Is a DIY Sabbatical for You?
“I feel like I have been grinding since grad school. I am totally burnt out and I want to spend more time with my kids. Is it financially possible to stop working for the next 3 years until my oldest starts high school?”
Over the last few years, many of our clients (30s-50s) have come to us with some version of the question above and a desire to explore an alternative life track. Often, the reasons for this are:
They want to take a break from the non-stop grind and take a professional pause.
They are burnt out from their current position and want to refocus on their passions.
They want to spend more time with their kids while they are young.
Their main question is: Can we financially afford to do this and still be on track with impacting our lifestyle and goals for our retirement date, education for children, etc.?
A WSJ article inspired me to add my thoughts to this ongoing conversation. It's always a pleasure when our work supports clients' life goals and passions and we've helped many explore the possibilities of a DIY sabbatical.
To clarify, we define a DIY Sabbatical as a planned break from work with full intentions to return after 1 month to a year, or more. These are often opportunities to focus on health and/or life experiences. While a year is not uncommon, it does require more planning to maintain financial and career goals.
Ample forethought comes when considering the possibilities--how to get started, the different types, and the benefits. For many, jumping off the hamster wheel sounds like a dream. Make no mistake, a DIY sabbatical (aka faux-tirement, mini-tirement, adult gap year, etc.) may be more financially attainable than you might think.
Though no two circumstances are the same, as financial planners, we love the opportunity to help clients achieve personal life goals and explore all possibilities. Here are the typical steps we cover:
Identify the (possible) long-term financial impacts.
When planning for retirement, we do extensive scenario planning using very conservative rates of return (4%) in today’s dollars (inflation-adjusted). A sabbatical is just another scenario we can model in the near to more distant future using our sophisticated financial planning software. We also consider what your salary might be when returning to the workforce. If we all believe a sabbatical is worth exploring further, this is usually when we take a pause. Clients continue with research and self-exploration and come back to me when they are ready to continue the conversation.
Determine the cost.
Once clients know what they want to do, the next is the budget needed to support not only the sabbatical activities but also the fixed and variable costs of your day-to-day life. More than likely, clients’ expenses increase due to travel, education, entertainment, etc. But this is not always the case. One client household noticed their expenses going down when one parent left employment to reevaluate their career path and spend time with the children over the summer.
Plan ways to offset expenses.
When bringing in little to no income, you can increase the benefits of completing Roth conversions and realizing long-term gains in taxable accounts. Though deductions prior to TCJA were better, the current tax rules still have a few options.