Money Issues For Career Changers
By Mark Mills, CFP
A lot of Boomers have been cranking away at their jobs for decades and are ready for a change. It’s great to find your passion and pour yourself into a new, meaningful career. But before making the leap do some serious financial planning.
If you make a late-in-life career change you may well see your income drop. Are you ready for downward mobility? Can you make enough to support yourself without having to dip into savings while still in your 50s and early 60s? You want to wait as long as possible before tapping into retirement accounts. Those savings may have to last 30 years or more. Ideally, you should still be socking away cash between 55 and 65.
If you’re going to leave a job to start your own business and will lose health care benefits, investigate the cost and availability of health insurance. While working as an independent contractor I've been paying $1206 per month for a family plan. That's $14,472 a year!
Before leaving a job, make sure you understand any pension implications. If you’re just a few months short of qualifying for a higher pension or getting vested in a 401(k) match, you may want to stick around until you hit that benchmark.
Don’t use your intention to work as a substitute for saving for retirement. Yes, extra income to supplement savings is great. But what if you find you really don’t want to keep working? What if you have medical issues and can’t work? If you slacked off on saving for retirement thinking you’d work until age 75, you could come up short.
Keep building that nest egg to be your meat and potatoes in retirement. Let the after-65 employment income be the gravy.
A lot of Boomers have been cranking away at their jobs for decades and are ready for a change. It’s great to find your passion and pour yourself into a new, meaningful career. But before making the leap do some serious financial planning.
If you make a late-in-life career change you may well see your income drop. Are you ready for downward mobility? Can you make enough to support yourself without having to dip into savings while still in your 50s and early 60s? You want to wait as long as possible before tapping into retirement accounts. Those savings may have to last 30 years or more. Ideally, you should still be socking away cash between 55 and 65.
If you’re going to leave a job to start your own business and will lose health care benefits, investigate the cost and availability of health insurance. While working as an independent contractor I've been paying $1206 per month for a family plan. That's $14,472 a year!
Before leaving a job, make sure you understand any pension implications. If you’re just a few months short of qualifying for a higher pension or getting vested in a 401(k) match, you may want to stick around until you hit that benchmark.
Don’t use your intention to work as a substitute for saving for retirement. Yes, extra income to supplement savings is great. But what if you find you really don’t want to keep working? What if you have medical issues and can’t work? If you slacked off on saving for retirement thinking you’d work until age 75, you could come up short.
Keep building that nest egg to be your meat and potatoes in retirement. Let the after-65 employment income be the gravy.
posted at 6:58 PM
4 Comments:
Hi Mark & Nancy,
I don't know a lot about your blog other than I fit the "Baby Boomer" category. I found out about it through Dan Briklin, who I e-mailed about his SMBmeta Tag. But, I thought you would like to read my latest post on http://www.Brokerblogger.com that is entitled "Search Engines & Patriotism". In it, I mention how baby boomer parents can spend more quality time with their children by teaching them how to use search engines better (as long as they learn themselves, first).
Keep up the good work,
Bill Kelm
Great job!! Just an awesome concept!! Lots of Boomers in the Pan-Mass Challenge---we can still cut it!! All the best--Tab
Mighty Blog. Keep up the good work.
Ken Little
Ken@Young-at-Sixty.com
This is a very interesting blog, i appreciate the information you provided
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