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October 23, 2012 No Comments

Changing Jobs as a Coach

Unfortunately, being fired is part of the life of a college coach.  As television contracts reach into the billions and overzealous boosters demand change to demonstrate their influence, coaching families are the ones who ultimately pay the price.  There are many financial ramifications to such a life changing event and below is a list of issues to discuss if you are ever forced into involuntary job change. 

Home Equity Line of Credit

                In some instances, you may be aware that the job security of you or your staff is waning.  If you have minimal cash reserve in non-retirement accounts, one low cost option may be to obtain a Home Equity Line of Credit with your banking institution.  In most cases, these lines of credit require equity in your home, carry no annual fee and require no expenditure up front.  Credit is only extended to those who have employment, so it is imperative to establish an open line of credit prior to being terminated from your employer.

                Home Equity Lines of Credit typically have very favorable rates because they are secured by the equity in your home.  In addition, in most cases the interest charged is tax deductible and you are only charged for the amount withdrawn.  Utilizing debt to sustain your lifestyle for an extended period of time is not recommended.  However, if you must use credit, a Home Equity Line of Credit is certainly better than living on credit cards.

Sell This House!

                Getting out from underneath your largest debt is imperative when facing a job change.  In most cases, you will be forced to move hundreds of miles away in a very short amount of time and managing the debt and property for several years can damage your long term financial health.  In some cases, coaches are among the highest paid in their communities and their house often is among the nicest in town.  This creates an issue when selling the home because fewer people qualify for a high end home.

                It is important to contact your real estate agent as soon as possible.  They can help you to understand the current real estate market, give you an expectation of how long your home may be on the market, and give you a listing price so you can begin to plan for its liquidation.  You must express to your agent that you would be willing to sacrifice on the price for a speedy sale; do not let your agent get greedy with the sales price.

Separation Agreements

                Understanding your separation agreement is important to structuring your finances during unemployment.  If you are lucky enough to have a multi-year contract, you will want to understand how much you are due, over what period will it be paid, and whether it is paid through the university system.  Depending on how it is structured, you may be eligible for continued health insurance, retirement benefits, and/or unemployment insurance.

Unemployment Insurance

                If your employment was involuntarily terminated by your employer you may be eligible for unemployment benefits.  Each state has different policies relating to unemployment so be sure to contact your Human Resources department as well as the state’s unemployment office or website to view the regulations.

                Unemployment benefits are an important social safety net.  Their role in our society allows people to take risks without the threat of living their lives in abject poverty.  While the system was not designed for state employees making six figures, if eligible, you will want to take advantage of this safety net to assist in your financial transition.

Continuation of Benefits

                Maintaining your health and life insurance coverage is important when in between employers.  Insurance in its purest form is hedging against risk and with limited financial resources during unemployment, you must protect yourself again the threat of financial catastrophe.  We encourage our clients to maintain life insurance outside of employer provided policies to bridge the gaps in between employers.

                Health coverage is available through the government sponsored COBRA program.  You will receive a notice with the pertinent information upon separation of service including the cost.  Depending on your current health situation, you may be well served to check the private health insurance market for a policy more designed to your needs.  

Rollover Your Retirement Assets

                Consolidating retirement assets can be a full time job for a coach.  Often employment can only last for several years before you move on to your next position.  In order to maintain continuity from one location to another, you will want to consolidate your retirement assets once you have separated from service into a Rollover IRA.

                One thing to consider prior to rolling over your assets is whether or not you may need cash to help fund your lifestyle while unemployed.  One difference between most university retirement accounts and an IRA is that often loans are permitted on university plans.  If you need cash once you have rolled the assets into an IRA, you will need to take a distribution which is a taxable event.