Financial Planning For A Sabbatical – Do You Have a 45-Year-Old Fund?

Planning for a mid-life break has come increasingly important in today’s fast paced world. A recent news article by The Straits Times about a sabbatical chasing dogs and sheep in New Zealand serves as a testament to how planning for such breaks has evolved.

The article highlights not only the necessity of taking a pause or break to recharge but also the importance of proper financial planning to make this possible. These mid-life breaks are essential for personal rejuvenation and can often leads to greater productivity and job satisfaction in the long run.

The Importance of Early Planning

Early planning is crucial for those considering a mid-life break. As a financial planner, I have coined the term “45-year-old fund” after repeatedly working with clients who seek career breaks around their forties. Establishing a 45-year-old fund ensures that you have the financial resources needed to take time off without sacrificing your long-term financial goals.  However, the concept can be easily adapted to any age that aligns with your personal goals, hence the idea of a “45-year-old fund”. The fund should be built up gradually over the years, starting as early as possible.

Why Call It a 45-Year-Old Fund?

You can call it a 40-year-old fund, a 45-year-old fund or a 50-year-old fund, the idea is to create funds earlier than the usual retirement payout age of 65 as defined by CPF-Life. The goal is to have financial resources available to take a meaningful break or have the financial flexibility to deal with life’s unexpected challenges. For example, one story featured in the article was about a 50-year-old mother who took a break from work to support her dyslexic 12-year-old daughter. This decision allowed her to provide the necessary care and attention to her daughter needed.

A Simple Three-Step to Start Planning For a 45-Year-Old Fund

1. Clarity on Commitments

Find out what commitments you have, such as funding for your housing loans, medical plans or your parents’ retirement. Understanding your financial obligations helps you better plan and allocate resources for your 45-year-old fund. For example, if you still have significant housing loan, you may have to save extra to ensure that you can meet both your loan repayments commitment and your fund goals.

2. Decide on How to Fund

Determine whether the amount you are saving and investing is on pace to reach the 45-year-old fund. You can work with a financial advisor if you have one or you can find numerous calculators online to help. For example, using an online calculator from Income, if you are a 30-year-old, you need to start investing about $625 every month growing at 4% p.a. to reach your goal of achieving $100,000 a 45-year-old fund. This regular investment can be adjusted based on your age, income and financial goal at age 45.

One effective way to support a mid-life break is through annuity income. Private annuities can serve as a bridge fund during hybrid work arrangements, allowing you to take a break from full time employment while still maintaining some form of income. Through working with some clients, I have learnt that we can effectively plan for mid-life breaks using annuity income.

While annuity income is not essential during this phase of planning, it can be beneficial for some clients. It helps them spend confidently and avoid the pitfall of underspending(*). This financial cushion allows them to focus on personal growth and relaxation without worrying about immediate financial needs.

*It is important to note that underspending is a real issue and can be unhealthy. People often overlook the negative impact of spending too little which can lead to decreased quality of life and missed opportunities. For more on this topic, read here.

3. Support from People Around You

It is good to have the blessings and support of friends and family as you plan for your mid-life break. Communicate with your siblings to help you with the elders at home for example. Having a support system in place can make it easier to manage your responsibilities and ensure that your decision to take a break is well understood and supported by those close to you.

A Planned Mid-life Break is Better Than an Unplanned One

Taking a mid-life break is more than a dream. It is a necessary step for many professionals seeking balance and renewal. By planning early and start saving early, you can ensure that you have the means to enjoy a well-deserved break. Sometimes you may not intend for a break but circumstances throw you into one.

One of my clients, a 50-year-old lady, took a six-month work break after caring for both of her parents who suffered from and eventually died of cancer. This break, though unplanned, provided her with the opportunity to cope with her grief and recharge before retuning back to work. She also received an inheritance from her parents which helped her during this time.

Establishing a 45-year-old fund is a proactive approach that prepares you for this important life phase, allowing you to recharge and return to your career with renewed energy and enthusiasm. Planning for a mid-life break is about ensuring you have the flexibility to take time off when needed. With thoughtful preparation and the right financial plans, you can make this dream a reality.

Article by Lee Meng
Email: meng.lee@gen.com.sg

The writer is an Executive Financial Services Consultant of GEN Financial Advisory


If you want to know more about Financial Planning or any other enquiries, you may contact me through whatsapp, schedule an appointment with me or fill up the form below and I will get back to you as soon as possible.


Lee Meng 李萌
Executive Financial Services Consultant

RNF No. LMX200165625
B. Business (Banking & Finance), FChFP, AFC


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