Financial Considerations When Going Back To School In Your 40s

Several days ago, a client who is also a close friend reached out to inform me of his decision to begin an MBA program at Stanford in the upcoming Fall. While his enthusiasm for joining Stanford and embarking on a new chapter in California was evident, I also detected a hint of anxiety in his voice. Naturally, once the initial excitement subsides, a wave of questions and uncertainties tends to flood one's mind.

After residing in Houston for an extended period, particularly while working in the Oil & Gas sector, bidding farewell to this city becomes a challenging task. Houston holds a unique appeal that extends beyond its culinary offerings, making the relocation process even more arduous.

Furthermore, when accompanied by a family, the associated anxiety reaches a heightened level.

Throughout the past 15 years, I have relocated to five different countries in pursuit of professional opportunities. Although these experiences differ from the act of moving for educational purposes to a new state, I believe I can empathize with individuals who experience a sense of nostalgia when departing their familiar home for a new residence.

However, choosing to resign from your current employment and embark on higher education in your 40s undoubtedly represents a bold and transformative undertaking. While this decision may yield various personal and professional advantages, it necessitates meticulous financial planning. Therefore, the purpose of this post is to delve into critical financial considerations, guiding you through this transition with assurance and positioning you for enduring financial prosperity.

• Assess Your Financial Situation: Prior to embarking on your educational journey, conduct a thorough assessment of your current financial standing. Take stock of your savings, investments, and outstanding debts. Determine your monthly expenses and establish a realistic budget to gain insight into how your income will be impacted during this period. This evaluation will provide a comprehensive understanding of your financial resources, enabling you to plan effectively.


• Research Funding Options: Depending on your present financial circumstances, it is advisable to investigate diverse funding sources to finance your education. Conduct thorough research on scholarships, grants, and financial aid programs tailored for adult learners or individuals transitioning careers. Additionally, explore the possibility of employer tuition reimbursement programs, as certain companies provide sabbatical leaves and financial support to employees pursuing higher education. And if leaving your current employment becomes necessary, you may also want to consider part-time work or freelance opportunities as a means to generate income while studying.


• Create a Realistic Financial Plan: Embarking on this new chapter of your life not only brings professional changes but also has a significant impact on your financial well- being. Therefore, it is crucial to craft a comprehensive financial plan. A well-designed plan allows you to visualize the impact of upcoming expenses and make informed financial Start by identifying the costs associated with your education, such as tuition, textbooks, housing, transportation, and living expenses. Compare these expenses with your available financial resources and explore strategies to bridge any gaps. Evaluate the necessity of student loans and understand the long-term implications of debt on your financial future. It is essential to fully comprehend the terms of the student loans and take the time to compare offerings from different providers.


• Consider the Impact on Retirement Savings: Leaving your job to pursue education can significantly affect your accumulated savings. Without employment, you may lose employer-sponsored insurance coverage, 401(k) contributions, stock options, or profit sharing. The absence of these benefits can have a profound impact on your long-term financial well-being. Therefore, carefully assess the effect on your retirement savings and determine if you can continue contributing to them while studying. Explore alternative retirement savings options, such as Individual Retirement Accounts (IRAs), and seek guidance from a financial advisor to develop a strategy aligned with your long- term retirement goals. Additionally, it is prudent to consider arranging insurance coverage for yourself and your family during your time in school without employment.


• Build a Support Network: While I don't say this solely as a financial advisor, I firmly believe that seeking guidance and obtaining a second opinion from professionals who specialize in financial planning for career transitions can greatly assist in making well- informed decisions. A financial advisor can provide invaluable support by creating a personalized financial plan and offering advice tailored to your unique circumstances. Additionally, connecting with fellow adult learners or individuals who have undergone similar career shifts can provide opportunities to exchange experiences and gain valuable insights. Another beneficial network to consider is alumni, as they can potentially open doors to future employment and internship prospects.

In addition to the aforementioned considerations, there are several other important factors I discussed with my friend:

• Real Estate: Depending on your future plans after completing your studies, it's crucial to decide whether to sell or lease your house. Take into account the tax implications and how the cash inflow may impact your eligibility for financial aid.


• Other Assets: Consider your other valuable possessions, such as cars and home furnishings. Downsizing from a 3000 sqft home in Texas to a potentially 1200 sqft dorm apartment in California requires careful consideration of your real estate space.


• 401(k) Decision: Determine whether to leave your employer-sponsored 401(k) with your previous employer or roll it over into an IRA. Be cautious if you choose to roll over your 401(k) and receive a check at your old residence, as there are tax and penalty consequences if the rollover is not completed within 60 days. Make your decision regarding your 401(k) wisely.


• Education for Children: Ensuring your children receive proper schooling is Research schools in your new neighborhood and inquire about enrollment procedures to ensure a timely process.


• These considerations are essential when making the decision to pursue higher education in your Take the time to evaluate each aspect and seek professional advice for a well-informed decision.

Once again, quitting your job to pursue higher education in your 40s requires careful financial planning and consideration. By assessing your financial situation, researching funding options, creating a realistic financial plan, considering retirement savings, and building a support network, you can embark on this new chapter with confidence. Remember, seeking professional financial advice is essential to ensure you make informed decisions that align with your goals.

Are you considering a career change through education? Let our team of financial professionals assist you in crafting a personalized financial plan. Contact us today to schedule a consultation and take the first step towards a financially secure future.

Any opinions are those of Ali Dhanji and not necessarily those of Raymond James. The information provided in this blog post is for educational purposes only and should not be considered as financial advice. Consult with a professional financial advisor for personalized guidance tailored to your specific circumstances.