Pursuing a dream may be worth the high cost
Like a lot of middle-aged people these days, Nancy Lomen, 50, is thinking about retraining for a new career.
What the San Gabriel resident and her husband, Bill, 64, are trying to figure out is whether a $60,000 investment in Nancy’s education is a smart bet at their ages. They have two children, one in college and another who will be in college next year, and little in the way of retirement savings.
“I’ve been thinking and dreaming about becoming a registered nurse midwife for a good 10 years,” Nancy said. “But how are we going to fund this dream? Have I just left it to too late?”
On paper the move looks risky. The Lomens’ modest combined income of $88,000 will decline 40% if Nancy quits working. The couple have just $23,000 in savings.
But fee-only financial planner Delia Fernandez, of Fernandez Financial Advisory in Los Alamitos, said the plan might be just what the Lomens need to shore up their financial future if Nancy is able to land a good-paying job.
“It’s not a slam-dunk guarantee,” Fernandez said, “but this has the potential of being a great retooling story.”
Nancy first started thinking about becoming a midwife when she was a teenager. But when she and Bill married, she decided to devote herself to raising her children. She worked at a variety of jobs but never lost sight of her dream.
Ten years ago Nancy went through a lengthy certification process to become a childbirth educator. She now makes $98 per class teaching a course for parents-to-be at a local hospital. Three years ago she became a doula, a non-medically trained birthing assistant. She began helping women through the childbirth process from conception to delivery. Lately, however, she hasn’t been able to take part in any births given the demands of her full-time job.
Nancy earns $31,774 a year as an administrative assistant and $3,000 more from the classes she teaches. Her husband, Bill, makes $53,434 working as an electrician and teaching English as a second language at two nearby community colleges.
The couple have saved only $14,500 in retirement funds and have an additional $8,200 in checking and savings accounts. They have no credit card debt and they own their cars outright. And they have plenty of home equity. Their three-bedroom home is probably worth at least $550,000 with a mortgage of $79,000 at 5.375% interest. They also have a $16,000 home equity loan at a variable interest rate, which was 3.75% last week.
The Lomens’ children, 19-year-old Luke, a college student, and 17-year-old Larissa, were raised knowing their parents could provide little toward their college educations.
Bill and Nancy said they have no interest in retiring, which is a good thing considering their modest savings. Bill spent his 30s traveling the world and lived for a decade in Australia, where his first daughter, Lyra, still lives.
“I played when I was younger, so I didn’t plan for retirement,” Bill said. “And I want to work because my work is interesting.”
Nancy too is preparing for a long career. “I don’t know anyone in my family who retires to a life of leisure,” she said. “They like to work.”
To prepare for their later years, the planner said, the Lomens should start socking away $15,000 annually as soon as possible. That would be difficult given their current incomes and Nancy’s education plans.
But if she were to become a nurse, Nancy’s income probably would start at $50,000 annually. If she completed a master’s degree with a concentration in midwifery, it could increase to $70,000 to $100,000 annually.
It won’t be easy. Admission to most California nursing programs is tough. And despite a nationwide nursing shortage, budget cutbacks have resulted in fewer job openings.
Still, energetic graduates who are willing to relocate or commute can find jobs, said B.J. Snell, the program coordinator overseeing the midwifery graduate nursing program at Cal State Fullerton. Snell said Nancy’s age would not factor in to her application process or hurt her chances for employment.
“I guess I’ll do whatever it takes,” Nancy said. “I’ll travel if I have to for a job.”
An accelerated bachelor of science degree in nursing at Cal State Northridge would cost about $20,000 in tuition, books and related expenses. Nancy favors that program because it’s relatively economical and fast. Because she has already completed most of the prerequisites, she would be on track to become a registered nurse in 15 months.
She is considering graduate school at Cal State Fullerton, which has a master’s program in nursing with a midwifery focus. That two-year program costs about $20,000. But first she would need to work for a year to gain clinical experience helping patients through labor and delivery.
That requirement would be a good thing for the Lomens, financial planner Fernandez said, because it would allow Nancy to generate some much-needed income in the midst of her career makeover.
Fernandez urged Nancy to research all available scholarships. She said the Lomens might also want to take advantage of historically low interest rates to refinance their home loan and borrow an additional $60,000 to fund Nancy’s education and living expenses.
Fernandez figured that the couple could get a cash-out refinance at about 3.75%. The Lomens could pay off their home equity loan, fund Nancy’s schooling and still end up with a mortgage payment of $1,563 a month. That’s $165 less than what they’re paying now for their mortgage and home equity line.
Despite the costs, Fernandez said it made sense for Nancy to pursue the bachelor’s degree because she could potentially boost her earnings quickly.
“Even if she couldn’t afford to do the master’s program or didn’t get in, she would still be a nurse after one year,” Fernandez said.
There are other considerations, however. Fernandez said Nancy might be forced to work night shifts early in her nursing career, hours that can be tough on even the youngest workers. The planner recommended that Bill increase his life insurance coverage before he becomes the sole breadwinner, and that he try to teach during the summer to earn extra money.
Bill, who surfs in his spare time, said he supported his wife’s dreams. “If that’s what she wants to do, she should do it.”
The planner said the Lomens should consider their plan carefully, then proceed quickly if they decide to do it.
“I’m thinking the sooner the better,” Fernandez said. “The danger is when someone has a dream, you ask, ‘Is this just a dreamer?’ You’ve got to have a plan to make it happen in a practical way.”
