Ask Money

Thinking about an encore career

Chris Farrell Mar 14, 2012

Question: First, I love your radio show! You have helped my really think about my financial situation.  

Currently, I am thinking about going back to school for a graduate degree to change my career entirely. It would be hard to do this while working full-time.

Right now, I earn $65,000 annually, contribute 15 percent to my 401(k), and beginning this year I will contribute the max ($6,000) to a Roth IRA (also available through my employer). I have about $80,000 in my 401(k) now and $5,000 in an emergency fund. I have no debt.

I think that if I stick out this job for another 15 years, I should be OK to retire. (It’s just me — no husband or kids — and I owe about $80,000 on my house.)

I would LOVE to quit and go back to school (maybe with a loan?) for an “encore” career. It’s amazing how much more expensive school is now. It’s crazy. I know that I will be able to find a position once I have the degree. It may not be earning as much as I do now, but that’s OK. Is this even something I should entertain?  Jackie, Columbus, GA

Answer: Yes, you should definitely entertain embracing a major change in your career. People should follow their passions when it comes to their careers (and elsewhere in life).

The realization is sinking in among many people that most of us are going to have to keep working when we’re older rather than retiring. It isn’t an oppressive thought. It’s liberating. The insight should impact how people look at work when they’re younger. The financial penalty of doing more of the things you love and earning a lower income is much less than you might think, once you factor in working longer. Indeed, your standard of living will probably be the same if you work less but earn an income into your 70s, compared to working more and then retiring at age 60 or 62. “The kickback model and the profit maximizing model are the same over time,” says Alan J. Wilensky, a Minneapolis-based attorney specializing in estate planning.

So, while I would like to see you continuing to contribute to retirement savings, it’s OK if it’s much less. Part of the payoff from the investment you would make for your encore career is that you’ll work longer in old age. It’s a reasonable trade-off to me.

That said, transitions are hard. Life intervenes with a layoff, a sick parent. The mortgage still has to be paid. We’re forced to make difficult trade-offs or, as the late Randy Pausch put it in his Last Lecture, confront our brick walls:

The brick walls are there for a reason. The brick walls are not there to keep us out. The brick walls are there to give us a chance to show how badly we want something. Because the brick walls are there to stop the people who don’t want it badly enough. They’re there to stop the other people.

The bottom line: If this is something you really want to do, the rest is number-crunching, savvy research, and trade-offs.

Among the things I would do is talk to people who are in the career you want — especially folks who made it a second career. How did they accomplish it? What do they wish they had done differently? What advice do they have for reducing the financial cost of your encore career? I would also check out the website of for insight and information. The social entrepreneur Marc Freedman founded the nonprofit to encourage boomers and others to engage in second and third careers. His idea is that experienced workers can use their talents to address serious social problems, from sustainability to homelessness. The website offers everything from stories by people who have made the transition to original research. It’s inspiring and thought provoking. 

I’d also investigate whether you really need to go to graduate school. Is a professional certificate enough? If you do head to graduate school, how can you reduce the cost? Perhaps picking up some accredited courses at a community college, or by taking a reduced course load for a year or two while you’re still working? Would your current employer pick up the tab for some additional education? I’m just tossing out ideas here.

You’re absolutely right to want to keep your debt burden down, but I wouldn’t let taking on some debt deter you.  Look at your household budget and play with the numbers. Where can you cut for the next several years to limit the financial hit from the transition? What are you willing to give up to pay for the next stage of life?

These are the kinds of questions I would ask. There’s no right answer. At the end of the exercise, you might discover that now isn’t the time — that the numbers and sacrifices don’t add up. Alternatively, you might figure out ways to narrow the financial gap sufficiently or even eliminate it, justifying the plunge.

Personal finance begins with understanding what you want out of life, where your passions lie. It’s also taking the risk to find out if this is the right path for you. The timing isn’t always right. Sometimes you have to stick where you are. But as a goal, yes, I would definitely reasearch the cost of pursuing your dream. 

Let us know what you decide.

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