How Early Retirement Works vs Semi Retirement: Your Options

There is a more balanced way to achieve early retirement than working, saving and investing like crazy for 10+ years to fund it. And it only takes 5-10 years. Semi-Retirement or Semi FI is a new (Millennials’) FIRE movement—Financial Independence Retire Early.

These folks pursue an easier path and shortcut to financial freedom. But at one cost: You won’t retire EARLY. Because that’s not the goal. Instead, the goal is for you to establish a semi retired lifestyle early in life, where you can find meaningful (part-time) work for a decent income, such as 10.000 per year or 833 a month. Until you reach financial independence and still fully retire earlier than the average.

In this blog post, I will talk about how early retirement (F.I.R.E.) works vs semi retirement (F.I.) and the options you have holding one surprising truth almost no one talks about. Also, I’ll share the biggest pros and cons of FIRE vs FI, the role work will play and further resources to explore both retirement planning strategies.

My hope is that by doing so you figure out which path might be best for you before starting your FIRE journey. Or, if you’re already pursuing FIRE, maybe change your FIRE plan for the better if that’s something you’re looking for.

Early Retirement vs Semi Retirement: What’s the difference?

The difference lies in the words themselves. FIRE stands for Financial Independence Retire Early. Whereas Semi Retirement or Semi FI stands for Semi Financial Independence. So, both retirement planning strategies have one big difference.

With FIRE, your goal is to retire EARLY as soon as possible for whatever reason. So, your priority No. 1 in your budget is to save and invest a significant amount of your family’s income—for example, into the stock market. You do this until your portfolio reaches a specific point. That’s your FIRE number—the amount of money you need to have saved up in your portfolio. From now on, the passive income it generates can pay for your bills. This moment is called your FIRE date when you can fully retire early.

When you aim for FIRE you want:

• achieving financial independence early, like in your 30s or 40s.
• self-funding your retirement savings account fully and early on in your life.

With Semi FI, your goal is to take the stress out of your work life as soon as possible. Not to retire early. You simply want to have more time freedom now and chase real work-life balance. You want to decide when and how to work on something that is meaningful to YOU. And you want to keep working part-time, even if it’s just a few hours a week, because you find it fulfilling and important.

When you aim for Semi FI you want:

• achieving financial independence one day, like in your 50s or 60s.
• self-funding your retirement savings account, but not necessarily fully funding it early on in life.

What Both Have In Common: Earning Passive Income

Both retirement planning strategies – early retirement and semi retirement – have one in common: you invest your money in assets with the goal of one day generating passive income from your investments. An asset is something that appreciates in value over time. Prominent examples are real estate properties, material goods such as art pieces or rare alcohols, stocks, bonds, or (nowadays) Index Funds or ETFs. These bundle numerous stocks or bonds or others in one investment vehicle. In another post I have put together The 7 Best SAFE Index Funds For Financial Independence.

Most FIRE folks like using stock market investing (into Index Funds or ETFs) to earn passive income through dividend payments or selling their investments. Others like to generate passive cash flow, for example from a property through rental income or a partnership within a company in which they are not actively involved. To name just a few.

FIRE / Early Retirement: The Biggest Pros And Cons

The biggest pro of FIRE is that work becomes fully optional EARLY on in your life. You have accumulated such wealth that you can live off of it. If you want or need to, you can leave your job immediately as you don’t have to work to pay your bills. The passive income you’ve built up so far can do that for you.

The biggest con of FIRE is that you need to save and invest 50–70+ % of your family’s income for around 5–10+ years. That can be quite challenging, especially with small kids. But it’s possible, especially if you earn an average to above average income. It simply comes down to your dedication towards earning more money, saving more money and investing more money for your family’s future. And make big lifestyle changes through some drastic, different lifestyle choices. Below, I’m sharing a few resources—each with a success story from a family that has achieved or is on the verge of achieving FIRE at every income level.

The crux of FIRE is that for not a few people that early retirement turns out to be the least retired period of their life. Not because they have to go back to work, because they ran out of money and exhausted their portfolio. But because they find meaning and deep fulfillment in work. You see, people have been achieving FIRE and early retirement for decades. In some countries, entire pension systems are based primarily on living off of passive income (rather than a state pension, as this is of secondary importance).

This article is not intended to prove what is already known. It is intended to reveal what is known but rarely taught. With Semi FI you plan something that not a few people actually do in (early) retirement but almost never plan for before: continue working (part-time a few hours per week for an income). If you want to learn more you can read one of our latest blog posts on Semi Retirement: How To Semi Retire In 5-10 Years.

Further Resources To Learn More About FIRE

If you want to get some inspiration of how a FIRE journey could look like if you have kids, I can recommend the following resources (as a small excerpt):

• Angelo Colombo runs a YouTube Channel in his mid 30s from Europe (Austria) and has been pursuing FIRE since his late 20s with his family.
• Anna & Eddy • Lazy Investors run a German YouTube Channel (among other things) where they share their best tips for achieving FI, always explained at a beginner level.
• PlayingWithFIRE is a great way to dive into the FIRE movement by watching the respective film.
• Road to FIRE is a YouTube Channel from a family of 4 from the US trying to reach FIRE by 2030.
• Our Rich Journey is a Blog and YouTube Channel from Christina and Amon from the US, who retired to Portugal at 39 (and 41 – with their two daughters) sharing resources like these:
• An Action-Oriented 365 Day Program to Get You Closer to Your Financial Independence Goals
• Activity Guide for Couples Communicating About Finances & F.I.R.E.
• Jillian Johnsrud is a mom of 6 who retired at 32 without a high-paying job. She shares her wisdom in this book (particularly interesting for content creators):
• Fire the Haters: Finding Courage to Create Online in a Critical World
• Julien and Kiersten Saunders are a Rich & REGULAR family of 3 from the US retired at 35 (Kiersten) as follows:
• Cashing Out: Win the Wealth Game by Walking Away
• In Eat Better On A Budget Julien shares his hacks from his former career as a professional chef.
• The Budget Mom runs a YouTube Channel and Blog as a single mom sharing her best tips for budgeting your money, paying off debt, saving more money, and crushing your financial goals.

Semi FI / Semi Retirement: The Biggest Pros And Cons

With Semi FI the biggest benefit is you get that time freedom and work-life balance that financial independence offers before you actually achieve it. And you‘ll still become fully financially independent one day. That‘s how you can live your ideal lifestyle and work life now while your kids are still young. Instead of having to wait and hustle until FIRE—when your kids are older or even about to move out. You simply enjoy more time freedom and and work-life balance right away. And your work income helps covering your family’s health insurance. Also, you don’t need to accumulate as much money in your investment accounts as with traditional FIRE so that you don’t need a Million-Dollar/Euro portfolio.

The biggest downside of Semi FI is that it pushes your FIRE date away so that you won‘t be able to retire EARLY. You take out the RE part (Retire Early) of FIRE and focus on the FI (Financial Independence) part. So, your goal is not becoming an early retiree. Your goal is to achieve financial independence one day. If that doesn‘t feel like giving up something but rather pursuing something else, then Semi FI is for you. But you need to be aware of the fact that with Semi FI, you will continue to work to make a living BUT on your terms.

Here’s the hack of Semi-FI: Most of us in the FIRE community have a high savings rate and investment rate of 30-40 % at least. Some even get to a 50 % savings rate or more like we do. So, if we stop saving and investing towards financial independence we can afford to earn 30-50 % less at least. That gives us choices. The choice to pursue another career. The choice to work less and do further education in the “free” hours we have now. Or simply the choice to maximize family time but without the feeling of that financial loss. If you have small kids at home then Semi FI will allow you to do that.

Further Resources To Learn More About Semi FI

If you want to learn more about Semi FI, I recommend the following resources:

• Jess and Corey are The Fioneers dedicated to help others achieving FI without the need to have a 50% savings rate so you can design a life you don’t want to retire from right now
• MoneyFlamingo is an Australian blog and all about sharing ways to achieve financial independence through Semi FI providing free calculators to run your numbers
• TheFrugalWoods actually achieved FIRE within years through extreme frugality BUT that’s why Liz want to help others finding their path to FIRE through her blog, her book Meet the Frugalwoods: Achieving Financial Independence Through Simple Living and consulting work since 2014
• Semi-Retire FIRE is a British blog by a woman who shares how she started her FIRE journey, only to realize she couldn’t retire early or much earlier than the traditional retirement age. So today she changed her plans and followed Semi FI sharing her learnings along her own journey.
• StrongMoneyAustralia is a couple (from Australia) who retired early and also earning part-time income through work they enjoy, which for them is one of the best parts about FI. Here’s their book Strong Money Australia: How to Gain Financial Independence and Create a Life of Freedom
• JulieDeVivre is Barista-FIRE’d sharing how she manages her money in semi retirement while solo traveling full-time since selling her house and her belongings in 2020 to quit her high-profile corporate job just one year later and live a happy nomad life

Is Semi FI Right For You?

If you say YES to the following 3 questions, Semi FI might be just perfect for you:

• Do you simply not want to work like crazy while raising (small) kids to earn, save and invest A LOT?
• Because you want to enjoy the time freedom and work-life balance FI offers before achieving FI?
• Can you find a part-time work you truly enjoy doing that also generates a modest income?

If you and your partner can and want to find meaningful work in semi-retirement that pays 10.000 per year (833 per month) more or less, you should consider Semi FI.

This income means you need to have 500.000 less in your investment portfolio! That’s because your family needs 1.666 less passive income every month (because that’s what you earn). In case you have no idea what I’m talking about, this is just the mathematical result of using the 4 % rule as a withdrawal strategy (i.e. you withdraw 4% per year from your portfolio) so you don’t run out of money in retirement.

If you need 500K less in retirement savings, you won’t have to put in as much effort on your FIRE journey to earn, save and invest more money. Remember: It’s about YOUR retirement planning and YOUR lifestyle choices now and in the future. So you decide exactly what that should look like.

Why Semi FI Is Perfect For Europeans (And Everyone Else)

I believe Semi FI is perfect for Europeans (and everyone else) who struggle with the standard path to FIRE. That’s because European culture is conceptually different to American culture – the birth land of the FIRE movement. That boils down to three main issues of FIRE and European culture which:

• is not a hustle culture: Most people have “only” 1 job and for not a few that is part-time work. It‘s hard to save and invest thousands each month this way to have 1 Million invested for FIRE.
• has a strong social security system: Many get state benefits for kids (250€ per child in Germany) until finishing education amongst others. That can be additional income in early retirement too.
• has no investment culture (with few exceptions): Living “only” from your investments, like passive income from a stock market portfolio, is not something most can imagine.

When you walk away today with at least one new idea to improve your financial journey 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 Semi FI be the better FIRE path for you? Let me know in the comments below!

Title image source: Agelesspix on Unsplash