4 Physicians Revisited: Dr. C & the Impact of a Sabbatical

The last time we revisited Dr. Carlson, we explored the impact of a higher salary and learned that a 33% raise shortened her time to FI by a similar percentage.

M.D. Financial Services

Today, we’ll investigate the ramifications of a completely different scenario: taking a break.

As we have done in our other revisits to our 4 physicians, we will alter their fate at a point 11 years after we were first introduced to them, the point where Dr. A became financially independent.

So Dr. Carlson has been making a good living, working hard, and starting to feel that 11-year itch. Symptoms of burnout are beginning to manifest. She is struggling to find joy in the day-to-day grind. Dr. C decides to take an extended timeout from her career.

After some discussion, Dr. C is able to negotiate a 1-year absence from her job. For 12 months, she will have no earned income. Intelligently, Dr. C plans to take her sabbatical from July to June in order to earn a half year’s income in each of two calendar years.  By doing so, she will be able to continue contributing to tax deferred retirement accounts, while paying a much lower tax bill in two consecutive years.

To keep things interesting, we can compare the outcome with a choice to take a full calendar year off from January to December. An additional comparison can be made by having Dr. C start her career 1 year later, showing us the cost of deferring for 1 year prior to beginning medical school, or needing an additional year to gain acceptance.

I can’t tell you how Dr. Carlson plans to spend her year off. I can think of a whole lot of fun and relaxing ways to spend that time, but I’m not Dr. C. Maybe she sails around the world, from one Island In The Sun to another. Perhaps she never leaves the county, and volunteers at the local free clinic to keep up her skills. Hopefully, she will take advantage of the sabbatical to find time for personal growth, travel, sleeping in, and connecting with family and friends.


On a [Galapagos] Island in the Sun

On a [Galapagos] Island in the Sun

I do know that Dr. C has some fixed expenses and she’ll find ways to spend money with her newfound free time. To keep the calculations simple, we’re going to assume that her family’s expenses remain the same throughout her year off. That is, the budget will remain steady at $160,000 a year in our calculations.

In the July to June year off, Dr. C has taxable income every year and is able to contribute to tax deferred retirement plans. To cover her costs though, she must sell some from her post-tax accounts each year to make up for a $74,500 shortage. I say post-tax accounts, rather than taxable account, because the taxable account won’t be quite enough to cover the $149,000 she needs. Thankfully, Roth contributions (but not earnings) can be withdrawn tax-free and penalty-free.

In the January to December calendar year off, she is unable to invest any money with no taxable income (although her already sizable investments will continue to grow). To cover her spending and health insurance, she’ll have to come up with $165,000 from her post-tax accounts.

Is $5000 realistic for health insurance for a family of 4? Probably not, but I’m keeping the number consistent, assuming she has a HDHP with HSA, and being a few thousand off means little when we’re looking at spending of $160,000 a year and a nest egg in the millions.  If health insurance costs her $15,000, she should be able to trim $10,000 from her fat $160,000 budget to cover it.

Here’s a look at what these years might look like for Dr. C.





It’s incredible to see how much taxes decrease with a lower salary, as we saw when looking at Dr. A going part-time. Of course, taxes are even lower when you have zero salary coming in, a situation exists when taking a January to December calendar year off.

There would be some long-term capital gains realized when selling off the taxable account, but not enough to push her out of the 15% tax bracket, so she won’t pay any taxes on those gains (or qualified dividends), a fact emphasized in one of my favorite posts, The Taxman Leaveth.

How will the year off affect her nest egg in the coming years? The following table shows us its size at our starting point, 11 years into her career (or 10 with the 1-year delayed start), at 13 years (after the sabbatical), 20 years, and finally when realizing FI after a 28 to 30-year career.





As we know from the original 4 physicians, maintaining the status quo will allow Dr. C achieve her FI goal of $4 million after about 28 years, most likely approaching age 60.

Timing matters.

Taking the June to July sabbatical makes her $214,000 less wealthy at the 13-year mark (shortly after completing the sabbatical), and $283,000 less wealthy at the 20-year mark. Her FI target of $4 million is achieved a few months shy of a 29-year career.  In other words, the 12 months off delayed her potential to retire with the same nest egg by about 20 months.

The January to December sabbatical costs her a bit more, because she is unable to spread her income out over two calendar years and take advantage of lower tax brackets in those years. She is also unable to make any tax-deferred retirement contributions or receive a match in her year off.   That difference ends up being $73,000 after 29 years, adding about 3.5 months to her time to FI when compared to the June to July sabbatical.  In this scenario, the 12-month sabbatical extended her time to FI by 23.5 months.

What about the 1-year deferral? Shouldn’t that have the most damaging effect, since the lost wages would rob her of so many years of compounding? It would if we assumed that she had a $160,000 spending habit and earned nothing during that deferral year. Of course, most new college grads are not spending like a doctor who brings home $300,000. Most likely, she was still living like a college student, and finding a way to make ends meet while enjoying her year off.

For the sake of this comparison, I’m assuming her year off in her early twenties was a break-even year. No savings, no debt, just a year of coasting, most likely with at least a part-time job. Therefore, FI is delayed by exactly a year, and she will always be one year behind where she would have been if she had not taken a extra year before starting down the path towards being a physician.

In essence, future Dr. C borrowed one year from retirement and used it early in life. During deferral, she has youth and health on her side, but very little money. Foregoing deferral, she will be able to retire a year earlier, but won’t have youth, and may not have the health she enjoyed in her twenties. She will have plenty of money, though!

Having looked at the numbers, does a sabbatical appeal to you? Would you take a mid-career sabbatical over a deferral year? Or do you share my pedal to the metal mindset? Sound off in the comments section below.

Follow this link for the rest of the 4 Physicians series.


  • MM

    Wow… can you post some numbers on a 6 month sabbatical? Looks like I might want to look into this in a few years!

    • Hello, MM. The numbers would vary based on a couple variables. A 6-month sabbatical that spans 2 calendar years would probably put you in a better tax situation than taking 6 months off in one calendar year. Also, it depends how close to the end of your career you are. The further you are from retirement, the greater the opportunity cost of not adding to the nest egg (and drawing from it) for those 6 months.

      A rough estimate based on what we learned from the full year sabbatical, is that a 6 month sabbatical taken mid-career would add about 9 to 12 months to the time it would take to reach a target dollar amount, such as the amount required to call yourself FI (25x expenses).

  • On my Way to FIRE

    Great article! While I’m not a physician and I don’t make 300K/year I can relate to the 1 year delay. I myself took 3 years post undergraduate to learn spanish, travel and work part time before going to graduate school to be come a PharmD. Although I delayed my earnings, I neither saved a ton nor created consumer debt. Those experiences were worth so much more than the now 350K in debt I now have after obtaining my degree. Now, I’m happily making a mere 150K and living on 25K on my way to FIRE.

  • Muy bueno, OmWfT! When your sabbatical is dollar neutral, you are simply borrowing years from your much older self and giving them to your much younger self. Most older selves will tell you it is a great trade to make.

    Living on 1/6th of your current salary, you will be FI in short order. Keep up the great work!


  • BTDT, $650/month family of four HDHP plan. Our monthly budget $5k-$5500/month. $2400/month rent. Pretty much same lifestyle as pre-sabbatical except our mortgage was higher and other expenses were higher but we moved from HCOLA to lower COLA. And our dog got sick and needed chemo so his expenses blew some of our budget out of the water. He’s still alive and well.

    We very consciously did this sabbatical for DH to change careers. Did I mention he also during this year did a bootcamp and spend $16k on tuition? We’re in it for the journey. We’re fine and he felt like he was missing out on the kids early years working while I stayed at home. This way he got to enjoy them and so what if he works at extra year at the end?

    My goal is he stops working at 50. I am not sure what his goal is? I know he’ll be able to stop in less than 5 years if he chooses, but he won’t. Type A personality. He’s not even about spending money and driving fancy cars or vacations. He just wants to be able to do work he finds interesting. We’ve decided the money isn’t for FIRE it’s for FU so he can pick and choose jobs.

    I’d like to go back part-time and do something to fill the time.

Share your thoughts with the PoF community.