I have been mentioning in my last several updates that I am leaving my current job to take a new one, but now I finally have some time to write about exactly what I am doing. If you have read any of my other posts on this site you know that I am trying to achieve Financial Independence in five years (when I turn 45). With that in mind I am going to discuss why I decided to leave my current job making approximately $85,000 a year for one that at best will pay approximately $75,000 a year. From a financial perspective this may seem like an ill-advised decision, but here’s why I will still end up ahead in the end.
For a little background if you have not been following my website, I am currently employed as an assistant professor at a private university in Florida. I teach exclusively in a graduate program and have a base salary of $73,832 a year and make on average an additional $13,000 – $15,000 teaching a couple of summer courses.
The new job is for a faculty position at a university in North Carolina (public, Research I) with a base salary of $63,000 and guaranteed summer pay of $12,000 if I choose to teach in the summer (I negotiated for the guaranteed summer pay). So at face value I am taking a pay cut of about $10,000 a year.
I could start with the non-financial reasons of why I am changing jobs and end up writing a short book on why I want to leave my current institution, but I will just highlight a couple of the non-financial reasons here that in some cases provides enough justification regardless of the financial implications…
Non-financial reasons related to my current job:
- Without going into too much detail I do not care for the colleagues or the institution where I currently work. If you want to see a model of how an institution of higher education should not be run this would provide a good case study. Poor leadership, inflated egos, policies that harm students and inhibit learning, to name a few…
- Because the institution only offers graduate courses in the evening, it means that I have to teach 3-4 times a week from 6pm – 10pm at night while at the same time having to go in for meetings and other work sometimes at 8am.
- All courses are taught face-to-face with no ability to teach online or hybrid courses. In my field this is a ridiculous university-wide policy. So along with this problem you can extrapolate that this university operates a few decades behind the modern universities.
- Ended up with too many administrative responsibilities, not enough time to conduct my research, and the teaching load was too heavy.
- The academic quality of many of the programs are questionable at best.
The disappointing thing is that when I was hired, the university wanted to move in a more modern direction and I was one of the hires to help transform and lead them in this direction. Unfortunately we had a complete leadership turnover at all levels that put an end to innovation.
Non-financial reasons related to my new job:
- Teaching load is a lot lighter and all of my courses will be taught online.
- More resources including a larger travel budget (~$4,000 a year)
- High caliber university with great colleagues.
- Good location, although we enjoy where we currently live.
- Better research opportunities and resources to support my research
I could stop here and most people would be convinced that this is a good move to be making based on those reasons alone, but since this is primarily a financial blog, I wanted to focus on the financial implications of this decision. Here is a chart that provides a financial comparison between the two jobs:
Base Salary $73,803 $63,000
Summer Pay (Optional) $16,800 $11,000
Travel Funds $1,500 $4,500
403(b) yes yes
457 no yes
Additional Retirement Plan no yes (State Plan)
6% pre-tax deduction
plus 6% salary match
Approximate Retirement Match $4,059.16 $3,780
I did not include the tax implications (NC has a state income tax) because if you account for sales tax and property tax differences it make no noticeable difference. The main difference that stands out is of course the salary difference. The base salary and even the summer opportunities represent a huge decrease in pay. I also did not factor in cost of living since they are almost identical if not a little bit less in North Carolina (even with the additional state income tax).
The retirement options provided by the new job blow my current options out of the water. Currently I only have access to a 403(b) that allows me to contribute $18,000 pre-tax with a 100% match up to 5.5% of my salary. In my new job I have access to a 403(b) and a 457 plan allowing me to save an additional $18,000 ($36,000 total) a year. Also once I leave this new job the 457 plan allows me to withdraw my money with no early withdrawal penalties. On top of that 6% of my salary is deducted pre-tax with a 100% match in a separate retirement account (ORP) run by the state. That is a serious amount of money that I am able to shelter from taxes right now giving me more control of the money in the future and allowing it to grow tax deferred.
Finally if all of that was not enough, because of the way the contracts work in my current job, I will continue to get paid through the end of December meaning that I will have two paychecks for five months. Once I factored this into my calculations (additional $34,230) I will actually make the same amount of money in base and summer pay for the first three years of my new job, the only difference is that I will get this additional amount over 5 months instead of three years.
Ultimately we are excited about this opportunity while at the same time trying to deal with all of the moving parts to make this happen. This includes selling a house, packing all of our belongings, and moving to a new place (renting) sight unseen all while taking care of a three year old and a 1 month old. I imagine that this experience will provide some interesting material to post over the next few months.
In terms of financial independence, if my calculations are accurate, we should be able to reach our goal a little sooner. As an added benefit I should hopefully get more enjoyment out of my new job!
Has anyone else ever made a similar choice, if so what did you do?