Four things stop, and they stop on different dates. Income stops on the last day worked or at the end of any severance period. Group health coverage generally ends at the end of the month in which employment ends, though the date is set by the plan. Retirement plan contributions stop with the final paycheck, because an elective deferral is a percentage of pay and there is no pay. And earnings credited to the Social Security record stop for the remainder of the year. Mapping those four dates before the last day is the single most useful piece of preparation, because the gaps between them are where uncovered months appear.
Health coverage is the decision with a deadline attached. Losing job-based coverage opens two routes, and they have different clocks and very different prices. Continuation coverage keeps the same plan and the same network, at the full premium plus an administrative charge, which is the number most people have never seen because the employer was paying the larger share. An individual plan bought through the health insurance marketplace can cost substantially less, because the premium tax credit is calculated on the year's income and a break year's income is low. Both are time-limited elections, and missing the window on either is the expensive outcome; the specific eligibility rules and deadlines are on the pages for each.
The retirement plan question has two halves and only one of them is obvious. The obvious half is that contributions stop: no pay means no deferral, and the employer match stops with it, so the cost of a break year is the deferral, the match, and everything the two would have earned. The less obvious half is vesting. The vested percentage is fixed by the service credited up to the termination date, and employer money above that percentage is not held pending a return: it becomes a forfeiture under the plan's own rules, and whether a returning employee could ever recover any of it depends on that plan's break-in-service and repayment provisions rather than on an intention to come back. This is a real difference from a leave of absence, where the employment relationship continues and vesting service can continue with it. The account balance itself is unaffected: it can be left in the plan, rolled to an individual retirement arrangement, or rolled into a future employer's plan, and the choice is the ordinary one that applies whenever anybody leaves a job.
Social Security records the year as it finds it. The benefit formula averages the highest 35 years of a worker's indexed earnings, so a year without earnings is not simply skipped: if a worker ends up with fewer than 35 years of earnings, zeros are averaged in and the benefit is lower. The size of the effect depends entirely on where the break year would have sat in that ranking. For a worker who will accumulate well over 35 earning years, a single zero displaces nothing and costs nothing. For a worker who will finish with fewer than 35, it replaces a real year with a zero. The computation itself is on the page for average indexed monthly earnings.
What does not break, and one thing that improves. An individual retirement arrangement is the account holder's and is unaffected, though contributing to one requires compensation, which a person with no earned income does not have; a married person filing jointly with an earning spouse can still be funded through a spousal IRA. A health savings account balance stays and remains spendable, though new contributions require being covered by a qualifying high-deductible plan. And the improvement is tax: a year with little or no taxable income is the cheapest year available for anything whose cost is measured in income, which is why a break year is the standard window for a Roth conversion or for realizing long-term gains, each of which is covered on its own page.
Sequencing matters more than the total. The order that avoids the expensive mistakes is: settle the health coverage start date first, because it has the shortest deadline; then confirm the vesting position and decide what happens to the plan balance; then size the cash needed, counting the higher insurance cost rather than the old payroll-deducted one; and only then fix the return date, because the cash figure is what determines whether the intended length is affordable.
