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Gearing Up for a Career Change

A midlife switch can be rewarding, but there are financial risks. Here's how to ease the transition

Richard Reyes was miserable. For 25 years, he'd worked for Detroit's housing authority, and the constant stress of the job had finally worn him down. It didn't help that new management had been brought in, and Reyes didn't mesh with the new regime.

That got him thinking about what he wanted to do with his life. Rather than wait five more years and retire with a full pension, Reyes took a $250,000 payout and a three-quarters pension and quit his job. He'd always wanted to be a writer and an academic. At the age of 53, he says, "I was running out of time."

Changing careers is surely not what Timothy Leary had in mind when he urged baby boomers 40 years ago to "turn on, tune in, drop out." Yet anecdotal evidence suggests that many are seeking fulfillment by doing just that at a time when the so-called sensible thing would be to put the finishing touches on their current job, maximize their retirement savings, and get ready for the golf course.

Making an Informed Decision

When the transition is managed correctly, many years of fulfilling work lie ahead. But without proper planning, your late-career switcheroo can blow up your finances, put you in competition with much younger people for jobs, and ultimately upend your life with little time to recover. It's a high-risk/high-reward decision, and it's never too soon to start thinking ahead. "Most people spend less time on life decisions than they do planning a vacation," says James Burns, president of J.J. Burns & Co. in Melville, N.Y.

How do you stack the odds in your favor? Financial planners recommend getting some experience first. Burns warns possible career-changers not to let dissatisfaction with their current situation lead to a decision they'll later regret. It's very easy to let your imagination run wild, morphing any change into a utopia. Then reality sets in: You're making less money and fulfillment still seems miles away.

Often, "the old job you had really wasn't a bad job," Burns says. He recommends learning as much as possible about a new vocation before making a change: speak with experts, volunteer, even try to do the work on weekends or late at night. That way, when you make the switch, you'll know it's the switch you want to make.

Budgeting for a Transition

Then comes the hard part: the finances. First you need to figure out how much money you have and set a budget. Reyes burned through a lot of his money during the first two years off the job by buying a new car and taking vacations. "Maybe I would have tried to hold on to more of that," he says.

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