Career breaks are becoming increasingly common in today’s workforce. Whether it is redundancy, maternity leave, or a planned sabbatical, stepping away from work can be an opportunity for growth, family time, or simply a well-deserved rest. While the emotional benefits are clear, the financial implications can be complex and often underestimated.
At Stratus Financial Group, we believe that a career break should be a positive experience, not a source of financial stress. With the right planning, you can pause with purpose, protect your long-term financial wellbeing, and safeguard your future legacy.
Why Career Break Planning Matters
A career break means a temporary halt in income, superannuation contributions, and sometimes insurance coverage. For many, this can lead to unintended consequences such as reduced retirement savings or gaps in financial protection.
Unplanned breaks such as redundancy can be particularly challenging. According to industry insights, Australians who do not seek financial advice during major life changes often miss out on opportunities to improve their financial position. In fact, 86 percent of advised clients report a positive impact from seeking advice[1]. Redundancy payouts, for example, can be structured to minimise tax and maximise future benefits, but only if you know how to use them effectively.
Planned breaks, like maternity leave or sabbaticals, also require careful consideration. While you may anticipate reduced income, many underestimate the impact on superannuation and insurance. Without proactive planning, these gaps can compound over time. A financial adviser can help you close these gaps and keep your long-term goals on track.
For many professionals, redundancy is one of the most significant career breaks, and it requires careful planning.
Redundancy: Turning a Challenge into an Opportunity
Redundancy can feel overwhelming, but with the right approach, it can become a strategic opportunity. Begin by understanding your entitlements, including your payout, accrued leave, and any additional benefits. Check for non-compete clauses in your redundancy agreement, as these can affect what you do next in your career.
Tax planning is essential because redundancy payments can attract significant tax. A financial adviser can help you structure part of your payout into superannuation to reduce tax and boost your retirement savings. Create a cash flow plan for living expenses during your job search and set aside funds for at least six months to avoid financial stress. If you have loans, consider reducing repayments or refinancing before your income changes. Review your insurance cover because leaving employment may affect income protection and life insurance.
Finally, use this time to reassess your goals. Upskilling or networking can position you for your next opportunity. Do not navigate redundancy alone, professional advice ensures your payout works for you, not against you, and helps protect your future legacy.
For those planning a break by choice rather than circumstance, a sabbatical offers incredible opportunities, but it needs a solid financial plan.
Making a Sabbatical Work Financially
A sabbatical can be life-changing, but it needs careful planning. Start by estimating your costs and building a dedicated savings fund that is separate from your emergency money. This helps you enjoy your time away without dipping into your safety net.
Think about ways to keep some income flowing while you are away. Freelance work or consulting can help bridge the gap. Check how your sabbatical affects superannuation and insurance cover, and plan for any gaps. If you are travelling overseas, make sure you have comprehensive health and travel insurance. If you earn income while abroad, make sure you understand the tax implications both overseas and in Australia.
Finally, consider your return. Maintaining professional networks and upskilling during your break can make re-entry smoother. Discuss your sabbatical plans with your financial adviser to ensure your financial obligations, cashflow, savings and insurance cover are aligned.
Just as a sabbatical requires careful planning to protect your financial wellbeing, maternity leave brings its own set of challenges that benefit from the same proactive approach.
Planning for Maternity Leave and Family Responsibilities
Maternity leave is a joyful time, but it often comes with financial surprises. Reduced income, extra expenses, and childcare costs can add up fast. Government parental leave payments and employer benefits can help, but they rarely cover everything. From prams to medical bills, costs accumulate quickly, so start saving early if you can. Missing super contributions for even a year can reduce your retirement balance, so strategies like spouse contributions or catch-up contributions can help offset this gap.
Planning with your financial adviser means you can focus on what matters most, your growing family. If you are part of the “sandwich generation” caring for children and ageing parents, the financial complexity increases. Planning ahead ensures you can manage these responsibilities without compromising your own financial security.
The Gender Gap and Career Breaks
Women often take more career breaks for caregiving, and that can have a lasting impact on retirement savings. These breaks reduce superannuation contributions and can create gaps that compound over time. The good news is there are strategies to help close that gap. Spouse contributions, super splitting between spouses and catch-up contributions can be effective ways to keep your retirement goals on track.
Speak with your adviser about strategies to protect your retirement savings during career breaks. Even small steps now can make a big difference later.
No Matter What Type of Break You Take, These Financial Fundamentals Apply
1. Cash Flow and Emergency Funds
The first step is understanding your expenses and ensuring you have enough liquidity to maintain your lifestyle. Think of this as your parachute. When income stops, your expenses do not. So, the first step is building a buffer.
- Emergency Fund: Aim for at least three to six months of living expenses. This gives you breathing room if things do not go as planned.
- Budget for New Costs: For maternity leave, factor in baby essentials and medical bills. For sabbaticals, include travel, insurance, and any professional development costs. Understand where your money is going.
- Debt Check: If you have loans, review them before your break. Can you pay down a little extra now or refinance to reduce pressure later?
This is not about cutting every joy out of your life. It is about making sure you can enjoy your break without financial anxiety.
2. Superannuation Strategies
Career breaks often mean paused super contributions. Over time, that can make a big dent in your retirement savings. But there are ways to stay on track:
- Boost contributions before your break if possible.
- Consider spouse contributions. You may be able to contribute to your partner’s super and even receive a tax offset.
- Splitting super between spouses can help to maximise your combined access to tax free pensions from your super later in life.
- Use catch-up contributions if you have unused contribution caps from previous years.
Even small steps now can make a big difference later. Ask your adviser about the best superannuation strategy for your situation.
3. Insurance Review
Income protection and life insurance are often linked to employment. If you are taking unpaid leave or leaving your job, check your cover. Does it continue during your break? Are there waiting periods or benefit limits you need to know about? For maternity leave, make sure your policy accounts for unpaid time off. These details matter and they are easy to overlook when you are focused on the excitement of what is ahead. Confirm with your adviser whether your cover continues during unpaid leave.
4. Tax Implications
Redundancy payouts and accrued leave entitlements can have significant tax consequences. Structuring these payments correctly can reduce tax and improve your financial position. Professional advice is crucial here. What seems like a windfall can quickly diminish without proper planning.
Ready to Plan Your Career Break?
At Stratus Financial Group, we specialise in helping professionals, executives and business owners, individuals and families navigate life’s transitions. Whether you are planning a break or facing an unexpected change, we will help you build a cash flow strategy that works for your lifestyle, protect your super and keep your retirement goals on track, review your insurance so your safety net stays intact, and make informed decisions about redundancy payouts or career changes.
Do not leave your financial future to chance and speak with your financial adviser today.
Contact Brett Cribb, Steve Nicholas, James Marshall and Debbie French at +61 (0)7 3007 2007, or email info@stratusfinancialgroup.com.au.
Stratus Financial Group helps individuals, families, and retirees manage their complex financial affairs and coordinate their professional advisers.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation, or needs, so you should consider whether the advice is relevant to your circumstances. Always read the relevant Product Disclosure Statements (PDS) before making any financial decisions.