5 Considerations When Navigating a Career Change

If you’re navigating a career change or considering making one, first consider the potential impact on your financial plans.

The last few years have changed how many of us view life, work, and the balance we’d like to strike between the two.

And for many people, the Covid-19 pandemic provided the necessary push to finally change careers. In fact, a recent survey from Prudential found that 22% of American workers have changed jobs since the pandemic started. Moreover, about a third of those surveyed said they took a pay cut for a job that gave them a better work-life balance.

At the same time, many workers are redefining what retirement looks like for them. Indeed, workers are increasingly opting for an encore career over traditional retirement. Meaning, they’re switching careers midlife for a more fulfilling path than their current role.

If you’re considering a career change, you’re in good company. But before making a move, it’s important to consider how doing so may impact your financial needs and goals.

Navigating a career change? First consider the following:

#1: Income

Most people tend to hit their peak earning years between ages 45 and 64, according to BLS data. This is generally because they’ve pursued one career path for many years, climbing the company ladder.

When it comes to navigating a career change, it’s important to consider how doing so may affect your income. Indeed, changing careers at any stage of life may mean taking a significant pay cut.

If money isn’t your sole reason for changing roles, the benefits may still outweigh the cost, so to speak. However, most people rely on the earnings from their job to support themselves and meet their financial goals.

For example, if you’re paying off student loans, a mortgage, or other debt, losing a portion of your income may extend your timeline until you’re debt-free. On the other hand, if you don’t have debt and you haven’t succumbed to lifestyle inflation, a pay cut may not make a difference in your financial plans.

In addition, you may have more flexibility when navigating a career change if you have a partner or spouse who earns a stable income. No matter your personal circumstances, make sure the numbers make sense before making a major move.

#2: Benefits

In the United States, benefits make up nearly a third of the average worker’s total compensation, according to recent data from the Bureau of Labor Statistics. Meanwhile, healthcare costs continue to rise year after year.

That means your current benefits package may be a more important part of your overall compensation than you realize. As such, you may want to make sure your new employer can provide similar benefits when navigating a career change.

Of course, benefits often extend beyond healthcare coverage. In many cases, you may lose retirement benefits and other incentives by changing careers.

In other words, consider how changing careers may impact your overall compensation and expenses. If you’re planning to work for yourself or a non-profit, for example, you may lose valuable benefits. And even if your new employer offers attractive benefits, you may not be eligible for them right away.

#3: Seniority

If you’ve progressed in your career, you likely paid your dues early on. That may have meant long hours, grunt work, and missing out on personal plans.

When you’re in your 20s, these sacrifices are often par for the course. However, later in your career, you may not be as willing to prove yourself again.

No matter what skills and experience you bring to the table, navigating a career change may mean climbing the company ladder again. In addition to affecting your status, you may lose your influence—especially when it comes to decisions that impact your goals.

More importantly, having seniority may make you less vulnerable to downsizing or company layoffs. These intangible benefits, while often hard to quantify, are the payoff for giving your time and energy to one employer year after year. Before changing careers, make sure you’re willing to endure all of the potential consequences that come with it.

#4: Skill Acquisition & Career Trajectory

Depending on why you’re navigating a career change, opportunity for growth may not matter to you in your new role. However, if you’re looking for a new challenge, you’ll want to make sure you’ll find one on your new path.

First, it’s important to understand what skills may be necessary in your new career. For example, you may need to acquire new licenses and other credentials to be successful.

Indeed, this may mean long hours of studying for exams, attending seminars, or meeting continuing education requirements. You’ll want to make sure you’re ready to put the time and energy into these endeavors before undertaking a new career.

Furthermore, if you’re advancing in age, be sure to consider the potential for age discrimination, which can present itself in a variety of ways. A common example is passing over an older worker for a promotion or pay raise. In extreme cases, it may even mean forced retirement.

Ultimately, everyone has their own reasons for navigating a career change. No matter your personal and professional goals, make sure the potential for achieving them is there before making a move.

#5: Long-Term Goals

Lastly, it’s important to revisit your long-term financial goals when considering a career change.

For example, will changing roles now affect your ability to buy a vacation home or retire on time? And if it does, are you okay with that?

You may not have specific financial goals yet, and that’s okay, too. Either way, be sure to identify your priorities when navigating a career change. If you’re changing roles for the right reasons, you may ultimately decide to go for it—even if that means adjusting your financial plans accordingly.

Consider Consulting a Trusted Financial Advisor Before Navigating a Career Change

A career change can be risky at any age. Yet the stakes tend to be much higher the older you get.

On the other hand, changing careers can also have many benefits. You may get to spend more time with loved ones, work from wherever you want, or simply feel happier and more fulfilled in your new role.

Ultimately, only you can decide whether the benefits of a career change outweigh the costs. Nevertheless, a trusted financial advisor like SageMint Wealth can help you understand the financial impact of navigating a career change, as well as the potential effect on your long-term plans. To find out more and schedule an introductory appointment, please contact us. We’d love to hear from you.