Career pauses can affect long-term savings, but many young Canadians feel the experiences gained are worth the financial sacrifice

In October 2023, Alex Peterson, 25, was laid off from his job at a tech startup in Vancouver. Initially, he felt lost. “I was kind of having an existential moment,” he admits. However, instead of rushing into job applications, Peterson viewed this as an opportunity to take time for himself. He embarked on a year-long journey, which included a four-month backpacking trip through South America with two close friends.

“Maybe I didn’t make any money, but the good memories and lack of stress were worth it,” Peterson says. “My happiness is through the roof.” Peterson is part of a growing number of Canadians in their 20s and 30s who are defying traditional career norms. Instead of following the typical trajectory of finishing school, working until retirement, and settling down, they’re taking breaks to experience life while still young. Sabbaticals, career pauses, and pursuing personal passions are all part of their redefined approach to balancing work and life.

These breaks are often referred to as “mini-retirements,” a term first coined by author Tim Ferriss in his 2007 book The 4-Hour Workweek. The idea has gained momentum in recent years, particularly among young people on social media who share their experiences under the #miniretirement hashtag.

A growing sentiment among Canadians is that the conventional path to retirement is no longer relevant. A survey by Wealthsimple found that 75% of Canadians aged 24 to 44 believe that the road to retirement is no longer a straight line.

While taking time off mid-career may hinder long-term savings, many young Canadians don’t let this deter them. For them, the opportunity to travel or explore new interests is worth the sacrifice, especially when the dream of homeownership feels increasingly out of reach.

“It’s just so unbelievably expensive. Thinking about buying a house isn’t even in my head,” Peterson says. “Taking a little break and saying, ‘Let’s have some fun, spend some money, and see the world’ – I’d much rather do that.”

However, experts warn that taking career breaks can significantly impact long-term financial goals, particularly when it comes to saving for retirement. “You’re missing out on the time value of money,” says Tom Edwards, a financial planner based in Calgary.

For instance, if you invest $200 monthly starting at age 30 at a 4% annual return, your retirement savings would reach $180,642 by age 65. But by starting five years earlier, you could have $233,063—over $50,000 more—by the time you retire. Taking a career break also affects employer pension plans, as contributions stop while you’re not working.

A study by U.K.-based Standard Life suggests that taking a five-year break could lead to a £27,000 (about $50,000) shortfall in a pension compared to someone who remains in the workforce.

However, Edwards notes that early career breaks are less financially damaging than later ones. When you’re younger, income and savings tend to be lower, so the impact is not as significant. “You’re not giving up as much as you would in your 50s,” he explains.

For Olivia Lang, the importance of saving for retirement was instilled in her from a young age. Her parents urged her to open an RRSP early, and she followed through, contributing faithfully over the years. But after a decade of saving, Lang began to question, “What am I saving for?”

Despite her savings, the prospect of homeownership in Vancouver seemed unattainable. Lang decided to quit her high-paying job and embark on a three-month solo journey across Europe. She spent months budgeting and saving $18,000 for the trip.

During her travels, Lang participated in various cultural experiences, from taking cooking classes to hiking in the Swiss Alps. “I learned so much, and the memories are priceless,” she says.

At 32, Lang is now seeking a new full-time job but has found it challenging. To support herself in the meantime, she’s turned to freelance writing. While her time off has impacted her retirement savings, Lang remains content. “I’m okay with what comes next. The trip made me a better person,” she reflects.

To make career breaks financially viable, planning is essential. “First, pay off any high-interest debt,” advises Jonathan Lee, a financial planner in Vancouver. It’s also crucial to save up for the break, as Lang did. Lee recommends setting aside one month’s income for every month you plan to take off, plus a three-to-six-month emergency fund.

Before quitting, consider asking your employer about sabbaticals or leaves of absence, suggests Jamie Clark, chair of the board at the Canadian Human Resources Association. More companies are offering such options.

In her late 20s, Sarah Dawson was working in a marketing role in Calgary when she saved $1,200 a month for 14 months before requesting a six-month unpaid leave. Her employer approved the request, and Dawson was able to return to her job after her break.

“Ultimately, that money could have been invested and grown, but honestly, life is short,” Dawson says. Upon her return, Dawson focused on rebuilding her savings, but she felt the break had been worth the sacrifice.

When Laura Martin, 29, quit her job as a lawyer in Ottawa last year, she didn’t prepare much. “I had barely any savings, but I wanted to explore my passion for hiking in the Rockies,” she says. Martin’s decision to take the plunge and move to British Columbia was motivated by a desire to live her best life.

“I feel like I would never be able to save enough for retirement. So might as well live now,” she says, speaking from her home in the mountains.

Though she’s still searching for a full-time job, Martin is enjoying her newfound freedom, engaging in activities like hiking, rock climbing, and reading. “I feel more relaxed now. I’m living the life I always wanted,” she says.

Despite the challenges of career breaks, more and more Canadians are choosing to step off the traditional work path to embrace the opportunities life offers. Whether it’s traveling the world or pursuing personal goals, these individuals are reshaping what it means to build a career while seeking happiness and fulfillment.