The global pandemic accelerated many economic and societal trends: The number of remote workers rose and will likely remain high post pandemic. Minimum wages are increasing at the federal and local levels. And many older employees, especially in specific fields like teaching, decided it was a good time to retire.

The ability to work remotely and earn more money is certainly attractive, but many late-career workers may be looking more enviously at those who decided early retirement was the way to go and wondering if they are ready to leave the workforce themselves.

Because early retirement comes with financial consequences, a mini-retirement may be in the cards instead to clear your head and assess what your future holds. That said, it should not be a snap decision. Here’s what you need to know about mini-retirement and three ways you can evaluate whether it’s the right time for you to take one.

What is a mini-retirement?

As the name suggests, when you take a mini-retirement, you are essentially leaving the working world for a set amount of time. Unlike a full retirement, a mini-retirement is not a federally classified work status. Instead, it’s a personal choice to not work for a certain period.

Your company’s HR department will probably have a different word for this: sabbatical. The concept is not new, but until recent years, it was most commonly available for educators working in higher education. Sabbaticals are a slowly growing trend among employers who want to attract top talent and are now considered a highly desirable perk.

Is a mini-retirement right for you?

Mini-retirement should be preceded by detailed financial planning. Even if your employer offers sabbatical perks, the time off will likely impact your income and benefits.

Here are three things to do in preparation for a mini-retirement.

1. Determine if your employer offers reduced income for mini-retirement

It’s possible (although unlikely) that your employer offers paid sabbatical leave. According to its 2019 Leave and Flexible Working Employee Benefits survey, the Society for Human Resource Management (SHRM) discovered that just 5% of employers provide paid sabbaticals. More than twice as many (11%) offered unpaid sabbaticals to their employees. Determining whether your employer offers paid sabbatical matters for two reasons in particular.

First, guaranteed income during your mini-retirement will reduce your financial burdens; you won’t have to worry about pulling from your savings accounts or creating a large budget. Keep in mind, though, that most employers that do offer sabbaticals will only provide workers with a percentage of their normal income during that time.

Second, whether paid or unpaid, sabbatical means you don’t have to worry about losing your job while you take your mini-retirement. Employers that offer sabbaticals as a perk operate on the understanding that your job will be held for you until you come back. That’s a huge financial safety net for someone who’s unsure of whether they’re truly ready for full retirement.

2. Make sure you have health insurance coverage

If your employer offers paid or unpaid sabbaticals, your health insurance needs are probably taken care of. As long as your employer still considers you employed, you will likely still have access to your employer-sponsored health insurance. Still, you should make sure to check with your HR department to verify what health care coverage you will receive during your mini-retirement and whether you need to budget additional money for health care.

Given most employers don’t have mini-retirement perks, you should also consider alternative health care coverage, such as purchasing private health insurance through your state’s health care marketplace or looking into short-term plan options. In either case, you’ll also need to account for higher costs than you’re used to, even if you select the most cost-friendly option.

For reference, workers with employer-sponsored health insurance pay less than $1,500 per year for insurance, on average, while those paying for individual health insurance pay an average of $5,940 per year without tax credits.

Bonus tip: Another way to cover health insurance costs during a mini-retirement is to establish and build up a health savings account, or HSA. An HSA allows you to collect tax-free interest, and if sponsored by your employer, does not count toward your gross income. As HSAs are not tied to your employer, a reasonably sized HSA can help you subsidize health payments and allow you to purchase a much cheaper high-deductible insurance plan while you’re enjoying your mini-retirement.

3. Boost your savings to cover your other costs of living

It’s worth reiterating that mini-retirements are not considered actual retirements by the federal government. That means that but for a few exceptions, you can’t withdraw money from your retirement accounts without getting hit with the associated penalties.

Unless your employer offers sabbatical pay, you’ll probably have limited to no income during your mini-retirement. And with your retirement accounts off the table, your best alternative will be building up a nest egg to cover all of your costs of living and any other costs you may incur during that time.

The amount you need to have saved will depend on how much you’d normally need to cover your monthly expenses multiplied by the number of months you plan to spend on your sabbatical. You should also account for costs you will incur during your mini-retirement that you normally wouldn’t, such as travel expenses.

For example, it’s reported that the average monthly cost of housing in the U.S. is just over $1,700 per month. That amount represents around 30% of the average monthly U.S. income (around $5,555/month, according to ZipRecruiter). And with the average personal saving rate up 2021, that means the average American would need to save an additional $2,000 per month for non-housing expenses.

Of course, since you’ll likely give up contributing to your savings and retirement accounts during your mini-retirement, you can shift money away from what you’d normally put into savings to pay for your monthly expenses. However, you’ll still need a fairly robust amount in savings before you take time off to make sure you aren’t setting yourself up for a financially stressful mini-retirement.

Plan accordingly before you decide to do a mini-retirement

Does all of this planning sound a bit overwhelming? It should. A mini-retirement is an exciting prospect, but it’s also an effective mirror to hold against your full or early retirement plans. If you struggle to save enough for a mini-retirement, you may instead need to focus your attention on putting that money toward your actual retirement.

A mini-retirement isn’t a low-cost endeavor, and neither is full retirement. Yet, planning for a mini-retirement can help you gain a better understanding of your current financial strength and put you into the proper mindset for full retirement planning.

Maxime Rieman is Product Manager at ValuePenguin. Educating and assisting shoppers about financial products has been Rieman's focus, which led her to joining ValuePenguin, a consumer research and advice company based in New York. Previously, she was product marketing director at CoverWallet and launched the personal insurance team at NerdWallet.