Working Yourself Into Semi-Retirement

My workplace recently changed its performance management and compensation practices to a new system.  Basically in the new system there are four ranks you can get related to how well you meet your goals.  If you get the top rank you can get an extra one or two percent raise compared with the rank below it.  What struck me about the system when discussing it with a friend is that it doesn’t provide much motivation to go the extra mile.  A 1 or 2% raise likely isn’t enough compensation for the amount of work you would need to do to achieve that top rank.

For example, if you earned $80,000 a year and did an extra half an hour of work a day over a year(~ 122.5 hours)  to get that top rank.  A one percent raise would be an extra $800, while two percent would be $1600.  That works out to $6.53 to $13.06/hour of extra work.  Granted that doesn’t take into consideration any improvement in pension benefits, but even if you assume a very generous 20% bonus that still works out to $7.83 to $15.67/hour well below $40/hour the person is making on their base salary.

So overall there isn’t much motivation to go the extra mile at my day job.  What this did inspire me to think about was where then would you put your extra mile to get the most bang for the time put in?  This then lead me to wonder a bit more about my long term goal to do more writing when I pull leave my day job around my 45th birthday.  Why should I wait to work on building that business up?  Doing it now would likely pay better than the extra effort at my day job and now that I’m working 80% time I have the time to consider doing something like that.

Perhaps the solution to leaving your day job isn’t just having enough investment income that you don’t need to work, but rather having enough income from other sources that you don’t need the day job.  If you like working on something else that provides a stable income why shouldn’t you consider it as part of your plan going forward?  Granted in my case, income from freelance writing and/or self publishing isn’t all that regular but if you build up a business to the point where you are getting fairly regular income over the course of two years you might be able to count on a portion of it.

That way over the long haul you are basically working yourself towards a full blown semi-retired situation where yes you are working, but on something you love.  The rest of your income then would come from investments.  Of course there are risks to a plan like this, but frankly so is expecting you to keep your current job for income.  Overall I feel having income from investments and self employment could very well be less risky than full employment with a company over the long run.

So would you try to work yourself into a semi-retired scenario or are you too attached to the idea of full blown early retirement?  Myself, I’m not really sure, but I’m now thinking about it.

10 thoughts on “Working Yourself Into Semi-Retirement”

  1. I think the one you are forgetting is that the raise is compounded annually…so really it isn’t 800-1600. In 10 years of compounding that 1-2% it might work out to more like 20,000$ which would turn that 122 hrs of extra work into a pay rate of over 150$/hour!

  2. Besides the compounding that Matt mentioned, other benefits besides pension (if you have one whose benefits are not frozen like at my old company) are related to pay raises. Those would include matching funds for 401(k) contributions, cash balance accounts, company stock distributions, and SS benefits (if you are under the cap in the benefits formula).

    That being said, I agree that working harder for a measly few hundred dollars a year is not worth it if you don’t really need the money to survive or buy/do stuff you really want.

    Back in the 1980s and for most of the 1990s, my raises were at least 2%, often 3% over the average raise. But after I got burnt out in 2001, I switched to part-time work with the same company, an option you did not mention. Reducing my net pay by about 40% still covered my expenses with room to spare because I had paid off my mortgage in 1998.

    Still not satisfied, I reduced my pay further in 2007 by reducing my hours by about another 25% and it still covered my expenses, this time with very little room. However, my growing investment income was always there in case I needed it.

    Meanwhile, I was just waiting for the remaining pieces to fall into place for an early retirement. One benefit or working part-time was watching the value of my company stock continue to rise, so when it hit a certain amount I simply retired in 2008 at age 45 after 16 years of full-time work and 7 more years of part-time (i.e. semi-retired) work.

    In short, you can progress from one option in your final paragraph (semi-retirement) to the next one (full, early retirement).

  3. I intend to be in a position to retire by December 2020 at the latest. Better than expected investment returns or picking up an extra PT job to knock down the morrgage even sooner may move that up by a couple of years.

    At that point I could completely stop working, but I expect when the time comes I won’t want to. Instead I expect I’ll do contract or temporary work in the summer when I want to be home to garden. Then I’ll travel for 1-2 months in the fall and be home again over Christmas. Then I’ll head out again to a warmer climate from mid Janauary to early April when I’ll head home to get the garden started for another season.

    My retirement plans include funding for some travel ($10k/yr), but continuing to work full time but only for several months at a time will fund additional travel, or allow for some more exotic adventures. For me working full time for a few months and then hitting the road will work better than working PT year round. It’s probably the same amount of income but it will allow me to do extended periods of travel.

  4. When I was single and mentally ready to toss aside the day job, my plan was that I would have gone the part-time route while living in a paid-for house. Then I got married, the pension rules changed, we needed a larger house, and my aged mother needed a higher care level… all of which meant my expenses and potential expenses went up, so what was a 2-3 year plan has morphed a decade later as a different plan.

    The current plan has me in golden handcuffs with the pension until 5 or 6 years from now. The house could be paid off in 5 years, but, if all goes well, I’m making more by not paying it off until I exit employment (no later than 2019). I also can’t exit employment until mom passes away, in case she outlives her money. So sometime between 2015 and 2019, the deed will be done (preferably sooner than later).

  5. George, your mother is lucky to have you care for her. It’s funny how unforeseen events can change our plans, isn’t it?

  6. @Matt,

    True. I didn’t include the value of compounding since really any/all money you take home could be compounded. If you work elsewhere and invest the money the same effect is possible. Also I should point out even if you put in the extra work you would not necessarily get that extra raise.


    That was somewhat like my original plan, use the extra money from work to fund fun things. Now I’m not so sure. Basically the barrier between ‘retired’ and ‘working’ is blurring so bad that I’m not sure when I’ll cross it until it likely happens.


    Yes, plans always change. I know I have to keep redoing my retirement calculations annually since life keeps shifting those numbers around on me. Thanks for the story, I personally didn’t think of elder care as being a potential pitfall until you mentioned it.


  7. I think there’s another option too–full-blown retirement followed by future “employment” (either paid or volunteer) sometime down the road (after a break). Having been retired for 2 1/2 years now, I think it’s great to have some time off to figure out what you’d like to be doing next. With so many years available in front of me, I’m sure I’ll get involved in some volunteer or paid endeavors, but I’m not pushing it. Just seeing where retirement leads me . . .

  8. I’m the “tail-end charlie” in my family, with my brother being 19-years older and my sister being 10-years older. Mom turned 90 this year and is still lucid, but not sharp-as-a-tack and has bouts of confusion, so I’m handling her finances. She never expected to live this long!

  9. I don’t think I could go into retirement and never work on projects. I would be way too bored. For me, it is about having the freedom to do pursue what you are really interested. Even travelling and working at the same time.

  10. I’ve really enjoyed reading your blog about retirement income. I’m 61 yrs old and, I suspect, being gradually edged into retirement by market forces within my (TV Production) business…I’m wondering what I will do in the near future. With my income declining, more competitors entering the business every day and with no retirement savings or pension to speak of it is not a happy prospect. My children and wife are young..loving, supportive & understanding but “Daddy” is running out of correct guesses and dumb luck. As an American my biggest expense will be health care for my aging body and for my family. As Canadians with a National health plan you are blessed..despite its’ pitfalls it is far superior to what we must deal with here “in the south”. The lurking anxiety of unexpected injuries or long term health problems is a national nightmare for us. This will take every ounce of brainpower,blarney,luck,planning and ambition I will be able to harness in coming years. I wish you luck..Thanks for your comforting blog. Very Sincerely, Jim….Philadelphia, Pa

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