The Year Of Not Saving
Recently I had the pleasure of being profiled in Global Woman Magazine, wherein I mentioned my recommendation that we take our “big vacation” or sabbatical in our mid-50s, rather than waiting until age 65 or later. This has garnered lots of interest, so I thought I’d explain myself more fully.
There are legitimate longevity reasons (and a good mathematical reason) we might want to do this. With respect to what this is, I propose that, for one year at or around age 55, we stop saving the money we would normally contribute to our corporate 401(k) or other retirement account and use it on a sabbatical or vacation the following year in exchange for delaying spending down our nest egg.
Why should we do this? As members of the Sandwich Generation––becoming the Triple-Decker Club Sandwich Generation––we are feeling pressure from both ends of the age spectrum.
Our Kids are Launching Later
If we had children in our mid-30s, we cannot be certain they will be completely launched by the time we are 60. This reduces our financial independence until they truly leave the nest. As I always say, “Family is a fixed expense.” And funding our children from our savings versus cash flow can be painful. I don’t recommend that.
Our Parents Aren’t Going Anywhere
Meanwhile, our parents (the kids’ grandparents) aren’t going anywhere anytime soon. If we wait until we are 65 to take the “big” vacation, they may still be living independently at home but on the cusp of frailty. How can you leave your 85-year-old mom in her house with nobody checking on her as you galivant halfway around the world? Two generations ago, you might not have faced this scenario. Mom and Dad would have passed on.
Our Bodies Won’t Last Forever
It's sad when someone works hard and puts off enjoying life until age 65 or later, only to discover that their knees and hips are no longer capable of climbing to Machu Picchu or walking miles on Eastern European cobblestones. Despite my general belief that mobility doesn’t need to decline with age, there are qualitative differences that make it reasonable to do trips that require physical exertion sooner rather than later.
The Window of Freedom is Shrinking
As you can see, the window of opportunity between children no longer needing us and parents needing us more is small. If we have to plan this window for when we’re no longer working, that’s an even smaller timeframe.
By our mid-50’s, we are making the last big savings push to get to retirement, whatever that means for each of us. And, corporate employment-willing, we want to stay in the workforce for at least ten more years to reach our Medicare birthday and maybe our Social Security Full Retirement Age (FRA).
If you’re like most people, you have moments where, even if you love what you do, you wish you had more freedom from the grind.
Here’s the Math (Made Easy)
This is where the “Year of Not Saving” can refresh you and prepare you for the final push. Let’s say you’re 55 and you intended to save $20,000 into your 401(k) this year. And let’s say that your employer’s contribution works out to $10,000 (5% of a $200,000 income). All told, that would be a $30,000 contribution to your retirement account. As a rule, we expect money to double every ten years in the stock market. Thus, when you are 65, that original $30,000 contribution will have grown to $60,000 in your portfolio.
Let’s also say that, to date, you have saved $750,000 in your 401(k). By the time you turn 65, that amount will have grown to $1,500,000 based on the same assumption.
Here's where the math works: If you let your nest egg grow for one more year (I know that market growth isn’t linear, but it’s plausible) you will be 1/10th of the way to another doubling. In other words, if you delay the start of your distribution, your nest egg will gain another $150,000. Your balance will now be $1,650,000. Sweet!
So, which would you prefer?
Retire at 65, start taking distributions of a $1,560,000 nest egg, and take your long-awaited big vacation at 66, or
Retire at 66, start taking distributions of a $1,650,000 nest egg, and take a $20K vacation at age 56?
Read that again: If you work one more year (until age 66), you can take a $20,000 vacation next year at age 56 with the money you would have saved this year and retire with $90,000 more money.
There’s more math to consider:
Reward: By doing this, you are also delaying your Social Security benefit by one year, so that benefit will increase as well.
Risk: There is “sequence of returns” to consider. You may need to rethink your retirement timing if the market is down in your final year of work. But you would need to consider that whether or not you enact your “Year of Not Saving.”
What We Know To Be True
There is a body of evidence that speaks to the benefit of delaying your portfolio distribution by even as little as one year. It is much easier to fund 29 years of retirement than 30. And it is easier to fund 28 years, etc. In other words, the biggest gift you can give yourself, without saving more, is to let your money grow and compound longer in the market. This may mean working to earn just enough to delay dipping into your nest egg early.
Let me know what you think of this idea. Would a big vacation or sabbatical at 56 help you stay on course to work a little longer? #WeRescueOurselves
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Copyright Madrina Molly, LLC 2025
The information contained herein and shared by Madrina Molly™ constitutes financial education and not investment or financial advice.
Sherry Finkel Murphy, CFP®, RICP®, ChFC®, is the Founder and CEO of Madrina Molly, LLC.