Not so long ago the phrase ‘gap year’ was pretty much exclusively associated with teenagers and people in their early 20s, usually taking time out to go travelling before university or before starting out on their career.
More recently, though, a new type of gap year has emerged: the midlife gap year. Figures show that a steadily growing number of people in their 40s, 50s and 60s are taking a career break and heading off for that trip of a lifetime – if not for a full year, certainly for an extended period far beyond the habitual fortnight’s annual holiday.
In many ways, this makes a lot of sense. Once you reach middle age (and your kids are forging their own independent lives), you are more likely to be financially secure, and you will certainly be more aware of your own aspirations, and more confident in striking out to achieve them.
Also, as we are all retiring later than our parents’ generation did, the thought of leaving that long-dreamt-of trip until your late 60s or even early 70s may not appeal, both because you don’t want to wait that long, and because you want to do it while you are still in good enough health to make the most of it.
There are many motivations for taking a midlife gap year, beyond the obvious one of wanting to embark on that trip of a lifetime. Some people will feel they need a break after 30 or 40 years of relentless hard work; others want to learn a new skill to keep their brains engaged; still others decide they want to put something back by volunteering. Or it may be a simple case of needing to de-stress or reconnect with friends after a long period focussing on bringing up the children.
Whatever the reason for considering a midlife gap year, it is not something which should be undertaken on a whim. There are significant financial implications to consider, and planning for a career break is best done over a long period of time – perhaps years.
The fact is that the financial impact of such a sabbatical is more than the direct cost of whatever you may be considering actually doing with your time off. As well as that, most people will still face the majority of their normal, ongoing costs, such as a mortgage, insurances and so on. And, of course, you will not be earning while you are away from work, nor will you be able to save or contribute towards your pension.
Then there is the consideration that if you quit your job, you may not be able to find another at the same level when you get back, at the very least not immediately. This is why many who decide to take a midlife gap year (or three/six months) discuss it with their employers first.
Many employers are keen not to lose senior, experienced staff, and are increasingly willing to be flexible when it comes to accommodating sabbatical requests. And with remote working now much more commonplace, the concept of combining a midlife gap year with some form of ‘digital nomad’ existence to keep a connection with a job is certainly feasible.
But whatever the employment circumstances, taking time out of employment and spending more on fulfilling your dreams will require hard cash. For most, this will involve raiding existing savings, taking money out of a pension, or releasing equity on the family home.
Each of these has long-term implications. Cashing in savings needs to be done at an opportune time; if it has to be done when the market is low, both the amount available and the residue left for the future will be lower. A little advance planning can enable that to happen at the optimum moment.
When it comes to accessing money tied up in a pension, the same consideration applies. At the moment anyone can withdraw a tax-free lump sum from their pension pot once they reach the age of 55; this rises to 57 in 2028. Provided you don’t withdraw more than 25% of the pot, you can resume contributions on your return without triggering the stringent £10,000 a year limit. But be aware that taking cash now could have a significant effect on your eventual retirement income.
For most people, alongside their pension, their home is their biggest reservoir of wealth. Much has been written about equity release, although doing this at a relatively young age can lead to large, accumulated debts later in life, so may not be the best solution.
Downsizing is in many people’s retirement plans. But it is not necessary to wait until you actually retire to do this. Once the kids have left home, many continue to live in homes which are far too big for their needs. Downsizing earlier has the twin advantages of releasing cash for such things as the midlife gap year, and reducing ongoing living costs as you approach retirement, not least because any residual mortgage will usually be paid off.
Finally, don’t underestimate the emotional effect that taking a midlife gap year could have. Many return with changed priorities, often pushing their career ambitions down the list in favour of wellbeing, family and work/life balance. That is great, but it could have a financial effect which you need to consider.
Such a sabbatical often shifts people’s attitude to retirement as well, in a positive way. A midlife gap year can be a great rehearsal for the next stage in your life.
After all of the upheavals of recent years, especially the Covid pandemic, many of us are re-assessing our lives and what is important to us. Taking time out in middle age to ensure you really are focussed on what matters can be a great way of building a platform for later life. Just be aware that doing it successfully requires considerable planning.