Should You Consider a Sabbatical?
For most people with above average incomes and the willingness to save and invest, becoming financially independent and having the ability to retire early (FIRE) is not only achievable, it is the inevitable result of “simple math.” For me and many others in the FIRE community, this realization was the catalyst to pursue this radically different way of life.
Before going all in on FIRE, there is an important question to ask yourself. Just because you can achieve FIRE, should that be the goal?
Today I bring a different perspective from one of my fellow Abundo Wealth financial planners, Riki Cooke. Instead of delaying gratification until retirement, even an early retirement, he selected an alternative path of taking sabbaticals, or mini-retirements, much earlier in his financial journey.
He answers my questions about why he chose this path, why you may want to consider it as well, and how to do it. Take it away Riki….
Let’s start with a definition. How do you differentiate a sabbatical from a vacation?
If you polled people who just took a self-identified vacation and people who just took a self-identified sabbatical, you would find two major differences.
The first is time. The average vacation is measured in days or maybe at most a couple of weeks if it’s the serious “14-hour flight to a remote destination” type of vacation. Someone taking a vacation has a sense it is short and finite. It’s a bit of a temporary escape, but work looms next Monday.
A sabbatical is, at a bare minimum, a full month off of work, but most people would think of it more in 3-, 6-, or 12-month terms. It’s a legitimate break—long enough to forget your work passwords.
The second is in what lies after the break. With a vacation, you’re always playing by company rules. You have X days of vacation—it’s part of the deal of working there—so your colleagues pick up your slack and your job is guaranteed when you come back (whether you dread that fact or not!).
A handful of companies might offer 1-3 month sabbaticals of this type to tenured employees, but the majority do not. That means taking a sabbatical is, in many cases, akin to quitting your job or at least placing your specific role at risk.
Where do you see sabbaticals fitting into the FIRE landscape?
The general framework behind most FIRE plans is to work until a particular age, usually between 45-60, at which point assets have accumulated that will fully support retirement. We’ll call that option “work-then-not-work.” Pretty simple.
A possible downside to that plan is that you don’t get to experience time freedom at a young age. All of your purchased time freedom is concentrated in middle or late-middle age.
With changing responsibilities and health over time, there may be experiences open to you at 30 that are more challenging at 55. That reality is usually a big part of the motivation to FIRE instead of working until 70.
Similarly, you have to work for a long uninterrupted stretch of time—say 20-30 years—in a job that may or may not be your true passion. We hear a lot about burnout and lack of purpose from clients, and many folks in the FIRE community refer to this period as “the boring middle.” It’s hard to derive purpose and connections to values from watching the spreadsheet tick up toward a target number over a few decades.
Instead of back-loading your time freedom, sabbaticals offer an opportunity to experience time freedom at regular intervals beginning at a younger age. Here’s a quick way to decide if this sounds appealing to you. Which option do you prefer?
- Work for 25 years, then retire 5 years sooner.
- Take a full year off every 5 years for 30 years.
If the second option piques your curiosity, then it’s time to at least open the door to the role of sabbaticals in your FIRE plan!
If graphic form, here is a way to visualize retiring five years earlier vs. other alternatives to gain control of that five years of your time sooner.
Like FIRE, I assume the biggest challenge with taking sabbaticals is the mindset shift required to get started. What first inspired you and made you believe it was possible?
I like to think of the sabbatical I took in 2019 as the first 15-minute break of my career. Rather than a walk around the building, I took a trip around the world!
My wife and I were at a point in our lives where we needed to reprioritize what was most important to us, but we didn’t have the time or energy to do that while entrenched in the hustle and bustle of traditional work culture. The time off was invaluable for me personally and professionally.
I wish I could say it was a grand story, where at the top of a remote mountain hike I realized new things about the world and my place in it, but the truth is that I was on the couch during a “sick” day that was more of a mental health day than anything else. I was feeling particularly unsatisfied with work and my wife said, “why don’t we just quit our jobs and travel?”
It was like a light bulb went off. The idea kind of built up quickly and after a bit of simple planning (which I’ll get into later), we were off and running. It’s probably better that way; with too much time to think about it, we might have let doubt creep in.
Describe your first sabbatical? How long was it? Where did you go? What did you do?
We wanted to see the world and experience new things. A stay-at-home sabbatical or taking time off to take courses to learn a new skill, while awesome sabbatical options, just didn’t appeal to our desire for adventure.
In total, we took about a year off of work and traveled to 23 countries on 4 continents. We chose a mix of places we wanted to experience together—London is our favorite place in the world but we hadn’t gone together before this trip—and places where we could stretch the dollar a bit more.
The image below shows a bit our planning process. The paper on the left is the original literal “back of the napkin” sketch that started everything. This progressed to the color coded calendars.
We balanced out notoriously expensive places in Europe with longer stays in less popular cities (Porto instead of Lisbon, for example) and 6 weeks in Southeast Asia. Some of those more affordable spots became new favorites and it was eye-opening to see totally different parts of the world.
What were the biggest benefits of this sabbatical? Do you have any regrets?
I can’t say enough about how this time changed our lives. I’m living the benefits right now, having re-evaluated my career priorities and moved to a new company (Abundo Wealth) where I found a team and mission that totally align to my purpose and values.
It’s night and day different from doing financial sales. The experience also taught me a very deep lesson about what it means to have “enough” and that time is too often undervalued relative to money.
Regrets, as you might expect, are very few. I have to strain to think of one, so I’ll just leave it there and say I truly don’t have any.
If there’s one thing I would do a little differently next time, I would slow down a bit. It takes longer than you think to decompress from always-on work mode, so I wouldn’t have packed so much activity into the early part of the journey.
How did your background as a financial planner help (or hinder) you?
Since one of the most stressful parts about not working is not earning income, I found it generally helpful to have professional skills both with near-term budgeting and long-term retirement planning.
Creating a budget is never an exact science, but I did make reasonably detailed plans about how much each part of the sabbatical was going to cost and selected locations and how long we stayed there based on the expected cost of living.
Related: Budgeting or Expense Tracking — How Much is Enough?
London is quite a bit more expensive per day than Ho Chi Minh City, for example. I also included a significant buffer of 3-6 months of expenses to bridge the gap from the end of the sabbatical to finding a new job.
We also ran retirement projections before going on sabbatical, which helped provide a great deal of comfort that we could afford it. A full year without income and saving is costly, so you really have to be comfortable with the idea of “enough.”
In that respect, achieving “Coast FIRE” before your sabbatical helps a great deal with knowing things will be okay and accepting the opportunity cost. By Coast FIRE, I mean you’ve reached a point where you’ve theoretically saved all you need to save for retirement as long as you can pay your bills with future work income. That makes career shifting (and especially downshifting) a lot easier.
The only downside to being a financial planner taking a sabbatical is that I worried what people might think, since it isn’t exactly a money-maximizing approach, but it is a life-maximizing one! But I found my colleagues were unbelievably supportive, and many even said they were a bit envious we were able to do it.
What financial planning opportunities do you think about when planning a sabbatical for yourself or clients?
Planning opportunities for a sabbatical are similar to any other expected low-income year. Depending on how much work income you already earned, you might have a great opportunity to execute Roth conversions or capture taxable account gains in the 0% bracket. If you’re on an ACA healthcare plan, though, just make sure you know how your premiums will be impacted.
Related: Maximize ACA Subsidies and Minimize Health Insurance Costs
Depending on your student loan repayment plan, you might also qualify for a $0 payment (or close to it) if your income is low enough. That frees up a bit of the budget for fun stuff during your sabbatical.
I also think it’s a great time to get your “home base” in place. You’re likely coming back to enough uncertainty with the job situation that having more certainty in other parts of your life is helpful.
Having a home that you own, either with an affordable mortgage payment or even paid off, could make your situation quite a bit less stressful than coming home and scrambling to find a place to live.
Related: What Are the Financial Advantages of Home Ownership?
What did you personally do (and how do you advise clients) to plan for health insurance while on sabbatical?
Generally speaking, the ACA (Affordable Care Act) is going to be your friend here. Especially for healthy young people taking a sabbatical, you might end up spending as low as $0 on healthcare during your time off.
One interesting wrinkle in the ACA is that you need to meet certain minimum income requirements to qualify for premium tax credits and avoid Medicaid. That might be a good reason to start the time off in, say, March, after you’ve earned just enough income to qualify for the tax credits. But there are other ways to get your income up, like Roth conversions, so you have many options there.
If you have more significant healthcare needs and you have officially left your work, then it might be worth exploring the tradeoff between ACA and COBRA coverage. COBRA tends to be expensive, however, so it’s only applicable in certain situations.
Related: Retirement Healthcare — What Are Your Options?
And for my fellow world travelers, there’s of course another wrinkle. The ACA is generally bad insurance for travelers.
So you’ll want to look into the cost of travel health insurance, which many digital nomads may be familiar with. These policies, offered by companies like Genki and SafetyWing, cover you for short periods when traveling to other countries, which might end up being extremely beneficial if you get sick overseas.
What are the biggest challenges and benefits when planning a sabbatical with a spouse or partner?
Traveling alone certainly has its appeal, but I think it’s awesome to have a partner for the journey. If you’re doing the travel version of a sabbatical, I would imagine it would be pretty tough for one partner to continue working while the other is gone for months at a time.
It’s also just such a formative life experience where real, honest-to-goodness life lessons are learned. Having those experiences and learning those lessons together is a seriously great relationship builder.
But if you’re doing more of a stay-at-home style sabbatical, then it probably matters a little less to have both partners doing it together. You’re still going to see a lot of each other.
That might be especially useful if one partner is reluctant to spend time away from work, which is very possible since sabbaticals are still a bit unusual in our society. It certainly can’t hurt to have one income coming in and maybe even family health insurance!
You and your wife don’t have kids, but when advising clients who do, how does this impact planning?
Having kids would have made our specific version of a sabbatical—traveling the globe—considerably harder. But that’s only one variation of a sabbatical.
Most parents consistently say they wish they could spend more time with their kids; they know there’s a shorter-than-it-seems window to really spend that quality time together. Traditional FIRE plans often miss this window entirely, because FIRE happens around the time kids are out of college.
A sabbatical can be used to stay at home and pursue local passions. Get involved with the kids’ activities, volunteer in the community, reconnect with family and friends.
It’s probably a bit more costly to take a sabbatical with kids in the picture, but when you subtract travel expenses, I’m not so sure. It likely evens out for many people, especially those who are generally more frugal.
It’s also potentially a great time to take a fun family trip that would be harder to take while working. This doesn’t have to be crazy expensive, either. What about a multi-week road trip to visit national parks or baseball stadiums? There are lots of cool things you can do when you have the time.
Thanks to Riki and My $.02
I hope you enjoyed reading Riki’s story as much as I enjoyed putting this post together. There is a lot here that challenged my thinking.
On one hand, FIRE represents a radical departure from the standard career and life path, working 40+ hour weeks with just a few precious weeks vacation each year until traditional retirement at age 65-70, that most Americans blindly follow.
On the other hand, FIRE still requires delaying gratification for at least a decade. Then after working so hard to achieve this goal, it can be hard to flip a switch from super-saver to spender.
Many people don’t end up retiring. Worse, some people do and can’t enjoy it because they were so focused on saving, they never learned to spend joyfully. A sabbatical requires a radically different, and arguably more healthy, approach to money.
Personally, I never considered a sabbatical. However, I loved Riki’s graphic that represents different ways of thinking about buying back years of your time.
My personal approach was to cut back to very limited part-time work after we achieved financial independence. I wish I would have appreciated these options and downshifted less but sooner.
Finally, Riki’s insights on using your money to create time in the appropriate seasons of life hit the right note for me. I’ll be forever grateful for the month long roadtrip my family took coming out of the pandemic and more recently having time to support my dad and brother through my mom’s end of life care and the recent summer road trip my dad and I took together.
Even if a sabbatical is not in your plans, there is a lot of wisdom in the idea of making time to do what is important at the time it makes sense to do it. Tomorrow is never guaranteed!
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[Chris Mamula used principles of traditional retirement planning, combined with creative lifestyle design, to retire from a career as a physical therapist at age 41. After poor experiences with the financial industry early in his professional life, he educated himself on investing and tax planning. After achieving financial independence, Chris began writing about wealth building, DIY investing, financial planning, early retirement, and lifestyle design at Can I Retire Yet? He is also the primary author of the book Choose FI: Your Blueprint to Financial Independence. Chris also does financial planning with individuals and couples at Abundo Wealth, a low-cost, advice-only financial planning firm with the mission of making quality financial advice available to populations for whom it was previously inaccessible. Chris has been featured on MarketWatch, Morningstar, U.S. News & World Report, and Business Insider. He has spoken at events including the Bogleheads and the American Institute of Certified Public Accountants annual conferences. Blog inquiries can be sent to chris@caniretireyet.com. Financial planning inquiries can be sent to chris@abundowealth.com]
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