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Financial planning

Career change at 40: Tips to do it right

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Smiling businessman in discussion with colleagues during informal project meeting in office
Thomas Barwick/Getty Images

Jumping into a job right after high school or college and sticking with it until retirement isn't the traditional path anymore. Today, it's normal to not only switch jobs but change your career at any age. Still, making a career change at 40 can feel daunting, especially when you have family and financial concerns to consider.

If you're making a career change, a job transition plan can help make the move as smooth as possible.

Why make a career change at 40?

There are plenty of reasons you might go through a career change in your 40s.

You may want to transition into something that pays more to help  boost your retirement savings . Or, you may be looking for something less stressful that allows for more time with your kids. Perhaps it's time to turn your passion or side hustle into a full-time career thanks to the gig economy and growth of online work.

Regardless of the reason, there are things to think about as you get started. For people in their 40s who might be on a growing career path, it's a delicate time. You may have a young family to think about and retirement lurking in the distance. So, there are circumstances to keep in mind, especially regarding your finances. Here are steps you can take to prepare yourself, and your family, for this big change.

Identify your new path and plan for it

You may already have a good idea about the direction you want to go with your new career. If that's the case, start setting a realistic timeline for this transition, and keep in mind any critical steps you need to take to tie things up.

If you aren't sure what you want to do, but you know you want a change, identify the following:

  • What you don't like or want to change as well as what you do enjoy about your current career
  • Your skills and experience and how they can apply to a new path
  • Who in your network (as well as friends or family) may be able to help you make a change

You may be excited to leap into a new career quickly. However, more often than not, it's a good idea to take your time and plan things out first, especially if you're still unsure what you want to do next.

Assess your financial situation

An essential part of any job transition plan will be  taking a hard look at your finances . Before you make the leap, consider chatting with a financial advisor. They will look at your current situation, ask about goals for your new career, and help guide you in creating a plan, so you don't skip a beat.

Before you speak with a financial advisor, take stock of your finances in a few different areas:

  • Your expenses. Before leaving your current job, consider tracking your spending for a few months to get a handle on your current expenses.
  • Minimum salary. Whether you've got a new employer or you're going out on your own, determine the minimum salary you need to pay for your basic needs.
  • Employer-sponsored retirement funds. If you're moving to a new employer, learn  what to do with your 401(k)  before leaving your job.
  • Self-employed retirement funds. If your employer doesn't offer any retirement plans or you're working on your own,  explore options for self-employed people .
  • Family needs. If you have young kids, evaluate their financial needs, including any  savings you may have toward education , and factor that into your budget.
  • Emergency fund. The pandemic illuminated the importance of being prepared during the unexpected; an emergency fund can help build a buffer if you're not receiving an income for a few months.

Consider your health insurance

Most people get their health coverage through employer-sponsored plans, so what kind of health insurance can you expect in your new role?

If you're moving to a new employer, check out their coverage, including the costs. You may have to make adjustments compared to your current plan. Also, if your new job offers  health savings accounts (HSAs) , these can help you use pre-tax dollars on qualifying health costs.

If you're transitioning into being self-employed, you may have to explore your options on the Affordable Care Act's (ACA)  Health Insurance Marketplace . For those who have qualifying high-deductible health care coverage via the ACA marketplace, you may open an HSA on your own. Ensure this will provide the coverage you and your family need.

Another option is to look at your spouse's coverage. You may find being added to their plan is the most attractive option for your situation.

Create a job transition plan

In most cases, creating a job transition plan can help you get organized, putting you in a much better position as you embark on your new career.

Here's how to get started:

  • Do your research. Spend time researching your new career path and making connections.
  • Get some experience. Depending on your new career path, you may be able to get knowledge on the side while at your current job.
  • Build your resume. Use your new skills and experience to boost your resume and prepare it for your job search.
  • Search for your new role. If you're looking for a new employer, start the job search. If you're going out on your own, now is the time to get ready to hit the ground running.
  • Set a timeline. You may need a few months to prepare, so giving yourself a realistic timeline can help.
  • Let your current employer know. It may not hurt to put in your notice early to help your employer with the transition.
  • Finish up current projects. Timing your transition out of your job around current projects can help you leave on a good note.
  • Take some time. Rather than going right from one career to another, give yourself a week or two to decompress and adjust.
  • Start your new career. Now it's time to jump on the exciting new path you've chosen.

Practice self-care

Changing careers in your 40s, while exciting, may also be stressful. Preparing for the potential emotional or mental stress can help relieve some anxiety. Here are a few tips:

  • Gather a support network. Remember you can count on family, friends and peers to help you when needed.
  • Stay organized. Review your timeline and job transition plan frequently to help you stay on track.
  • Realize there will be ups and downs. Try not to be too hard on yourself if things don't always go according to plan.
  • Consider working with a financial advisor. They can provide another set of eyes and guidance on the financial side of things.

The bottom line

Transitioning into this new phase of life may be equal parts challenging and rewarding. Create a plan and prioritize you and your family. A financial advisor can help you navigate this tricky time. Find a  financial advisor  near you, so you can transition seamlessly to a new job, new you.

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