Publications
Partners
Dreaming of taking a year off work to go cycling across Europe? Or completing that course in interior design you’ve been putting off?
More and more people are opting for a mid-career ‘gap year’ to pursue other interests or reskill themselves to start afresh.
But having a bold adventure comes with some financial risks and it is crucial to put proper financial plans in place before taking time out from the rat race.
Bev van Nijkerk, segment specialist for Sanlam Young Professional Market, says the first thing to do is consult your financial planner.
“They can advise you on how your sabbatical will affect your current and future financial life. For instance, what should be done about your insurance policies and savings plans if you stop earning an income for a while?”
Van Nijkerk says insurance providers may have different rules and conditions for products. “Some providers will give you a premium ‘holiday’ on a retirement annuity for a pre-arranged period.
Whereas this will generally not apply to life, disability and dread disease products, you may also be given some leeway with regards to your sickness benefit. It is worth finding out how your provider can assist you while you are not earning an income.”
She says South African professionals are increasingly taking mid-career breaks to gain some experience overseas for a while, and women often leave the workplace for a year after having a baby.
Other employees take time off to further their education. “We are seeing some professionals reskilling themselves in fields very far removed from their original vocations. We know of one man who recently left a decades-long legal career to qualify as a horticulturist.”
Taking a sabbatical has also become increasingly popular in the 50- to 60-year age group, with people nearing compulsory retirement age reskilling themselves in order to pursue a second career.
“Very few people are financially able to stop working at the traditional retirement age of 60 or 65, and many then enter the second phase of their working lives, which may well continue for a further 25 years.”
Van Nijkerk warns against taking a premium break on savings products at this age. “At a younger age, you have a better chance of recovering from financial loss, but in your 50s or 60s, not keeping up with your premiums could be hugely damaging in terms of the compounding factor on your savings.”
Other factors to consider before taking that gap year include:
• Any debt you may have – it is best to pay this off first
• How you will cover your living expenses – either by using savings or an emergency fund
• Whether or not you will have any additional income, such as from a spouse or a part-time job
• How you will pay for unforeseen expenses or emergencies.
More and more people are opting for a mid-career ‘gap year’ to pursue other interests or reskill themselves to start afresh.
But having a bold adventure comes with some financial risks and it is crucial to put proper financial plans in place before taking time out from the rat race.
Bev van Nijkerk, segment specialist for Sanlam Young Professional Market, says the first thing to do is consult your financial planner.
“They can advise you on how your sabbatical will affect your current and future financial life. For instance, what should be done about your insurance policies and savings plans if you stop earning an income for a while?”
Van Nijkerk says insurance providers may have different rules and conditions for products. “Some providers will give you a premium ‘holiday’ on a retirement annuity for a pre-arranged period.
Whereas this will generally not apply to life, disability and dread disease products, you may also be given some leeway with regards to your sickness benefit. It is worth finding out how your provider can assist you while you are not earning an income.”
She says South African professionals are increasingly taking mid-career breaks to gain some experience overseas for a while, and women often leave the workplace for a year after having a baby.
Other employees take time off to further their education. “We are seeing some professionals reskilling themselves in fields very far removed from their original vocations. We know of one man who recently left a decades-long legal career to qualify as a horticulturist.”
Taking a sabbatical has also become increasingly popular in the 50- to 60-year age group, with people nearing compulsory retirement age reskilling themselves in order to pursue a second career.
“Very few people are financially able to stop working at the traditional retirement age of 60 or 65, and many then enter the second phase of their working lives, which may well continue for a further 25 years.”
Van Nijkerk warns against taking a premium break on savings products at this age. “At a younger age, you have a better chance of recovering from financial loss, but in your 50s or 60s, not keeping up with your premiums could be hugely damaging in terms of the compounding factor on your savings.”
Other factors to consider before taking that gap year include:
• Any debt you may have – it is best to pay this off first
• How you will cover your living expenses – either by using savings or an emergency fund
• Whether or not you will have any additional income, such as from a spouse or a part-time job
• How you will pay for unforeseen expenses or emergencies.
