Griffin Kelly at Daily Upside wrote about micro-retirements, the growing practice of younger professionals taking extended breaks from the career ladder, and asked advisers about the risks. Health insurance and a plan for re-entering the workforce top the list, and a break longer than three months can take years to plan for properly.
My contribution was about compounding. Micro-retirements can be one of the smarter things a young person does, or one of the most expensive. The difference is whether retirement contributions stop while the person is out. A dollar not invested in your 30s is the most expensive dollar you will ever skip, because it had 30 years of growth ahead of it. Skipping a year of contributions at 32 costs far more at 65 than skipping a year at 55.
That does not mean the break is a bad idea. Burnout has its own costs, and someone who comes back to work refreshed and stays in the workforce longer may end up ahead. The planning question is how to fund the break from cash saved specifically for it, while keeping the retirement savings intact and, ideally, continuing IRA contributions from the sabbatical fund.
Take the break if you need it. Just do not let the retirement account take one too.
Read the full article at Daily Upside →
