Financial Planning for College Coaches: A Case Study in Career Uncertainty

Coach Smith, as we have established, is responsible. They know that saving money and paying down debts are the keys to achieving financial independence, so they target cash reserves equaling three months of essential expenses (which we’ll define as housing, basic household costs, childcare and school expenses, health and insurance costs, routine transportation and vehicle replacement, recurring services, and required debt payments) and start diverting extra money to taxable investments. They also contribute $14,000/year to retirement between themselves and their spouse, and $2,000/year to their 529 plans. Coach Smith then gets aggressive about paying down student loans and vehicle debt, knocking down the initial $65,000 to about $36,400 by the time they turn 36.

Coach Jones gets solid advice from GP. They build up and maintain a six-month cash reserve based on essential expenses, and direct extra cash towards taxable investments. They contribute $18,000/year to retirement across both their own plan and their spouse’s plan and contribute $4,000/year to their 529 plans. They also keep paying down their debts, dropping their $65,000 in student loan/vehicle debt to about $42,600 by the time they turn 36.

Coach Davis, on the advice of P4C, decides they need a larger cash buffer. They target 12 months of essential expenses, plus an additional $20,000 moving reserve. Since they’re still working on building that reserve by the time they hit 36, they haven’t started contributing to a taxable brokerage account yet, and in fact, decide to empty their brokerage account to build cash more quickly. They also contribute $18,000/year to retirement and $4,000/year to 529s, like Coach Jones, and pay down their debts at roughly the same rate as Coach Jones, leaving them at about $42,600 left by age 36.

Coach Smith decides to buy a $480,000 home. They’ve done the math, and decide that with their new income, available resources, and the money from selling the old home, that this would fit the budget. Coach Smith continues to maintain three months of expenses in cash, pay down student/vehicle debts, contribute to retirement and 529 plans, and divert extra cash to the brokerage account. For retirement, Coach Smith contributes $14,000 to their regular employee retirement plan, and $10,000 to their spouse’s plan, and maintains those contribution levels through age 39. Things are rocking for Coach Smith by the time they’re 39.

Coach Jones works with GP to decide how much home comfortably fits in the budget, and settles on a $440,000 home, a little less than Coach Smith spent. Coach Jones also increases retirement saving, but splits things differently than Coach Smith. GP recognizes that Coach Jones has multiple retirement plan options: their regular retirement plan, and a governmental 457(b) plan. Because GP is a competent firm that believes in not putting all eggs in one basket, they recommend that Coach Jones split contributions between the two plans. During the transition year, Coach Jones contributes $10,000 to their regular plan, $6,000 to the governmental 457(b), and $8,000 to the spouse’s plan. Once their spouse is re-established and household income rises to $265,000, GP increases total retirement contributions to $38,000/year, with $18,000 going to the regular plan, $8,000 to the governmental 457(b), and $12,000 to the spouse’s plan.

Coach Davis works with P4C to decide how much home comfortably fits in the budget, and they also settle on a $440,000 home, the same as Coach Jones and a little less than Coach Smith. Coach Davis, like the others, also decides to increase retirement savings. P4C recognizes that Coach Davis has multiple retirement options and specifically recognizes that they have access to a governmental 457(b) plan, which can generally allow distributions after separation from the employer without paying the usual 10% early-withdrawal penalty. They recommend that Coach Davis contribute more to that plan, to build optionality in case the funds are needed before retirement. During the transition year, Coach Davis contributes $4,000 to their regular plan, $8,000 to the spouse’s plan, and $12,000 to the governmental 457(b). Once their spouse is re-established and household income rises to $265,000, P4C increases total retirement contributions to $38,000/year, with $12,000 going to the regular plan, $12,000 to the spouse’s plan, and $14,000 to the governmental 457(b).

Coach Smith cuts spending, pauses 529 contributions, and pauses all retirement contributions. They still are paying for housing, household expenses, childcare costs, health and insurance, services, debt, and some leisure activities. They run a slight deficit for the year, and pay for that difference primarily out of their brokerage account, and a little out of their cash account. Coach Smith has handled this first setback.

Coach Jones responds similarly under advice from GP: cuts spending, pauses 529 contributions, reduces retirement contributions to just $3,000 into the spouse’s plan. They continue to pay for the same things as Coach Smith, run a slight deficit for the year, and pay that difference primarily out of their brokerage account. Coach Jones has handled this first setback.

Coach Davis responds in pretty much the same way under advice from P4C: cuts spending, pauses 529 contributions, reduces retirement contributions to just $3,000 into the spouse’s plan. They continue to pay for the same things as Coaches Smith and Jones, run a slight deficit for the year, and pay that difference entirely out of their cash account. Coach Davis has handled this first setback.

Coach Smith evaluates their new financial reality and decides that they can afford a $650,000 house. And why not? Remember, this was one of the initially stated goals for each coach. Coach Smith has landed a big-time head coaching job and is feeling good about everything.

Coach Smith evaluates their retirement options and elects for the pension. Everything they have read and researched indicates that retirement income is the key to a successful retirement life, and the pension formula looks attractive. They contribute the required 9%, or $20,700/year, to the pension, while continuing to make additional contributions through the household’s supplemental retirement plans.

In the meantime, Coach Smith pays off the rest of their student loan/vehicle debt, continues to set aside money, and settles into the role. Their net worth crosses $1 million by the age of 44.

Coach Jones evaluates their new financial reality alongside GP and decides to forgo buying a house right away. The Jones family rents a house for about $32,000/year while the spouse continues searching for a job and then buys a house at $590,000 the following year.

Coach Jones evaluates their retirement options alongside GP, and elects for the pension. GP likes the predictable lifetime-income potential and views this as a job where a long stay is entirely plausible. They contribute the required 9%, or $20,700/year, to the pension, while continuing to make additional contributions through the household’s supplemental retirement plans.

In the meantime, Coach Jones pays off the rest of their student loan/vehicle debt, continues to set aside money, and settles into the role. Their net worth crosses $1 million by the age of 44.

Coach Davis evaluates their new financial reality alongside P4C and decides to forgo buying a house right away. The Davis family rents a house for about $32,000/year while the spouse continues searching for a job and then buys a house at $590,000 the following year.

Coach Davis evaluates their retirement options alongside P4C, and elects for the DC plan. Like GP, P4C compared both options and liked the lifetime income benefit, but they explicitly modeled what would happen if this coaching job ended after two, four, or six years. Their reasoning is that Coach Davis had already experienced one involuntary departure and gave meaningful weight to protecting against another. Coach Davis accepts that this means giving up the pension’s formula-based lifetime-income promise and taking on investment and longevity risk instead.

Coach Davis still contributes the same required 9%, or $20,700/year, to the retirement system, and the school contributes an additional 5%. Coach Davis continues to make additional contributions through the household’s supplemental plans.

In the meantime, Coach Davis pays off the rest of their student loan/vehicle debt, continues to set aside money, and settles into the role. Their net worth crosses $1 million by the age of 44.

Coach Smith evaluates the new financial budget and decides to buy an $850,000 home. They also spend an additional $80,000 on improvements, because hey, why not? Their required pension contribution rises along with their salary, from $20,700/year to $31,500/year. Because they’re already putting substantially more into retirement through the pension, Coach Smith decides to stop making additional contributions to their own supplemental retirement plan, while their spouse continues contributing to theirs. Even with that change, the household is still saving more for retirement overall than they were at the previous job.

Coach Jones evaluates the new financial budget alongside GP and decides to buy a $750,000 home. GP determines that the household has the resources to spend another $60,000 on renovations. They see a steady career progression, a five-year contract, and several years accrued in the same pension system, and determine it’s entirely reasonable to allocate resources towards a renovation. Their required pension contribution rises along with their salary, and they continue to contribute across their supplemental retirement plans and spouse’s plan.

Coach Davis evaluates their new financial budget alongside P4C and also decides to buy a $750,000 home. P4C has no issue with the purchase itself. The household income supports it, Coach Davis is several years into the same retirement system, and this is exactly the kind of home the family wants to own. The difference comes when Coach Davis wants to spend another $60,000 renovating the house. Rather than saying no, P4C recommends waiting until the next contract renewal before making the improvements. The idea isn’t that Coach Davis shouldn’t enjoy the house, but that a large portion of renovation spending may not come back if the family has to move again sooner than expected. Coach Davis continues with the same DC retirement election and contributes the same total amount toward retirement as Coach Jones. The difference between their retirement outcomes continues to come from the structure of the pension versus the DC plan, not from Coach Davis simply saving more.

Coach Smith responds to the firing much like they did the first time. They cut spending and pause retirement contributions while they’re out of work. Because the old school is still making contract payments during the job search, the household remains cash-flow positive despite the disruption and roughly $24,000 in moving and overlapping housing costs. Since Coach Smith fell short of the eight years needed to qualify for the pension, they rolled $148,400 of their own contributions and credited interest into an IRA instead.

Once Coach Smith lands the new $180,000/year Division I head coaching job, they treat it as another chance to get settled. The family sells their previous home and buys a $700,000 house near the new school. Because they’re moving from the more expensive home they bought at the previous stop, the sale and new purchase actually free up some cash rather than requiring another major outlay. Coach Smith also resumes retirement contributions, putting away $24,000/year between their own plan and their spouse’s plan.

Coach Jones works with GP to adjust after the firing. They cut discretionary spending, reduce retirement contributions during the transition, and account for the tax consequences of the contract payments and job change. Like Coach Smith, Coach Jones leaves the retirement system after only six years of service, short of the eight years needed for the pension in our hypothetical plan. About $148,400 of their own contributions and credited interest is rolled into an IRA.

Once Coach Jones lands the new $180,000/year Division I head coaching job, GP reassesses the household around the lower salary. Rather than trying to recreate the lifestyle of the $350,000 job, the family sells their previous home and buys a $650,000 house near the new school. GP views the new head-coaching job as a reasonable place to settle, and the lower home price fits the family’s new income and overall financial position. The transactions actually free up about $40,600 of cash rather than requiring an additional major outlay.

Coach Jones also resumes stronger retirement saving once the family is settled, contributing $30,000/year between their own retirement plan and their spouse’s plan.

Coach Davis works with P4C to respond to the firing in much the same way as Coach Jones. They cut discretionary spending, reduce retirement contributions during the transition, and plan around the temporary contract payments and another substantial move. The difference is that Coach Davis’s retirement-system choice travels with them. Because they elected the defined-contribution plan rather than the pension, the employer contributions that had accumulated over the previous six years remain in an account they own instead of being tied to qualifying for a future pension benefit.

Once Coach Davis lands the new $180,000/year Division I head coaching job, P4C recommends renting rather than buying right away. This isn’t because renting is inherently better. Coach Davis has now been fired twice, both departures required major moves, and the new job pays substantially less than the one they just left. P4C wants to see whether the new position proves durable before committing another large chunk of the household’s assets to a home. The family rents for about $36,000/year instead.

Selling the previous home and not immediately buying another one leaves the household with about $162,200 of net home-closing cash during age 48. Once they are settled, Coach Davis resumes $30,000/year of retirement contributions, the same amount as Coach Jones.

Coach Smith keeps things pretty straightforward. They stay in the $700,000 home they bought after taking the new job and continue contributing $24,000/year to retirement between themselves and their spouse. At age 49, though, the combination of the lower household income and having both kids in college at the same time finally creates a pretty substantial cash-flow gap. Coach Smith runs a deficit of about $36,600 for the year and uses money from their cash and brokerage accounts to cover the difference. This isn’t exactly an emergency. They have plenty of accessible assets available, and this is one of the reasons they’ve been saving and investing all these years.

Things get considerably easier over the next two years. Once the oldest child finishes college, the annual education bill drops from $70,000 to $35,000. Coach Smith keeps the same house, maintains the same $24,000/year of retirement contributions, and is basically back to cash-flow breakeven. They run a tiny deficit at age 50 and a tiny surplus at age 51, while continuing to meet the remaining college commitment and leaving their retirement assets alone.

Coach Jones is in a pretty similar spot. They stay in the $650,000 home they bought after taking the new job and continue contributing $30,000/year to retirement between themselves and their spouse. At age 49, the combination of the lower household income and having both kids in college creates a cash-flow deficit of about $40,200. GP doesn’t treat that as some kind of financial emergency. Coach Jones has plenty of money available between cash and their brokerage account, so they use those assets to cover the shortfall while continuing to fund retirement and meet the college goal.

Once the oldest child finishes college and the annual education bill drops back to $35,000, things settle down considerably. Coach Jones keeps the same house and continues the same $30,000/year of retirement contributions. They still run small cash-flow deficits of about $4,200 at age 50 and $3,700 at age 51, but those amounts are easily covered from their available assets. GP doesn’t recommend some dramatic lifestyle overhaul just because cash flow is slightly negative for a couple years. The plan can absorb it.

Coach Davis has a little more breathing room during this stretch. They continue renting for about $36,000/year rather than buying a home at the new stop, and continue contributing $30,000/year to retirement between themselves and their spouse, the same amount as Coach Jones. At age 49, having both kids in college still creates a cash-flow deficit, but at about $26,100, it’s smaller than the shortfalls for Coaches Smith and Jones. Coach Davis covers the difference from their available cash and brokerage assets without changing the college goal or pulling money from retirement.

Once the oldest child finishes college and the annual education bill falls back to $35,000, Coach Davis moves back into positive cash flow. They run surpluses of about $8,900 at age 50 and $8,700 at age 51 while maintaining the same retirement contributions and continuing to rent. Nothing particularly dramatic happens during these two years. The household simply has fewer fixed housing costs during a period when income is lower than it had been earlier in the coaching career.

Coach Smith takes the job. Household income drops sharply during the transition, so they cut retirement contributions back to $8,000/year and use some of their available cash and brokerage assets to cover the shortfall. It’s a meaningful drop in income, but not one that forces them to reconsider the job or touch their retirement accounts.

Once the spouse gets re-established the following year, things stabilize. Then, at age 55, Coach Smith buys another $650,000 home. That isn’t a new accomplishment for the Smith family. They’ve owned homes at this level before. The important part is that taking the much lower-paying job hasn’t forced them to give up the kind of home they wanted to own.

Coach Jones takes the job too. Household income drops during the transition, so GP cuts retirement contributions back to $12,000/year and uses some of the household’s cash and brokerage assets to cover the shortfall. There’s no need to touch retirement accounts or reconsider the move.

Once the spouse gets re-established the following year, household income settles at $180,000 and things stabilize. Then, at age 55, Coach Jones buys another $650,000 home. Like Smith, they’ve owned homes at this level before. The important part is that taking the much lower-paying job hasn’t forced the family to give up the kind of home they wanted to own.

Coach Davis takes the job as well. Household income drops during the transition, so P4C cuts retirement contributions back to $12,000/year and uses some of the household’s cash and brokerage assets to cover the shortfall. Like the others, Davis can make the move without touching retirement accounts or backing away from the opportunity.

Once the spouse gets re-established the following year, household income settles at $180,000 and things stabilize. Then, at age 55, Coach Davis buys a $650,000 home. After spending the previous several years renting through two different stops, the Davis family is comfortable making a longer-term commitment again. Renting was never the goal. It was simply a way to avoid making that commitment until the family was ready to.

Coach Smith

Coach Smith gets close, but doesn’t quite make it.

After a year without employment income, the Smith family finishes age 60 under $2 million in financial assets. That sounds like a lot of money, because it is. But those assets also have to support the next several decades of the family’s life. They still have a mortgage, healthcare costs are higher before Medicare, and Social Security doesn’t begin until age 67.

So the portfolio starts doing some actual work. By age 65, the Smith family has about $1.44 million in financial assets remaining. By age 75, that falls to about $841,000. By age 85, they’re down to about $206,000.

Importantly, that doesn’t mean the Smith family is penniless at 85. They still own their home, which is fully paid off by that point. But one of the rules we set for this test was that nobody has to sell the house or borrow against it to make retirement work.

Under those rules, Coach Smith hits the first point where their financial assets can no longer fully support the modeled lifestyle at age 90.

So they’re close. Really close. And the easiest fix is pretty straightforward: work one more year. If Coach Smith and their spouse continue working through age 60 and make paid work optional at 61 instead, the plan works through age 95 under the same assumptions. They don’t need some dramatic lifestyle overhaul. They just miss the original finish line by one year.

Coach Jones

Coach Jones gets even closer.

After a year without employment income, the Jones family finishes age 60 with about $2.10 million in financial assets. Like Smith, those assets have to carry the household through decades of spending, taxes, healthcare, and the remaining mortgage, with Social Security not beginning until age 67.

The drawdown is slower than Smith’s. By age 65, Jones still has about $1.56 million in financial assets. By age 75, about $1.01 million remains. By age 85, they’re still sitting on about $438,000.

But under the exact rules we set for the test, the plan still doesn’t quite make it all the way through age 95. The first projected shortfall shows up at age 94.

Again, that is very much not the same thing as “Coach Jones can’t retire.” GP would see that gap decades in advance and adjust. And the adjustment required here is pretty small.

The simplest fix is the same as Smith’s: work one more year. If Coach Jones and their spouse continue working through age 60 and make paid work optional at 61 instead, the plan works under the same assumptions. Alternatively, they could arrive at age 60 with about another $46,000 of spendable assets or reduce the $70,000/year portion of household spending by about $2,100/year.

Coach Davis

Coach Davis is the one who actually gets there.

After a year without employment income, the Davis family has about $2.35 million in financial assets. That’s only about $245,000 more than Coach Jones, which is worth keeping in mind because this isn’t some scenario where Davis finished with twice as much money and the conclusion writes itself.

But that extra room makes a difference.

The household starts with the exact same retirement lifestyle we modeled for Smith and Jones. Same housing costs. Same healthcare assumptions. Same $70,000/year for the rest of life. Same Social Security assumption beginning at age 67. Nobody has to sell the house, borrow against it, or quietly decide that they don’t like spending money anymore.

And the plan holds.

By age 65, Coach Davis still has about $1.87 million in financial assets. At 75, there’s about $1.45 million left. At 85, they still have a little over $1 million. And by age 95, after 35 years of retirement spending, the household still has about $745,000 in financial assets remaining.

So there’s no extra year of work to tack on. There’s no spending cut required to make the projection work. There’s no other goal that has to get sacrificed at the last minute.

Coach Davis wanted paid work to become optional at 60.

At 60, it does.