I’ve recently realized that I should have taken significant time away from work prior to retiring instead of slogging straight through my career since graduating from university, 1999 to 2015, with hardly a letup.
Why have I come to this conclusion? What are the benefits to taking a gap year, or half-year, along the journey to financial independence? What is it about experiencing life away from the office that’s convinced me that I waited too long to take a significant reprieve — and why didn’t I do it? What does it do to the financial picture? And finally, what about the logistical challenges — how might you pull it off, if you’re so inclined?
If you’re interested in taking a non-working sabbatical within the context of FI/RE, this post is for you.
Taking The Year Off : Pros
Let’s say you’ve been working for ten years, the past five of which you’ve been aggressively saving in order to pursue your retire early plans. Your savings rate is an awesome 66.6%, putting your Time to FI at ten total years according to NetWorthify. (This assumes a 5% dividend-and-inflation adjusted return on your investment and a 4% withdrawal rate.)
Since you’ve already been saving for five, you estimate you have five remaining years to work before you’re completely financially independent and can pull the plug on formal employment forever.
Your income-producing career is running full steam.
What reasons could possibly be good enough to justify taking this particular time to take an extended period away from work? How can you justify prolonging the realization of your dream to achieve financial independence and travel to Quitz-ville?
Get ready for a wall of text containing thirteen.
- Most people who seek early retirement want desperately to know what life without work is like. But in the end, there’s really only one way to find out how you will personally experience it, and that’s by removing your job for a good long while. Think of it as an early-retirement trial-run.
- If your drive to quit work is rooted in a desire to pursue hobbies or chase an entrepreneurial dream full time, you will soon recognize whether or not they represent enough to engage and sustain you. Are you really as passionate about these interests as you thought? Can you play video games for sixty hours a week and derive enough fulfillment from that activity to power your entire life? If you want to write, are you actually sitting down to crank your novel out? Were you able to train a litter of kittens to tap dance onstage for your upcoming Broadway smash, Cats 2, the way you thought you would?
- Many people become concerned about potential changes in partner dynamics as a result of having so much more time available to spend with one another. This is your chance to check it out firsthand.
- It’ll be a long period to draw off of the stash you’ve built up, without the guarantee of any steady income. This will give you an idea of how you’ll feel about doing the same later on in life. Will you nervous about the money? Get a clue in advance. It’ll also help you understand whether or not your real spending levels are in line with your projections.
- Your mind will be clear to think about your life without the constant obligations and distractions that come along with work. You will begin to see the world differently once your ego has naturally decoupled from your job-identity. After several months away, you will be fully detoxified, meaning: The experience of work will seem almost dream-like: things that currently stress you out at your job (missed project deadline, whatever) will fade to the point where you no longer understand why they felt so important in the first place. And it’s practically impossible to get to this frame of mind while you are still working. Even four straight weeks of vacation’t won’t do it. You’re going to need a minimum of two months, and six or twelve are much, much better.
- You may have personal goals you have that can only be achieved at this particular point in your life that cannot wait for your final ‘early retirement’ date. Examples may include taking a long vacation with an older family member who is losing mobility, or spending most of a summer camping with your children before they hit their teen years and would never again agree to such a thing unless you heavily bribe them or kidnap Robin Thicke to come along for the ride.
- It can be a time to establish healthier personal habits that you can carry back into your working life. For example, if early retirement forums or CNN Money articles are to be believed, many people exercise more and lose weight once they’re no longer working. It makes sense: folks finally have time and energy to be active when they’re no longer obligated to sit and stare at pixels all day. You can work to maintain these habits even after returning to the office.
- You will finally be able to separate the part of you that is YOU from the part of you that is WORK. If you’re battling mild depression and five months into your leave you feel terrific, it’s likely that work was a major contributing factor to your illness. But if you still feel lousy, you can’t keep blaming the job — it’ll be time to consider other possibilities as the root cause.
- If you are one of those people who love work, your preferences will be validated after a while — you’ll miss it like crazy and will look forward to a return to doing whatever it is that you do. And you’ll be more energetic and inspired than ever.
- You will become re-acquainted with your inside voice that tells you what you want to do. Most people find this inspiring and confidence-boosting. If you are one of those people who view retirement as mostly an Escape from Work, it may be that listening to this internal voice transforms you into someone who wants to retire TO something. Having such a goal will energize you through your last several years of full time employment.
- Keep in mind the five years “until” you are done cited in the example above may not actually be five. It may turn into seven or eight due to factors out of your control: poor returns in the market, lower-than-expected raises or cutbacks in expected bonuses, unforeseen medical or other personal expenses, lifestyle creep. Additionally, when many people hit their initial retirement number, they immediately decide to voluntarily enroll in the One More Year program. (I did two of them myself.) Can you wait that many years? What impact will staying the course without taking a break have on you?
- If you’ve been seriously saving for 5 years already, you are probably firmly in the ‘delayed gratification’ mindset. You figure: I don’t need the time away from work. I’m tough, I’m stoic, everything is fine. And while that’s true, it’s good to occasionally have practice in the art of Giving Yourself What You Want. Treat yourself to a heaping pile of time.
- It’s a fairly normal thing to do. Really. About 4% of people take a sabbatical at some point during their lives. Very successful people advocate for it, too. Fashion designer Stefan Sagmeister, for example, believes in taking one out of seven years of life away from the grind, to help refresh and rejuvenate his career. Serial company CEO Tom Kalinske relaxed for six months after departing Mattel and joining SEGA just prior to the 16-bit console wars. Conan O’Brien sort of (involuntarily) took a year off between doing his late-night show on NBC and TBS. And so on. Bonus reading: a few quotes from people who took a mid-career break, if you’re interested.
Taking The Year Off : Cons
Ahhh, the negatives: There are some.
- Your employer may not hold your position for you. This means you may find yourself hunting for a new job at the end of it.
- If there happens to be a catastrophic event — a tremendous market crash and obscenely high unemployment — you may find yourself out of work even longer. Worse, this time it’ll be against your will, making it loads less fun.
- Your resume will have a hole in it, potentially making it somewhat more difficult to re-join the workforce in your field.
- If you are taking a sabbatical instead of simply quitting with the plan to get a new job at the end of your break, you will undoubtedly have to work with management and HR to get an agreement in place. This can take time and energy. In addition, it might actually be a stressful experience depending on your employer, their policies, and the specific personalities in play.
- Your Time-To-FI will increase. I’ll unpack that in the next section, since it’s the point that many people will be most concerned with.
Financial Implications of the Gap Year
So what does taking a full year off really do to the finances? Let’s continue the example above. Remember, you have a 10 year plan to FI based on a savings rate of 66% and expected returns of 5% — and you’re 5 years into it.
Let’s nail down some concrete numbers to help with the exercise. Again, for simplicity’s sake, we’re assuming 5% inflation-adjusted (linear) growth of investments and a 4% withdrawal rate target, which is generally considered to be safe.
Annually, you earn 100K, spend 33.3K, and save 66.6K. (Note: We’re ignoring taxes and sheltered accounts.)
If you were to continue this plan straight through 10 years, you’d end up with $835,000 which should give you 33.3K to spend annually (835,000 * .04 = 33.3K). This would take you just under 10 years — 9.8 to be exact.
But remember, we’re talking about taking a gap year, starting in Year 6.
At the end of Year 5, your net worth is 377K. You take the year off.
During Year 6, you spend the same amount as you did while working — 33.4K. You also earn 5% from your current asset sheet — about 18.6K.
At the end of year 6, your net worth is now 362K. You go back to work, earn the same salary, and continue to save two thirds of what you make.
When will you be able to retire? What effect did these shenanigans really have on your grander plans? Let’s plug the data into excel to generate an updated chart.
At the end of year 11, you’ll have 840K — just over the 835 required to fund a 100% complete and utter retirement from working forever, if you so choose.
Fact: Your updated plan will take you a full 11 years to get to FI instead of (instead of 9.8), but keep in mind you have one of those years entirely off.
Taking a year off in the middle of a 10-year FI plan doesn’t make you work much longer — you’ll have to put in about three extra months’ worth of duty to make up for the cost of getting a good blast of freedom a bit earlier than your original plan.
Mess around with the calculators at networthify.com to see what effect taking a year off might have on you.
So let’s say you are seriously interested in taking off for a good long while. How do you do it?
You have two top-level choices. Option 1 is to simply quit, with the understanding that you will look for alternate employment once your gap year is over.
Option 2 is to negotiate a leave.
Here are the basics:
- If you know of anyone else in the company that has taken a sabbatical, strike up a conversation with them. Learn the details of their approach and emulate it. This will allow you to follow a process that worked for at least one other person in the past.
- Always talk to your manager before Human Resources (HR). Make sure s/he is aware you are seeking significant time away. If s/he doesn’t have the answers you need, you can then ask for approval to involve other resources. Taking this approach will safeguard against surprising or embarrassing your manager. (They hate that!)
- Offer to train another company resource on the most critical aspects of your job so they can fill in while you are out. This may involve producing documentation or providing official sessions for learning.
- Expect the leave to be unpaid unless there is current company policy that designates a specific sabbatical benefit to which you are entitled.
- Most companies do not offer sabbaticals longer than a year. If you are asking for the full 12 months, be prepared to hear them counter with 6 — And know in advance whether or not you will accept this.
- Much of your chances of success depend on a) your value to the company and b) the overall culture. Your request could turn sour if they aren’t open to this sort of thing or do not believe you are an important resource.
- Be sure to have your FU money in hand. There is always an off-chance that asking for significant time off will irritate your employer (read: make them think you are checked out or possess a bad attitude). You never know where that might go. Based on their overall company practices, my guess is that asking for a sabbatical at Amazon, for example, would get your ass fired. Like, immediately.
- Be prepared for them to say no. Gauge your response in advance. Will you leave the company if your request is not granted? Or will you graciously return to your cube and continue working without abatement until you reach your FI crossover point?
- Have a good reason for the sabbatical. Don’t: Tell your employer that it’s your intent to lay on a hammock for six straight months. Do: State your requirement (e.g. I really need time away to accommodate my wife, she needs to visit family in France for an extended period and I want to support her. Or: I want to take an intensive 6-month course in becoming a pro-level scrivener. Etc.) and ask if your company can “work” with you to allow you to meet your personal needs.
- Make an effort to be positive during the discussions by talking about your personal connections and commitment to your job and your employer. Express hope that you’ll be able to reach an agreement that makes everyone happy and allows you to return to making strong contributions in the future.
Congratulations. If you’ve made it this far without quitting the post, you either have a naturally fine attention span or you have taken your ADHD medication. As a reward for your efforts, you will now be subjected to an incoherent brain dump. (You’re welcome.)
I’m pretty close to that 15 year example scenario I’d outlined above. Worked close to 16 years in my industry, the first three-plus of them a spender and the final 12-ish a hard-core saver.
In hindsight, this would have been the perfect time to take a gap year. I was going to leave that job no matter what. And when you absolutely need to leave a job, you don’t have to work through the song-and-dance required to negotiate a sabbatical. It simplifies everything: You quit, you don’t go back to work, and suddenly you have loads of time to decompress, to explore, whatever! When you want a job again, you start to look for one. It’s easy like Sunday morning.
And I wanted to. Truth is, the thought more than just crossed my mind. I knew I was burnt, crispy-style, like black bacon. I knew that taking time off would help me to more accurately picture my future life without any work whatsoever. I knew most of the pros listed in the opening sections of the post — that I’d detox from work, that things would look different after an extended period away, that I could afford it, and so on.
But I didn’t seriously explore it anyway. Nope! Instead I just launched myself back into the working world, and wound up taking a rotten position in a startup that probably took 12 parsecs off of my life.
Here are the five major reasons that I was able to pin down:
#5 Fear of Becoming Unemployable
I worried a lot about becoming obsolete if I took any time off from my career. It was a ridiculous concern, given how in-demand folks with my skill-set are — the software industry is hot.
But I couldn’t shake it. I thought no one will want to hire me with a full year off in my resume. (Wrong, for sure.) And I also thought: I will fall behind in the industry — I’ll miss out on new technologies, get behind the tech curve, become unemployable. (More bone-headed wrongness, of course. Smart people will actually turn the year off into an asset.)
#4 Fear of De-Railing FIRE Plans
Back then, I didn’t do the math on taking a year off the way I did in this post. I probably should have. Because instead I envisioned myself losing a massive amount of ground in my quest to become financially independent. As it turns out, I would have lost very little. I’m not sure why I didn’t see it. Probably willful blindness.
#3 Trouble envisioning my future life
I didn’t feel like I’d prepared enough for a lot of time off. Just as stupidly, I felt as though preparation was necessary. It wasn’t. I wish I had a good friend to push me off the fucking job-plane-train-and-automobile back then. I would have been absolutely fine.
Over the years of working, I’d become tougher, and took ridiculous cave-personish pride in my ability to put up with challenging conditions. I have to admit, when I thought about finally giving myself what I wanted (i.e. to take some serious time off), there was a very loud inside voice that told me I was a weakling, that a quote real adult endquote would just keep on trucking until completing the job of reaching FI.
#1 Fear of Not Wanting to Return to Work, Ever
Somewhat paradoxically, given my fears of not being able to find employment after the break, I was scared that I wouldn’t be able to force myself to go back.
In actuality, that last insecurity was my only legitimate concern. I mean, I saw myself taking the full year off and, at the end of twelve months of freedom, being unable to re-fasten the dog-collar, so to speak.
Turns out, this particular fear is precisely the reason I should have left. I’ll explain.
If you read this blog at all, you’re probably aware that I had a surprisingly difficult time actually quitting when the time came. Even after settling the finances and coming up with a comprehensive plan to leave my employer, I waffled. My mind was awash with fears and anxieties. I even felt, occasionally, guilty about leaving — there was a bit of Stockholm Syndrome mixed in with the madness.
I’ve come to believe that the reason I had such a hard time leaving was because I didn’t take a long break between starting full time employment and terminating it. Somehow I’d become partially institutionalized myself, despite making a continual effort to keep my eyes as wide-open as possible during the cubicle-laden journey to early retirement. I came to rely on my employer almost as much as they relied on me.
Because a decade and a half is a hell of a long time to be doing the same thing without a letup. During that interval, I’d become used to not thinking for myself. What am I going to be doing today? Don’t have to consider THAT question too carefully — I know I have to drive to the office, and I know after that I’ll be checking my email, and after that I’ll just be prioritizing Stuff That Must Be Done For The Company. By the end of the day, I’d be so tired that I deserved to do nothing, to watch reruns of Everybody Loves Hypnotoad, for example, instead of actively thinking about much of anything at all.
Taking a full year off mid-way through would have likely broken that spell and allowed me to avoid much of the tumultuous waffling that came at the end.
My zombie-like sleepwalking through the workplace routine of days and weeks and months would have been shattered.
My sense of individuality and autonomy? Restored.
And I would have felt much, much more confident about leaving my industry for good when the time eventually came.
Bottom Line AKA TL;DR
Not only is it completely possible to take a break from the grind, it’ll barely impact your FIRE plans.
For your consideration.
**Before I end this post, I want to point out that Doug Nordman over at The Military Guide to Early Retirement had similar thoughts when reviewing his own journey. Specifically, he lamented not slowing his career down earlier and taking alternate opportunities, blaming the so-called Fog of Work for his inability to change course and chart a better path to the end. Instead, he “bulldozed all the way through to 20 instead of transferring to the Reserves at about the 12-year point.”
So I submit that it’s our tendency as people to simply run full speed to the end of the race (regardless of how tired or injured we are), instead of slowing down and re-assessing as we go.
** Some bonus links if you’re seriously interested in taking a leave from your employer.
Mainstream Sabbatical Advice from Forbes.