The 5 Financial Moves to Make Before Taking a Career Break

Thinking about stepping away from work for a bit? Whether it's a sabbatical, parental leave, or time to build something of your own—it’s a bold move. And it can either feel empowering or overwhelming, depending on whether your finances are ready for it.

Let’s get one thing straight: You don’t need to be rich to take a career break. But you do need a plan. Here are five key financial moves to make before you hit pause on your paycheck—plus a real-world breakdown of what taking 6 months off could actually look like.

1. Build a Career Break Fund

This is different from your emergency fund—this is money specifically set aside to cover your living expenses while you’re not working.

Imagine you want to take 6 months off, and your lifestyle costs you about $7,000/month. That’s $42,000 you’d want saved before taking the leap. I usually recommend adding a 10–15% buffer for surprise expenses, just to play it safe.

Saving that kind of money might sound intimidating, but if you start early and automate your savings into a separate high-yield savings account, it becomes way more manageable.

2. Sort Out Health Insurance

If you're leaving a W-2 job, your employer-sponsored coverage likely ends when your paycheck does.

Here’s what to consider:

• COBRA: You keep the same coverage, but it’s expensive. You’ll pay the full premium plus a small admin fee.

• Marketplace Plans (ACA): With your income dropping, you might qualify for subsidies, making this a more affordable option.

• Join a spouse or partner’s plan: This is often the simplest and most cost-effective route, if available.

Whatever you choose, don’t put this off. One unexpected medical bill can undo years of good planning.

3. Make Smart Retirement & Investment Moves

This is one of the most overlooked planning opportunities during a career break.

• Front-load retirement contributions (like your 401(k) or IRA) before stepping away.

• Lower income years are ideal for Roth conversions—move pre-tax retirement dollars into Roth IRAs at a lower tax cost, resulting in a lower lifetime tax bill.

• You might even qualify to contribute to a Roth IRA directly, depending on your income while on break.

• If you’re drawing from taxable investment accounts, create a withdrawal strategy that keeps your long-term investments intact.

Bonus: If you’re self-employed or doing freelance work during your break, you can still contribute to SEP IRAs or Solo 401(k)s and potentially deduct contributions.

4. Optimize Your Tax Situation

Taking time off often means temporarily dropping into a lower tax bracket. That creates several windows of opportunity:

• Harvest long-term capital gains at lower or even 0% tax rates.

• Use Roth conversions to reposition your tax-deferred dollars while paying minimal taxes.

• Evaluate if you’re still eligible for the Qualified Business Income (QBI) deduction from any self-employed or side income.

• Consider tax-loss harvesting if markets are down, using those losses to offset future gains.

These are the types of moves that, when timed right, can save you thousands—not just now, but over the long term.

5. Get Clear on the "Why" and the "What’s Next"

This isn’t just a financial decision—it’s a life decision. Are you taking time to travel? Recharge? Explore a new direction? Be with your family?

It’s helpful to define your “why” so you can make the most of your time off—and also start thinking about what comes next.

Do you plan to return to your old job? Pivot careers? Start something on your own? These decisions have financial implications, so start thinking about them early. The clearer your vision, the easier it is to align your financial plan with your next chapter.

Final Thoughts

A career break can be one of the most rewarding decisions you ever make—but only if you’ve set yourself up to enjoy it.

Build a dedicated savings buffer. Handle your healthcare. Make smart investment and tax moves. And take time to reflect on what you actually want this next phase of life to look like.

When you do all that, stepping away from work becomes less of a financial risk—and more of a strategic move toward a more intentional life. If you're wondering how to strategically plan a reset, schedule a free consultation here

Disclaimer: This blog is for educational purposes only and does not constitute financial advice. Please consult with your advisor, tax professional, or mortgage lender before making a major purchase decision.