Let me cut to the chase: I’m giving you permission to plan a sabbatical. Do I have your attention?

Traditionally, we have divided our lifespans into three unequal stages: growing up, working, and retiring. Of the three, a 30- or 40-year working career usually dwarfs the other two stages. In less than a generation, however, we have seen our retirement stage catching up to our working stage. For some of us, we may live (hopefully in good health and security) another 35+ years beyond age 65. That’s a retirement as long as our working careers.

The media endlessly bemoans how financially unprepared Americans are for retirement. And in general, that’s true. But I don’t think we should make ourselves wrong if we’ve saved what we can. (We already have mothers for that. Stop it.) We may have saved enough for a 10- or 20-year retirement in the style to which we’ve become accustomed while working. And we are prepared to create a part-time “next act” (i.e., consultancy) that will allow us to ease into retirement. (See my earlier post, “Retirement Is Dead! Long Live Reinvention.”)

Rather than wish the problem away, let’s reframe it productively. If you’ve funded a 20-year retirement at your current level of spending, determine how much you are actually able to spend monthly–accounting for inflation–and still live comfortably to 100. You’re going to need a model to do this. (I use a solution from IncomeLab with my members. I receive no compensation for mentioning this solution. Financial planners use many different software models.)

If this number is acceptable to you, you can plan on it for your retirement. While your high-spending days might be numbered, at least now you know where you stand. Carry on.

If this number is unacceptable to you, you can do one (or both) of two things: save more and/or retire later.

Let’s talk about the mechanics of retiring later. How fair is it that you will continue to grind and be in your 70s by the time you get to enjoy the fruits of your labors? It’s not. Thus, I propose you head into the final stretch, and it is a stretch, with one or two well-planned sabbaticals.

I’ve played around with enough financial models to generalize with some confidence that nothing improves the plan outcome so much as extending your employment another year or two. Why? Because you avoid spending down your assets, which in turn provides another year of compounded growth. (Recall that the market is up more than it is down, and the odds favor you.) So, if you intend to extend your employment by three to five years–to age 70–I recommend you reward yourself and plan a month off at age 55 and another at 62.

I give you permission to trade a half-year of retirement savings (about $15,000) for each additional year of work. Take some time and do something amazing. Maybe you can rent a castle in Italy for a week or two and have the family join you there. Or maybe you’ll want all that time to yourself; after all, it’s your sabbatical.

What’s more, if you remain employed, you’re more likely to have the ability to delay claiming your Social Security benefit. Waiting guarantees you an additional 8% per year until age 70.

Here’s the fact: It’s hard to work continuously for 40 to 45 years without growing cranky. You need to look forward to something. You need to feel refreshed. And you need to check off some bucket list items sooner rather than later. Hiking the Inca Trail at Machu Picchu is a heckuva lot easier in your 50s than in your 70s, even if you regularly invest in your health.

In 2019, when I first agreed to sell my practice to my former firm, the Hubs and I took an 18-day vacation (our first). I swear, in my adult life, I’d never been off work for 18 days. I wasn’t even sure I knew how to do it. It was glorious, and I felt a little foolish for not figuring out how to make it happen sooner. We returned refreshed, with stories and photos, and my clients benefitted from my improved energy. Better late than never; and we’ve been making it a point to do bucket list travel out of cashflow (which feels a lot better than doing it out of savings) until our traveling days are done.

Of course, nothing is guaranteed, certainly not our ability to work until 70. If you are underfunded for retirement, you should be carrying personal disability income insurance above and beyond your corporate benefit. If you receive a corporate 401(k) match, you should continue to contribute enough to get some of that. And I recommend you provide management with lots of warning that you intend to take an extended holiday. This may include spending time documenting your role and asking others to shadow your job. But most employers realize it’s in their best interest to address the health and well-being of their employees, especially if the employee has their own solution.

If you work for the kind of employer where a sabbatical is not possible, consider taking a break between employments as you seek a place that is more accommodating of your talents. Just sayin’.

I recommend you work a little longer to ensure a well-funded retirement. And I truly recommend you take a breath (i.e., sabbatical) before the last big push of your work career. This is all in preparation for strengthening your retirement plan in the long run. Don’t wait too long to walk on cobblestones or climb a mountain. Do it while your knees and ankles are up to the task.

As for me, while you’re reading this, the Hubs and I are boarding the Rocky Mountaineer headed east from Vancouver to Banff, where we’ll hike Lake Louise before returning home. (Recall that I promised Hurricane Jackie I’d stay on the continent.) #NotYoungNotDone #MoreRunwayThanYouThink #OnlyTooLateIfYouDontStartNow #WeRescueOurselves

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Copyright © Madrina Molly, LLC 2024. All rights reserved.

The information contained herein and shared by Madrina Molly™ constitutes financial education and not investment or financial advice

Sherry Finkel Murphy, CFP®, RICP®, ChFC®, is the Founder and CEO of Madrina Molly, LLC.

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