Taking a year off

[KarefulKactus15]

Hey! I just found this thread. Another vote for DO IT!

I always wanted to. I had the money, but I also had a pre-existing condition pre-ACA and I live in the US. I didn't dare go without healthcare coverage. It seems that's not a concern for you, so hell yes, get up and go!

Drop us a line once in a while, please.

I know I'm not the OP.. but I'm one of the ones that was convinced to take the year off while reading this thread. Here's my update:

NO REGRETS!  Oddly my money seems to keep being stretched further and further... Just little stuff I now have more time for saves a lot of money between cooking all my meals at home and not driving anywhere.

I'm currently 29 and have been practicing mustache ways since about 22. What I'm realizing is even though I'm not fat fired or whatever its called I may not have to go back to traditional work. Between my Vanguard Life Strategy income fund kicking off dividends and business income that I'm now a silent investor in....  Income > Living expenses. (Dont let me fool you, I'm in a LCOL and have absolutely squeezed my living expenses down - Examples - Mint mobile for 15$ / month. I've traded some work for landlord towards no rent increases so I'm under market rate. My car is a $3500 car with liability(Maybe it should be upgraded to a bicycle =P) ... etc etc.)

I'm still planning to start that other business that I wanted to start but its very freeing to just be off and pursue the things I want to do while not worrying about running out of $.

One annoying but not surprising update about the mega corp that I left - They kept my final paycheck.  My pay stubs didnt match my deposits and a pay date was missed even though my 401k contributions showed up so I had to call HR. When I talked to payroll it was "discovered" that I had been over paid all year by the exact amount of my last paycheck to the penny, so they reversed the deposit.  I don't have the resources to fight it.  However I'm annoyed that they wont update their paystub paperwork that W2 is based on. I'm going to end up owing taxes on money that was deposited into my account and then reversed so I didn't actually receive it.


One final update:
Somewhere higher in the thread, someone mentioned that taking time off will greatly open your mind to lifes possibilities. This has been true for me in a huge way even though its only been 2 months. Before I had to force myself to "Think outside the box". Now I find myself transitioning into a boxless mentality completely. I also seem to be running into more open minded people lately now that I dont spend all day in Mega corp. Ive actually made an acquaintance about 10 years older than me who did the same thing. While he's never heard of Fire, he built savings and passive income streams until Income > expenses.

So far my biggest problem is family members and friends confused / concerned that I'm out of work and not even looking for a job. I tried various explanations like "Ive been saving for a self funded sabatical for years" , "Im working on starting a business, I expect it to take a year" and other stuff but even that doesn't register for the average spendy pants person. The full Fire concept would blow their minds and not process, plus I dont need anyone thinking I'm well off.

[4tify]

Hey this is great, congratulations. So glad it worked out for you.

[snowball]

One annoying but not surprising update about the mega corp that I left - They kept my final paycheck.  My pay stubs didnt match my deposits and a pay date was missed even though my 401k contributions showed up so I had to call HR. When I talked to payroll it was "discovered" that I had been over paid all year by the exact amount of my last paycheck to the penny, so they reversed the deposit.  I don't have the resources to fight it.  However I'm annoyed that they wont update their paystub paperwork that W2 is based on. I'm going to end up owing taxes on money that was deposited into my account and then reversed so I didn't actually receive it.

I find this so annoying on your behalf!

Have you looked into consulting an employment lawyer in your state about what your options are?  You might be able to get an initial consultation for free/cheap.  Plus, perhaps the lawyer could send a letter to your ex-employer about this for not too much of a fee.  Letters from lawyers tend to scare people a bit and are often enough to get them to do the right thing.  You don't have to commit to actually following through with legal action.

It's probably worth looking into a bit more anyway.  You might also be able to report this to your state's dept of labor, but I think the likelihood of getting any action from them varies greatly by jurisdiction; your chances of success with a lawyer may be higher.  You could do both things...In your place I'd see an employment lawyer first and get some good local advice.

[vand]

My only advice would be to be very aware of how your finances are likely to look after a year out, assuming your spending level doesn't change drastically, and how much it will delay your overall journey to ultimately reach FI. 

The maths of this might make a good blog post for someone...

For someone with a high saving rate (>50% like the OP) then taking a year out doesn't really delay their overall journey time by more than a couple of years, and it doesn't really matter when during their whole FI journey they take it.

However, if you have a low saving rate and haven't yet already been working a long time to amass enough assets to get the ball rolling, then taking a year out is devastating. As a example (assuming a 5% long term real return), for someone with a 10% saving rate, it takes them 8 years to amass just one year's worth of spending. So if they take a year out in year 9, they're effectively resetting themselves back to zero and adding 9 years onto their overall journey taking it from 52 years to 61 years.

Conversely, if this same person with a 10% saving rate can slog it out to year 26, which is approximately the midway point of their normal journey, they will only be adding 3 more years onto their overall journey time, taking it from 52 to 55 years.

Given these figures, it easy to see why people with a low savings rate get perpetually trapped when they face a period of unemployment every few years and with high living costs they burn through their meagre savings which effectively resets them to zero and takes years to recover.

tsk. compounding, eh? Charlie Munger says "never interrupt the compounding process unneccessarily.

[never give up]

I’m not sure if this post has been linked before on this thread. Apologies if it has.

https://livingafi.com/2015/08/04/taking-a-gap-year/

[vand]

One other thing that springs to mind is that you may want to keep ongoing NI contributions even during your year off in order to eventually meet the minimum full contribution requirement (35yrs).

[lutorm]

One other thing that springs to mind is that you may want to keep ongoing NI contributions even during your year off in order to eventually meet the minimum full contribution requirement (35yrs).

What's "NI"?

From a Social Security standpoint, if you split the year off into 2 calendar years, and your income is higher than the SS max cutoff, then your SS mean income and future benefits will be greater. (But you'll also pay more in tax, of course, so you can think of that as a good or a bad thing...)