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Beware of the Silent Pay Cut

When considering a voluntary job change as a collegiate coach, you must beware of taking a silent pay cut.  Due to differences in retirement benefits and the cost of living between locations, it is possible to receive a higher income while reducing your standard of living and overall net worth.  In order to accurately compare employment opportunities, you must include numerous factors in addition to the base salary and bonus probability.

One primary difference in employment opportunities lies with the retirement benefits made available to you at each institution.  Ideally, both of your opportunities will include a pension plan option as well as an optional retirement plan (ORP) option.  If one opportunity only offers a pension, be sure to check the vesting schedule to understand how long you must be employed in order to receive employer contributions.  While optional retirement plans may also have vesting schedules, the schedules for pensions often require employment for five or ten years.

Retirement contribution rates are another important factor to check when making an accurate comparison.  The rate of contribution is often used by universities to recruit personnel so many times a less desirable location may have generous contribution rates while a prestigious, private institution may offer minimal retirement contributions.  Since the amount of voluntary retirement contributions are limited, a coach may be able to save additional retirement money if the university has a required employee contribution or if it is a public institution and has a deferred compensation plan option.

The Cost of Living index is another important tool in assessing employment opportunities.  This index takes into consideration housing, food and medical costs, transportation expenses, among other factors to determine the variations in income required to maintain your current lifestyle.  The biggest difference between locales will often have to do with how urban a location is as these environments often carry a higher cost of living compared to a small college town.

Within the Cost of Living index, taxes can also be a differentiating factor when evaluating options for employment.  It is useful to familiarize yourself with the taxation structure of the state and municipality of each choice to determine if there are ways to reduce the cost of living.  For instance, in states in low or no state income taxes, property taxes are often much higher than states with income taxes.  An option may be to rent in lieu of buying or to live in a nearby state with a more competitive tax structure.

If you have children, schools can be the most important factor of all.  The best investment you can make in your lifetime is the one you make in your children.  Comparing school systems between locations and even within locations is time consuming but well worth the reward.  If one location offers limited resources in their public school system, you will want to account for the price of a private school when assessing your employment options.  Private school costs have skyrocketed over the past decade with many costing in excess of $20,000 per year.

These financial factors should all be taken into consideration when evaluating employment opportunities.  While choosing your career path is by no means strictly a financial decision, you must be aware of the risks and potential rewards of each decision.  By incorporating each of these factors, you will be able to understand the choices better and make a more well-informed decision.

For more information, please contact Scenic Wealth Management.

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