Planning a 5+ year sabbatical

ent_moot

Hello,

I have a one-year-old daughter, and my wife and I are planning to move to the countryside when my daughter begins secondary school at age 11. This will be in 10 years from now (obviously ). At the same time, I'm hoping to begin a sabbatical that I hope will last at least 5 years.

Current situation:

Debts:
Mortgage of 155k
No other debts

Assets:
House: ~400k
Car: 7k
Pension pot: ~40k
Other savings: ~20k

Income (before tax): 95k
Age: 32


Current Plan:

Pension:
Currently (thanks to advice on this forum) I am turbo-charging my pension with a 25% salary sacrifice. Including my employer contribution, this equates to £2600 paid into my pension per month. Assuming I continue this rate for 6 years, followed by 4 years of employer contributions only then pay nothing into my pot until age 55, I should have a pot of £450k (this assumes a 3% interest per year).

So, basically, that means we're sorted after age 55.

Mortgage:
Currently, I overpay £600 per month, and at this rate my mortgage will be completely paid in 10 years time.

Savings:
This is the bit where I need advice. After tax and salary sacrifice, I earn 4k per month. After mortgage and overpayments, £2650. After everything else, I think we can save about £1000 per month. Assuming modest pay rises, and the fact that I will stop with the pension overkill after 6 years, and assuming a 0% interest rate, we should have saved £230k over the 10 years.

However, when moving to the countryside, I would like to buy a house for ~100k more than our current house, as I would like a house big enough for my mum to move in when she's too old to look after herself, and ideally a few acres of land.

That leaves 130k to live on for the sabbatical. I think we can live comfortably on 25k per year, even after inflation, as this is 30% more than we live on now plus cost of living should be lower when not working.

So, that gives 5 years.

However, if I invest wisely hopefully we can have considerably more than £130k left. Also, my wife is keen to go back to work when she can, which could make the plans dramatically more comfortable.


Beyond the sabbatical:

I'll be age 43 when it starts. Add 5 years, that's 48 by the end. So, there's still a gap of 7 years to cover before the pension kicks in at age 55.

I'm not too worried about this because I will hopefully find a fun way to make money during my 5 year sabbatical, and even if I don't, I can probably return to work for a 2-3 years and save enough to cover the remainder.


Philosophy:


Moving at the point when our daughter is starting secondary school makes sense because it minimizes the disruption for her: she will likely need to make new friends anyway. However, maybe we should just give it a couple more years to be a lot more comfortable financially after the move?

I changed schools a lot as a child because my parents were forever moving around. I think it contributed to me utterly detesting school, and so I would prefer not to cause unnecessary disruption for our daughter.

That being said, I lived in some exotic places and had an absolutely fantastical childhood. Perhaps I'm placing too much weight on timing this according to our daughter's age?

There's also the bigger question of whether a sabbatical is the way to go. It's something I've dreamed about pretty much since starting work. I crave having lots of time to work on my own projects (e.g. writing a novel) with no financial pressure for them to succeed, and plenty of time outdoors in a place of natural beauty with my family.

I suppose that if I kept working, we could be very wealthy indeed, able to afford a £1 million home and plenty of epic holidays. But this seems like a poor prize compared to years of total freedom. And who knows, given 5 years to work on my own projects, one of them may succeed.


Questions:

Anyway, getting back on topic, I have a few questions:

1) Any obvious things that I'm missing in my plan?

2) How would you advise I invest our savings? I was thinking that my wife and I each open ISAs with nutmeg and shove the savings in there..

3) Any strategies to STOP thinking about the long term? I obsess over too much and I think it makes me enjoy the present less. I'm hoping that once I have a plan, then it'll just be a case of sticking too it and not thinking about it.

kidmugsy

In your shoes I might want to increase pension contributions to avoid 40% income tax and avoid losing child benefit. Use this trick while it's available: neither it nor salary sacrifice may last for more than a few years longer. You'd need to use your carry-forward annual allowance. You'd probably need to divert your mortgage overpayment money too. When you've used up all your carry forward, change policy.

A five year sabbatical out of the labour market sounds awfully ambitious to me. I've known someone take 6 months and enjoy it enormously, but 5 years? Especially 5 years when you won't want to travel because you want stability in your daughter's secondary schooling. Could you settle for the sabbatical after your daughter finished secondary school?

As for avoiding obsessing about the long term: remind yourself that all your plans may turn on the use of tax shelters, which will wax and wane in a way completely out of your control. Or that your plans may change because, say, a second child comes along. Or because you or your spouse may suddenly or slowly find your ambitions changing.

ColdIron

You might want to check that you will have enough qualifying years for the State Pension by the time you want to retire

ianthy

With my OH, we took a 3 years sabbatical and really enjoyed it. A few things I would add to the great advice you have received:
1. You can't plan enough around costs - understanding how you spend money and how much contingency you have to cover unplanned issues that may arise.
2. Keepings skills up to date or learning new skills. We returned from career break to find that contract rates have collapsed in my area - Oil and Gas. Thankfully I had plenty of funds in my limited co and decided to retire early and OH returned to his job in civil service.

Apodemus

I guess it depends on your line of work, but I would caution against pinning too much hope on returning to the same income level after five years out.

However, against that, once you have moved out, you will probably not want to move back anyway and will find something sufficient to maintain your lifestyle locally.

kidmugsy

How about this? When your daughter finishes primary school, you all wander around the world for a year, before returning so that she can begin secondary school. She'll have to make new friends at school, but as you said she'd have to do that anyway.

Then you can let your year off influence your attitude for the future.

You could even spend a bob or two on having her coached so that she can speak, say, Spanish or French when she leaves primary school. Then if you wander mainly in countries that speak that language, plus English-speaking countries, she would be undergoing a wonderful educational experience.

ent_moot

As for avoiding obsessing about the long term: remind yourself that all your plans may turn on the use of tax shelters, which will wax and wane in a way completely out of your control.

Thank you, I hadn't thought of this. I'm now seriously considering going for the full 40% salary sacrifice to take advantage of it while I can.

As for avoiding obsessing about the long term: remind yourself that all your plans may turn on the use of tax shelters, which will wax and wane in a way completely out of your control.

I'm planning to do whatever I need to in order to carry on with NI payments so that the years count towards my state pension.

I guess it depends on your line of work, but I would caution against pinning too much hope on returning to the same income level after five years out.

Yes, I expect to earn between 30-50% of what I earn now, and I would probably enter in a role of much less responsibility after the sabbatical than I have now.

I'm a software engineer, and my favourite hobby is programming. So I'm likely to stay sharp during my 5 years. Thankfully it's an industry that is relatively easy to keep abreast of if you know where to look, plus it's getting increasingly easy to work remotely.

How about this? When your daughter finishes primary school, you all wander around the world for a year, before returning so that she can begin secondary school. She'll have to make new friends at school, but as you said she'd have to do that anyway.

I hadn't thought of this. I may have to give it some more thought.

Thanks for the advice.