From the February 2007 issue of Wealth Manager Web • Subscribe!

Next Stop

As his first career, the post Impressionist artist Paul Gauguin worked as a successful stockbroker in Paris, while he enjoyed painting on weekends and collecting artworks. After leaving the stock exchange to take up painting full-time, he arranged an exhibit of his works to generate funds for his voyage to Tahiti. There, he planned to live on "ecstasy, calmness and art." Was he successful? Yes and no: Toward the end of his life, in 1903, he experienced health and financial problems, but in November 2006, one of his paintings sold at Christie's auction house for a record $40.3 million.

Changing careers--especially in midlife--takes courage, commitment and a clear vision. It involves redefining core identity and values, so each case is unique. And with ego so closely tied to income, title and possessions, few people determine to take the plunge. A client may begin with a mental image of a new direction, but it is up to the financial planner to evaluate that dream and then to help build and execute the reality.

As longevity increases, time horizons shift. A couple, both aged 60 today, can expect a 60 percent chance that one of them will live to be 90, and a 42 percent probability of both making it. Today's 50- and 60-year-olds are more physically active and better educated than those of previous generations. These are just some of the reasons we need to dispel myths about seniors, according to Maureen Mohyde, a gerontologist with the Hartford Financial Services Group.

"For example, people believe older adults are unwilling to learn technology," she points out. Studies by Pew and AARP suggest otherwise--even that retirees actually spend more hours online than younger people.

As boomers reach their 50s, a small but growing number is contemplating embarking on a different career altogether, instead of taking traditional retirement. Some who have been at the same grind for more than 25 years seek more satisfaction and different intellectual stimulation. Many opt to help younger people, or "give back" to their community; some decide to buy a business or franchise to gain autonomy and control.

Keeping it Real: The Bottom Line

As a financial planner, you should become involved in the process early--as soon as your client questions whether a career switch is affordable. Experience shows a majority of those who begin new careers after 50 will make less money, rather than more. For a sense of how much a position in a new field might pay, you and your client will find useful information on Web and

On the other hand, a fresh start could mean more years to accumulate savings before retirement, or even to acquire better benefits. Gail Fialkow, a financial planner in Fairfax, Va., counsels clients in the Washington D.C. area, who often transition to jobs with the federal government. "The government offers awesome retirement and health insurance benefits, and some 50-year- olds will trade those off against less pay or prestige," she says.

In these situations, clients may turn to you for help in squeezing out extra investment dollars. "We can work some magic to produce more income, but we don't want to jeopardize a financial future by taking too many risks," says Dallas Coffman, a Boston area planner. Recently, Coffman reconstructed a client's $62,000 income, invested 100 percent in growth equities to generate $87,000. He allocated 20 percent to REITs, put 60 percent into variable annuities with a 5 percent yield, and 20 percent into bond funds. "But a few years of negative returns can cause a portfolio to run dry much faster. If anything starts to go wrong," he warns, "get on it immediately."

Most likely, clients will have to brace for budgeting, and it is up to you as their planner to frame the reality in black and white. "Everybody hates the 'B' word, so we call it a 'spending plan,' " Fialkow says. Whatever you call it, you must go through the minutiae of the clients' expenses: cable TV, veterinary care, lottery tickets, vacations, restaurants, credit card debt, a refinanced mortgage. Don't forget to adjust for any shifts in tax rates, which may actually turn out to be favorable. Realistically, it's not easy to make a lifestyle change. It may call for major sacrifices, such as moving away from home to a cheaper location.

Clients will also need to focus on the transition period and find the cash to weather it. Optimists assume it will take only some months or a year. In fact, it could last two or three times longer. Even in the client's own field, "It takes an average time of 11 months to find a new job paying over $200,000 right now," reports Jeff Crown, managing partner at Boston-based recruiter Essex Partners. "Planners must lay out a ramp or runway for the search time, without drawing down assets or incurring tax penalties through selling them," he says.

In the search for additional funds, it may be tempting to tap retirement dollars. But it is a basic principle of financial planning that money earmarked for retirement should only be used for that purpose, and not before--not even for college tuition or a second home. Notwithstanding, many people do borrow from retirement accounts like 401(k)s and 403(b)s to launch their own businesses. The IRS permits holders to borrow up to the lesser of $50,000 or 50 percent of the current balance. But Fialkow warns, "The minute you leave your company, you must pay it back." Otherwise you take it as a distribution, and hence owe taxes and penalties. If you are younger than 59 1/2 , you will also pay 50 cents on the dollar on IRA withdrawals.

Since the late 1990's, employees have been less likely to be offered participation in defined benefit pension plans, "But individuals who walk away from them could sacrifice an inordinate amount," cautions Tim Driver, CEO of

The Client's Due Diligence

A major life change deserves extensive research and preparation. Has the client done the homework? It is splendid to visualize emotional and mental self-fulfillment, but how about the everyday details? "You may have to kiss off five weeks' vacation," Coffman reminds. This new "worklife" will involve different people, new superiors and subordinates, different hours and benefits.

Clients who come from a corporate background should utilize their corporate skills and resourcefulness in their research. Suppose they faced a business problem like finding a new supplier. Whom could they contact, and where would they network, to locate one?

As their plans take shape, further education or even your hands-on involvement may be in line. Doug Taylor, a planner in Torrance Calif., is a member of the Alliance of Cambridge Advisors, a group that specializes in holistic financial planning. Taylor cites one of his clients, who had worked until 56 as an accountant in a large company. Fascinated by the Civil War and a frequent visitor to the battlefields, he decided he wanted to teach history at the college level. Recognizing the need for qualifications, he has begun to take night classes. "Depending on state requirements, you may need to be enrolled for two to four years," says Taylor. Meanwhile, he suggests, think about making a presentation at a local school. Get into the environment and do it, to see if you really like it.

Prospective career switchers also should consider doing some volunteer work in the new field, even while they are still working full time in the old one. "You don't want to walk out of the door of a Fortune 500 company to cure world hunger!" says Mohyde. One of her own clients who was working in management at FedEx, went to culinary school to learn to become a pastry chef for high-end caterers. While taking courses, she worked part-time as a manager at Starbucks.

Some skills, however, cannot be acquired at night school. For those who have always been employees, starting their own business may prove to be a daunting challenge. They must come to grips with time management, costs, insurance, liability, business formation, taxes and recordkeeping. They may have to focus on the job during the day, and paperwork at night. Marketing abilities are critical. "Employers provide buffers between you and the real world," Failkow says. "That is one reason small businesses so often fail."

Consulting is another popular choice among 50-somethings. Certainly the notion of hanging out a shingle and working from home is appealing. But you should prepare these clients for how difficult that can be--particularly if they have never worked for giants like McKinsey or Deloitte or Bain. It might then make sense for them to team up with a more experienced partner. Crown has dealt with many executives who assure him that they are "brilliant" at financial services or manufacturing or outsourcing. "Unfortunately, they don't realize that they haven't been trained as marketers and business developers."

Help your clients to be realistic about their strengths, too. Many companies recognize the advantages of hiring older workers--the lower turnover rate and a higher affinity with older customers among them. For example, more mature workers may be well equipped for fundraising.

A Family Affair

Since spousal buy-in is essential, and both partners must be committed to making such a drastic career change, the first question to ask at the very first career discussion is: What does your spouse think? Your client will probably pause for a moment, and reply that the spouse sees it from an entirely different angle. Even if the would-be career changer has already made a lot of money, the spouse may prefer that he or she stays home and takes the opportunity to bond with the family. Or if both parties work, one may harbor resentment at possibly having to carry the other for a while as they pursue the dream of self-actualization.

Relocation is another frequent source of contention. Crown suggests conducting a strategy session with both spouses in the room. "Discuss the breadwinner's skill set and passions, and how to combine them." Depending on levels of antagonism, you might call in a family therapist to help the couple communicate in a non-threatening way.

In some cases, the expenses of dependents, or even a second marriage, may make a career switch less feasible. There may be children and grandchildren to consider; middle-aged clients are probably approaching the age where they are thinking about leaving some legacy for their heirs. Any income disruption could affect those plans.

Yet children can also contribute a valuable lesson. What would you, as a parent, tell them, if they asked you, "What should I be when I grow up?" Most parents would probably advise, "Do what makes you happy." Now is exactly the occasion, says Taylor, "to take your own advice and practice what you preach."

Go to Plan B

Not all adventures go as planned, so it is wise to keep a few fallback options open. Above all, advise clients not to burn bridges from their first career. If the second one does not pan out, a candidate should leave things as easy as possible to re-enter the workforce. The supply chain and technology they worked with may be outdated, and their rolodex contacts long gone, so it is wise to keep in touch with the "old life."

Another prudent route could be a part-time alternative. Taylor recalls one client who worked as an executive in-house recruiter for a healthcare company, but dreamed of painting full time. Taylor reminded her about starving artists and suggested that she continue to work part-time. Earning $125,000 a year for the next seven years, she could secure a better retirement--and keep on painting.

For years, the financial planning industry has focused on wealth accumulation and generating the largest possible return for retirement savings. But if increased longevity means that income must extend for another 30 or 40 years, advisors will be incorporating a wider range of scenarios, including playing an important role in late career decisions. In fact, you may be the first to ask if clients have ever thought of working at something entirely different--both as a way to renew interest and enthusiasm, and also, by working longer--to put off the need to tap into savings. The Hartfortd's Mohyde predicts, "One day, more advisors will be talking in those terms."

Remember the last time you tackled a jigsaw puzzle. You spread out all thousand pieces on the desk and thought: Which is the first key piece, the corners or the sides? Wrong! That piece-by-piece approach is not what works in assembling a second career future. You need to help clients look at everything together--the finances, psychology, and family dynamics. "The most important image is the picture on the box, and it will change over time," Taylor explains. "What is your picture?" he asks.


Graduate Student

Paul Dash "learned to understand human nature" working as a dentist, which allowed him the freedom to be his own boss. "Although dentistry was very lucrative, I had always wanted to be an attorney," he confesses. When he found himself financially independent by age 58, Dash enrolled in the Massachusetts School of Law in Andover, where "the hardest challenge was staying alert to study after seven at night." After being admitted to the bar, he joined his son's law firm (Dash & Father!) where he worked for a year-and-a-half, until he decided to retire--this time for real. "My wife was very supportive, but I wasn't willing to put in 70-hour weeks."

Serial Entrepreneur

Twice retired, Gary Grefrath "didn't know enough to quit." After running operator services at Rochester Telephone, he left after 26 years to launch a new phone company, US LEC in North Carolina. Two years later, the new company went public, earning him "a nice financial bonus." He sold enough stock to repay his debts and set up an irrevocable charitable trust to minimize the tax impact. Now Grefrath has gone back into business yet again. He and his son, Eric, a 25 year-old engineer, together operate an Alpha Graphics franchise. Grefrath's advice to fellow entrepreneurs: Prepare a thorough business plan and talk to others who have already gone down the same path.

Family Business

By the age of 58, Glenn Anderson had been a court reporter for 35 years, but always wanted to start a business, eventually working with his wife. However, when he opened a dry cleaning store near Minneapolis, his wife decided to continue in her job as an accountant temporarily, in order to maintain her health insurance. The Andersons, who are currently living on her income and savings, plan to open another half-dozen stores. Then she hopes to come aboard. Meanwhile, their 21-year-old daughter, a Web designer, already works 25 hours a week in the business. "She likes working here," Anderson says. "We used to teach skiing together, too."

Helping Others

Ben Gustavson retired as principal of Jamestown High School in western New York to take care of his wife, who was ill. Five years later, aged 57 and with a pension sufficient for his financial needs, he "did not feel old enough to be retired." As an educator, he liked being able to help people realize their goals. He had already taught economics and been involved in school budgeting. After taking the Series 6 and Series 63 exams, he joined AXA as a financial consultant, where he is "helping people meet their dreams and desires."

Spotting a Need

Kraig Kast retired from his job as a technology consultant at 51 to tend his real estate investments. He soon discovered a need in the market for real estate expertise integrated with estate planning, tax and financial analysis, so decided to set up Atherton Trust, in Redwood Shores, Calif. He had saved three years of liquid reserves for his mortgage and living expenses--the time he estimated he would need "for a fly or die decision." It flew, and Anderson now employs more than 300 people in 25 offices.

Vanessa Drucker, who used to practice law on Wall Street, wrote about British advisors in October 2006.

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