial Independence.

For us, we feel most comfortable when we reached the point of building up a stock market portfolio of around 500.000 Euro which is 50 % of our FIRE number. We want to achieve this by the age of 45/46. Therefore our family needs to save and invest a specific amount of money into the stock market over the next 5-6 years (as we’re about to turn 40).

This means that by 2030 we will have to save and invest an average of around 3.600 euros every month into our stock market portfolio (over 260.000 in total). We expect to achieve an annual return rate of around 10(-15) % on average. That is half of what we achieved so far on average during the last 5 years.

Semi retirement through Barista FIRE / FI

Once our portfolio hits around 500K we start withdrawing money. We expect this to happen when we turn 45/46. We pretend using the 4% rule and withdrawal rate as a withdrawal strategy for retirement as presented before. That’s how we’d take out 1.500 Euro per month in withdrawals from our portfolio. But we have to pay for taxes. So, we would have less than 1.500 Euro in our bank account as passive income but at least around 1.000 per month. But how long would it take us to then reach full FIRE? What would happen with our portfolio along the way? Here is a simplified view showing how the average looks like:

Of course, there will be many ups and downs in the stock market during our Semi-FI years. But this is how the average trend would look like. As you can see our portfolio still grows in the back until it accumulates into our FIRE number between the age of 55 and 60 years. Since 67+ years is the traditional retirement age for us we could still retire earlier than the average. Around 10+ years earlier. Our semi retirement period would be around 10-15 years. But actually, we don’t like to start withdrawing money before our portfolio compounds into our FIRE number. That’s why we feel like the next Semi FI approach is best for us.

Semi retirement through Coast FIRE / FI

With Coast FIRE / FI (in the version of Flamingo FIRE as presented before) we pretend we won’t start withdrawing money from our retirement account after it hits 500K. How long would it take us to reach full FIRE? Down below is a simplified view showing how the average looks like. As you can see our portfolio grows in the back until it accumulates into our FIRE number between the age of 50 and 55 years. Since the traditional retirement age for us is 67+, we could retire around 15+ years earlier than average. Our semi retirement period would be around 5-10 years. A lot shorter than it would be with Barista FIRE / FI.

The following table is summarizing our hybrid approach for Semi-FI combining the different elements of Coast FIRE, Flamingo FIRE, and traditional FIRE while tailoring the approach to our unique circumstances, priorities and goals.

FREE Semi Retirement Calculator

On our blog we offer a free Barista FIRE Calculator and a free Coast FIRE Calculator. Both are completely for free so you can run your numbers directly online. You can also try the free Semi Retirement calculator from Money Flamingo featuring another well-known approach: Flamingo FI.

If you consider semi retirement for your family we like to encourage you to simply run your numbers. How much money do you need to live off of when enjoying your Semi-FI lifestyle? How much do you expect to continue earning as an income? How much would you get in social security benefits? What other income streams do you might have like a rental income you‘re about to create as we do?

Simply subtract the total expenses you expect to have during your Semi Retirement / Semi FI years from your total income. If you’re in the red, that is the amount you need to cover from your investment portfolio in passive income.

We also offer a FREE Investment Growth Calculator if you want to see what’s possible for your invested money. In addition, we offer a Passive Income Calculator. Calculate how much money you can take out from your portfolio, adjusted for inflation, during retirement WHILE seeing how your portfolio’s value changes over time. You will know when / if your portfolio could grow into your FIRE number, for example until traditional retirement.

When you walk away today with at least one new idea to improve your personal financial journey towards F.I.R.E. I’d love to show you some more in the next post. If you haven’t already, you can apply to become a part of the community to not miss any new release. For that you can subscribe to our newsletter below in the green footer.

Now, I’d love to hear from you: Could you imagine to semi retire while still retiring years (if not decades) ahead? Let me know in the comments below!