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6 crucial money moves for a midlife career change

Key takeaways

  • Understand the financial implications, from potential income adjustments to shifts in employer-provided benefits.
  • Consider ways to make the transition easier, such as testing out your new career part time if possible or seeing if you can make an internal move at your existing employer.
  • Tap into the knowledge of career coaches and financial professionals who can provide valuable strategies and insights.

Dentist to management consultant. Public relations professional to college professor. School principal to an education-focused entrepreneur. Police officer to flight attendant. These are among countless examples of people who've launched new careers in their 40s or 50s.

Many people feel pressure—from finances or family— to stay in the same profession their entire adult lives. But if you want to make a change, it's possible to forge a new path, no matter your age, says Meredith Stoddard, vice president of life events planning at Fidelity Investments.

"Remove the words 'too old' from your vocabulary," she says. "When you think you're too old to try something new, remember there's somebody who is 65 and skydiving."

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If you're considering a change, good for you, says Ryan Viktorin, CFP, vice president and financial consultant at Fidelity's Investor Center in Framingham, Massachusetts. In fact, she encourages it for those that might seek a different career path, saying you could pivot to something that brings greater satisfaction and success.

Yet, before giving notice to your current employer, she and Stoddard stress the importance of having a comprehensive financial strategy.

"It comes down to running the numbers, determining what you're willing to do, and creating a plan," says Viktorin. "You may have to give certain things up. But also consider what you could gain by making the transition, which could be more joy and fulfillment."

If you're thinking of a career change at 40 or 50, here are 6 essential steps to take.

1. Get a solid grasp of your current financial situation.

Thoroughly understand your income, expenses, savings, investments, and debt levels. This knowledge will help you to make more informed decisions as you consider your career options. If you're not sure where to start, consider visiting Fidelity's spending and budgetingLog In Required experience to help track your spending and create a budget.

The next step of a financial assessment is to review how much money you have saved for emergencies. Ideally, you have enough to cover 3 to 6 months of essential expenses such as housing, groceries, and health care. If you don't have any emergency savings, now is a great time to start setting some money aside. Consider aiming for $1,000 to start and then keep adding to it until you feel secure. If you're planning to leave your current job without another one lined up, it's even more important to try to reach the full 3 to 6 months buffer—or more depending on how difficult your job hunt could be. Saving for emergencies can take time and the amount you may want to target could depend on your financial situation and other sources of income.

"Make sure your emergency fund is beefed up," Stoddard says. "It's important to have that safety net."

Read Viewpoints: Thinking of quitting your job?

2. Understand how a career change at 40 or 50 could affect your finances.

Research potential expenses, such as paying for a training program to learn new skills. Look into the typical income levels in your desired role. Get a feel for what you may lose when you leave your existing position—such as subsidized health care or a 401(k) match. Finally, check the vesting schedule (if applicable) for the employer match to your 401(k) or any share payouts, plus bonus dates so you can make the most of benefits you're earning.

Before transitioning from school principal to founder of Calmer Schools, which helps schools implement trauma-informed care, Meredith McNerney and her husband, Mark, thoroughly reviewed their finances and planned for realities such as a smaller pension down the line. "We got really clear on our finances," says McNerney, who launched her business when she was 45.

If you plan to launch your own business, like McNerney, entrepreneur-focused organizations such as SCORE and Small Business Development Centers in your local area can guide you on what to expect with income and expenses. With any job shift, network with others in your desired profession to glean insights. You can also get pertinent information from employer review websites, relevant social media groups and forums, as well as by looking at job listings from states that require salary range disclosures.

3. Create constructive spending and saving habits.

Outside her hours as a school principal, McNerney taught online courses, which boosted her bank account and granted her more freedom to pursue her new professional path. "In order to have options in your life, you have to have savings," she says.

When public relations professional Eric Webber decided to become a professor at the University of Texas at Austin in his late 50s, he scrutinized his expenses. One big insight: He could make small cutbacks that would add up. For instance, Webber decided to dine out less. "I like to cook," he says, so it was a relatively simple shift.

As a result of his teacher's salary being less than his income from public relations, Webber is "more mindful" overall of his spending. Yet he is glad he made the transition.

"I could be making more money," he says. "But I like this lifestyle, and I don't sacrifice a whole lot."

4. Hedge your bets to reduce risk.

Consider adding a transition period before starting a new full-time career. This way, you can be sure you enjoy the work before you fully go down a new path.

Webber kept his job at an established branding agency while first teaching at the University of Texas. He got a feel for the role while still making a stable salary. And once he fully moved to teaching, he knew he could still do freelance public relations work if necessary. Investing the extra time to understand if the new job would work was a little bit of a sacrifice but it paid off in the end.

Another way to minimize risk: Use your current skills to explore new industries. "If you're an accountant and want to get more into science, you can look into an accounting job at a science company," says Stoddard. "You can make some early moves that will get you a step closer to where you're looking to go long term."

Read Viewpoints: How to evaluate a job offer

5. Capitalize on your current employer's offerings.

Explore your benefits to see if your employer can subsidize your transition. For instance, you might have access to tuition reimbursement or other funding for continuing education, Stoddard says. Read Viewpoints: 4 ways employer benefits can help you save money

Another option is to see if you can make an internal move to a department more aligned with your long-term career goals. Since your employer knows you and the quality of your work, they may be willing to give you a new opportunity. You can also work part time in your desired field or go to school part time while keeping your existing job full time or part time.

Webber used a creative strategy to boost his income while trying out teaching. He was offered benefits through the University of Texas, so he approached the branding agency's human resources team and asked if they'd boost his salary if he no longer needed their benefits. Their answer: yes.

6. Enlist the help of professionals.

A career coach or financial professional can give you valuable insights on the economics of a professional transition.

Webber, who says he's not naturally a planner, turned to a financial professional when he was considering the move to full-time teaching. "He did all these models of how long my money will last," Webber says, including scenarios in which Webber only taught or both taught and did freelance public relations work. The planner also helped him determine how much he could spend on travel.

"It was great to plan it all out," Webber says.

A professional can even provide you with some peace of mind. Viktorin recently advised a woman who wanted to make a career change at 50. They did some data analysis, and the results were reassuring. "After running the numbers to get the net after-tax paycheck difference, it wasn't as big as she thought," Viktorin says.

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