Need a break? Maybe you can afford to take a year off from work.
- With some research and the right planning, you might be able to take a sabbatical year to travel or volunteer.
- You’ll need to pay for expenses involved with the adventure, and most people will need to plan for a drop in income.
- You’ll want to make sure your retirement savings and insurance coverage stay on track while you’re away.
Taking a year off from work to travel or volunteer can be a terrific experience. But, it can also be challenging financially. You’ll need to plan for the expenses as well as a likely dip in your income. Here are four things to keep in mind.
1. Find out what your employer offers
Not many employers have a formal policy. Only 3 percent of employers offer paid sabbatical or leave of absence programs, according to the Society for Human Resource Management's 2014 Employee Benefits report.
However, companies may evaluate leaves for reasons other than health and parenting on a case by case basis. In these instances, you want to negotiate the amount of time you can take and ensure you’ll be returning to the same or similar position.
You may also be asked to use up your vacation days as part of the leave, says Julie Gallion, Senior Human Resources Consultant at Nonprofit HR, a human resources consulting firm in Washington, D.C.
Check with your human resources department to find out your company’s policy around taking time off from work.
2. Prepare to pay for insurance coverage
You may need to plan to pay for insurance expenses while you are gone. The reason? Most companies that allow extended leaves will let you continue all of your insurance coverage — health, life and disability — as long as you still pay the amount that would normally be deducted from your paycheck for these benefits.
If you’re travelling, be sure to check with your health insurance provider to make sure you will be adequately covered on the road.
3. Don’t forget about retirement savings
It’s easy to lose sight of retirement savings during an extended break. Your automatic contributions from your paycheck will stop if your leave is unpaid or you’re between jobs.
But, even a small break in contributions can impact your total savings over time. Stay on track by contributing extra to your retirement account in the months leading up to your leave.
Or, if that’s not possible with your employer-sponsored account, consider contributing to or opening an IRA account to help fill the gap.
4. Make the most of your resources
- Consider options for saving on housing. If you’re staying for an extended time in one place, think about a house swap in which someone from another location stays in your house while you stay in theirs free of charge. Or, you may want to consider renting your home or apartment while you’re gone for added income.
- Work on the road. If your employer is flexible and you have access to technology, you may be able to arrange to do some work on your trip to keep earning at least part of your income. That way you won’t completely lose touch with work, making it easier to pick up where you left off when you return.
- Clear your debts. Be sure all credit card balances are paid off before you leave. You don’t want to be trying to make payments at a time when your income is suspended.
Are you ready to take a year off work?
Your Ameriprise financial advisor can help you plan for your break while helping you keep your retirement plan and other financial goals on track.