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If you’ve worked for a company long enough, you may be entitled to a sabbatical. A sabbatical is a period of time in which your company grants you leave but you are still technically employed by that company. Sabbatical terms can vary company to company and may include the length of sabbatical, whether it’s paid or unpaid, and whether or not your benefits are frozen during that time. If you are one of the lucky ones, your sabbatical is paid, long, and your company continues to fuel your pension/401k, or any other benefits you may be enjoying. However, these types of cushy sabbaticals are not as common as we hope. Often the opportunity for a sabbatical goes unpaid. Even though your sabbatical is unpaid, it may still be a good opportunity. However, before you take an extended unpaid leave, you should think about how much money you will need for that period of time. Your savings will depend on mainly two things:
The length of the sabbatical will vary between companies. Some may offer a full year off while others may only offer a few weeks. If you plan on being away from work for only a few short weeks or a month of two, simply having saved enough to cover your expenses for that time should be sufficient. If you plan on being out of pocket for more than a couple of months, maybe you’ll want to save up more. Investing in a high-yield CD account is also a great way to hold on to extra funds you don’t need right now. It’s likely that during your time off, you’ll engage in some activities or travel that isn’t part of your usual budget. If saving isn’t your forte, try one of our saving challenges or budgeting tips to help you get started.
As I mentioned in the first point, a longer sabbatical will likely be more expensive to manage because during that time there will be opportunity to engage in different activities or maybe travel. In this case, you should set aside not just enough to cover your monthly expenses, but also budget at least +10-15% on top of that to cover additional expenditures. After all, it would be quite difficult to just sit home all day for that long of a period-you will likely want to try out new hobbies or passions, or plan a few trips. Alternatively, your sabbatical terms may include a mandatory program or volunteer work. For example, companies may grant you sabbatical, but only for specific reasons such as engaging in volunteer work or some form of teaching. In this case the company may pay those expenses but be sure to double check your terms. If your time off is yours to plan, check out some of these great ideas by Remote Work.
If you company’s sabbatical policy puts a freeze on all of your benefits, you may be without insurance for that period of time. Check with your HR department to make sure you’re covered. If you are not covered during this time, your HR Manager should be able to provide you with more information on paying for your company health insurance via COBRA.
It’s no surprise that if you are not working during this period of time, you won’t be brining in any income. To help mitigate the income loss through your full time job, consider finding other sources. Your company may have a policy in place that forbids you from securing other paid work during the sabbatical. However, renting out your own property could be a good source of income especially if you don’t plan on being home.
A month of two off won’t do much damage to your retirement portfolio. However, a year off can cost you thousands retirement funds in the long run. Remember, you are not just missing out on the contributions, but you are also forgoing any matched funds by your company, and the compounded growth generated from those contributions. Try contributing extra funds to your 401k or IRA account a few months before leaving on sabbatical to recuperate some or all of what you lose during the break.
A sabbatical can be a wonderful time to learn, grow, and frankly just relax. Sabbaticals help decrease burn out, and allow you to have time to pursue personal passions and goals. Use this time wisely so when you go back to work, you’re ready to contribute something new. Most companies offer this time for these exact reasons. These opportunities don’t come around often so plan adequately how you want to spend your time before taking the leave.