Higher Salary Vs. Better Benefits

When comparing higher salary vs. better benefits in a career decision, pay attention to hidden costs such as high health care premiums and 401k fees. 13 years with one company is a long time in today’s employment market. My tenure has never been about loyalty or career advancement, and it certainly won’t earn me a gold watch.

The company pays me a salary above the market rate for the job I do. That’s why I’ve stayed.

The benefits have always lagged competitors. Benefits weren’t as important when I was single and childless.

But as the sole earner for our family of five, I’m constantly debating: should I sacrifice my higher salary for better benefits?

Speaking to other employers and friends, I’ve realized what a good benefits package looks like and should cost.

I don’t have one. And what’s most annoying is that I’m paying for excellent benefits, but receive substandard ones. How can that be?

Why are the Benefits Bad?

Before I get into the details, I acknowledge I am fortunate to have an employer that has benefits and pays well. Not everybody has access to the same. The local economy is strong and opportunities are abundant for educated IT workers. The benefits I describe are bad compared to similar employers in the area.

Here are a few reasons why my employer’s benefits are bad:

  • Healthcare for our family is much more expensive (2x) compared to better plans at larger employers
  • Same for dental; the lowest cost dental plan isn’t even accepted by dentists in our area
  • The 401k fees are outrageous; a third party siphons off advisor fees and the fund selection consists of only 12 expensive managed mutual funds
  • No official maternity or paternity policy; women get nothing (less than 50 employees), not even a guaranteed job when they return from leave
  • No training
  • No IT support; when the power button broke on my company issued laptop, I had to hail a cab to a repair shop

Healthcare plans have always been structured for large companies to negotiate good deals while many small businesses are left behind. Many small businesses have suffered in the past decade.

On top of that, we don’t have a dedicated benefits specialist. We have the owner and an admin. So every year, they piece together a package that is suitable for them and keeps their costs down but doesn’t consider everybody. And they don’t compare themselves to competitors.

To make up for the bad benefits, the company pays high salaries. But with high salaries come thin profit margins, and thus, no money left over to provide better benefits.

In a way, I’m the walking example of why our benefits aren’t good. My salary is high and my margin is thin, so there’s less to go toward improving benefits.

It’s a situation I’ve struggled with for years.

Chief Forgetful Officer

Every year I receive a salary increase. But I’ve never received a benefits increase. Most years, I get a benefits decrease in the form of cost appreciation. Big ones. I know the cost of benefits is consistently rising for everyone, but the company disproportionately passed the costs onto its employees.

Aside from benefits, sometimes I wonder if working for the company has held back my career. Maybe I maximized my earning potential here and should have left long ago. Leaving a position for a better one can be more lucrative.

Hard to say.

For many years, I’ve believed my current job is the path of least resistance to early retirement (NSFW), a job where I can earn the most for my efforts.

Working for a small company with a direct relationship with the owner does have some perks. Once, I asked for a $22,000 raise and got it.

If I don’t like a company benefit, I tell the boss. He listens.

Then forgets.

The problem is I don’t want to be asking for better benefits. I want excellent benefits to be ingrained in the company’s DNA.

For example, I told my boss the 401k sucks years ago. He didn’t understand why so I explained it. No change.

Then a year later I reminded him the plan sucks. He was shocked and upset that didn’t tell him earlier.

In a way, I’m stuck with my company and they’re stuck with me.

Quantifying a Higher Salary vs. Better Benefits

Being a spreadsheet wizard and numbers nerd, I’ve been looking at some hidden costs of my employer. I found some potential savings.

Last summer, the cost of the so-so HMO plan for our family jumped $2,500. The boss blamed politics, but he avoids the truth that bigger companies don’t take hits like that. Plus, they’re not afraid to swallow some of the cost.

To offset the higher health care costs, I opted for the lower cost dental plan. But later I found out no dentists in our area accepts the insurance for adults (only kids).

So I started to look at my health costs (which are well over $10,000 per year) and compared them to the healthcare cost of other similar employers. Google searching led me to some actual plan data, and an interview led to another. Then I asked a co-worker at a partner company to see their data.

I wasn’t surprised to learn that I could get a much better PPO heath plan for my family for half the cost my so-so HMO. Or, a very good high-deductible plan with an HSA for a fraction what I pay now.

Next up is that dirty old 401k. I’ve lost thousands over the years because of the lousy fund selection and high fees. Nonetheless, I’ve managed to save more than $300,000.

The 401k balance must stay in the administering account as long as I’m employed with the company. Meaning, the money is stuck in this account until I leave the company.

I’m fully vested, so that’s not an issue. The problem is the fees. The expense ratios on these funds are 1.0% to 1.5%. So staying employed and in this plan is costing me up to $5,000 annually.

Add that to the $6,000-$7,000 in potential savings health care savings and switching employers could easily save more than $10,000. That can offset a salary decrease.

Two Options Going Forward

Late last year, I sat down with Mrs. RBD and told her I wasn’t thrilled with my employment situation. This wasn’t the first time.

I have a 13-year history with my employer, mostly on good terms. Prior to the job I was broke, unemployed and living with my parents.

But we often disagree on how to run the business and my opinions are often ignored.

The company is always putting out fires instead of preventing them.

Part of creating a life of freedom, happiness, and purpose is to eliminate negative aspects of your life.

I told Mrs. RBD that 2017 would be they year I leave. And I’m ready to make the move, even if it requires some kind of loss of income.

I see two options going forward:

  1. Continue working for the company and hope that a better one buys it
  2. Actively look for a new job outside of my current expertise

#1 Stay and hope that a better company buys it

Most of the work I do I enjoy. I’m an IT consultant working for a large institutional organization. I interact with smart people and solve difficult problems. The day-to-day customer interaction is fine.

But nearly every aspect of dealing with my company is unsavory. Added to my client work, I’m asked to manage fifteen or so company employees. The task needs a full-time project manager and I’ve recommended that, but the company won’t make the investment.

There’s no sign the own is going to sell the company soon. He was more active trying to sell it a few years ago.

#2 Look for something new

One problem is that my specialty is fairly narrow. I have significant domain knowledge of the computer systems of our end customer. Those skills are valuable, but only for their specific computer systems.

I have built some expertise that is transferable outside of this end customer. But leaving may be foolish because my skills are more valuable where I am.

My primary goal is to stop working full-time sooner rather than later. So starting a new career trajectory isn’t so appealing right now.


Weighing salary and benefits will change depending on your age and life situation. Not long ago, the benefits weren’t an issue for me. Today, they mean a lot more. I’m supporting a family who relies on me to keep them safe and healthy. I’m there for them as a breadwinner, and as a Dad every day after work.

Prior to early retirement, balancing earnings and quality time with family is difficult for some professions. I know an attorney who doesn’t see his kids many weekdays.

I don’t want to be that kind of Dad. Luckily for me, my profession provides a solid income and flexible schedule.

But there’s more. Benefits are more important as your family grows and everyone ages. I’ve waited too long to make this a priority.

Do you face a similar situation? Am I being too picky? Should I feel more gratitude toward my employer?

Featured photo via Pixabay

18 Responses to Higher Salary Vs. Better Benefits

  1. Dividend Family Guy February 22, 2017 at 7:37 am #

    Hey RBD,
    I too have 5 kids, am in IT, and face the same dilemmas that you do. My skills appear to be more transferable than yours as I have switch jobs each year for the past 3 years. When switching I have a spreadsheet to punch in all the numbers to see if I am coming out ahead after taxes/benefits are applied. I also factor in the distance to work and time lost with the commute. All of that matters but not as much as you enjoying your job. I have worked at companies where I had to do things I didn’t agree with and brought that sourness home to my family. That affected us more than any additional salary I was paid. In the end you have to balance it all out.
    Good luck!

    • Retire Before Dad February 22, 2017 at 12:45 pm #

      Good to hear your insight. I do enjoy parts of my job. So I’m trying to keep what I like and ditch the rest. May not be possible. But I need to expand my horizons to see what else is out there.

    • Harold February 23, 2017 at 2:55 pm #

      Wait… 5 kids? He said “family of five”… which is 3 kids right?

      I, however, also have 5 kids! What is with us people with 5 kids and an obsession with financial responsibility???

      • Retire Before Dad February 23, 2017 at 3:25 pm #

        Yeah only three kids for me. You people with five must be pulling your hair out daily.

  2. Jack February 22, 2017 at 9:01 am #

    Get out.

    Only you can know the odds of going to your partner company but either way you need to leave.

    I worked a small company and ran into similar problems. My wife worked a similar situation (small, worthless company, old owners) and got burned big time.

    You’re in a bad situation with no good choices, but staying is the worst choice so it’s time to pull the ripcord before it’s too late.

    Good luck!

    • Retire Before Dad February 23, 2017 at 3:27 pm #

      I hear you. It’s long overdue. 2017 is the year, one way or another!

  3. Rich from www.pennyandrich.com February 22, 2017 at 10:02 am #

    RBD — I think you’re highlighting something that many people miss. Benefits are part of total compensation and sometimes more important than the salary itself! One of the reasons I never plan to leave my job (until I retire) is the benefit package, which gets better along with tenure. I’d add to this intangible benefits like the people you work with, your commute, etc. Great post! –R

    • Retire Before Dad February 22, 2017 at 12:43 pm #

      I should have maybe spelled it out a little better. The total compensation package. Need to look at everything and make the best decision. For too long I’ve weighed my career more heavily on salary.

  4. brian503 February 22, 2017 at 11:03 am #

    It can’t hurt to look, right? Check with your network, see what position might be available, go on a few interviews. I think the best way to help in your decision to to really find out what on the other side. I was with my former company for over 20 years, change is hard, but so wish I would have left sooner.

    • Retire Before Dad February 22, 2017 at 12:41 pm #

      This comment got me onto LinkedIn to start looking around. There are positions to explore and people to reach out to. Just gotta get in gear. It’s hard to get up when the seat is contoured to your butt.

  5. Dividend Growth Investor February 23, 2017 at 11:14 am #

    I think that better benefits is always better, since you are not taxed on this “benefit”. If your employer charged you $2000 for what you pay $10,000 today, that is like an $8K increase in salary.

    That 401 (k) you have is ridiculous, but unfortunately it is limited to your current work. Depending on how you are doing with your side hustles, it may make sense to put enough for a 401 (k) match at your workplace 401 (k), and then put the rest in your solo 401 (k). It would have been nice if 401K plans were portable like HSA plans are today.

    As a side note, is there room for ownership of this consulting company ( or perhaps a partnership opportunity for you). While your boss considers the business to be valuable than its true cost, I wonder if a knowledgeable owner-operator like yourself may not be able to increase the value over time ( provided you are incentivized by ownership)

    • Retire Before Dad February 23, 2017 at 11:37 am #

      Always so insightful with your comments. You’ve definitely picked up on some things I didn’t elaborate on. NFC really good point on tax saving of better benefits.

      I’m looking at the health costs as total compensation. So a decrease in cost is an increase in income in my book. On the plus side, what I pay for health is pretax, but I’d much rather pay a lot less.

      The solo 401k could be a new pursuit this year, funded by real estate and hustles.

      Not mentioned earlier, I did finally get through to them on the 401k. I partnered with the admin to convince the owner to switch to a much better, still not great, 401k. It should transfer in the next few months. We sold it as a cost savings to him, better for employees, and auto-administered. This was a no brainer for everyone(except the 3rd party), but it still took 4 years to get him to switch. The selection of funds is much better, though not as many index funds as I would like. My preference is to leave the company and take my money elsewhere.

      As for equity, this would be the owners final Hail Mary to keep me. He mentioned equity years ago and never followed through. Every time I followed up, he said he’d pursue it, but that’s a cost and effort he never had the capacity for. It’s his only card to keep me, and yes, it would highly motivate me to improve, grow and fix the company. The problem is, he’s a micro manager and incapable of changing. He can’t delegate, lacks trust. Owning a minority stake would put me at the mercy of his bad decisions and irrationality. I don’t want to own part of a bad business. Just like a stock. Accepting a stake would make me miserable, because it would bring me closer to the person I am trying to remove from my life. He drives me crazy some days. Unless it’s 51%, no way. If he was smart, he should do that deal, frankly. He could relax and let me fix the mess. But it will never happen, too stubborn. And I certainly would never throw good money in his direction.

  6. Duncan's Dividends February 23, 2017 at 2:57 pm #

    I totally hear you on this one and I think I’m lucky with the company I work for, even though I don’t like the politics of everything is puppies and rainbows. We have decent health insurance, but I have a 401k with moderate fees that I dislike, but we also have 4.5% of our salary put into a pension for us to build on our 6% company match for our 401k’s. Those numbers ratchet up to 5% and 8% respectively next year which is a pretty solid 13% of my salary going directly to retirement so challenging to think about leaving even though my skillset is readily transferable to any insurance company. That being said I share your challenges as I really don’t like the politics of not being able to say something is a problem without people having a meltdown. This is especially challenging when my job involves lean and six sigma thinking to resolve said problems. Good luck on your future endeavors!

  7. Go Finance Yourself February 24, 2017 at 4:25 pm #

    The fees in my 401k plan are similar to yours. The silver lining is the plan is all American Funds which perform pretty well, even considering the high fees.

    It sounds like your current job pays you well, so there is some silver lining there despite the dysfunctions at your employer. I would go with plan #2 but be cognizant of the overall benefit package offered by a new company to make sure it doesn’t delay your path to FIRE.

  8. Jacq February 26, 2017 at 8:03 am #

    “The local economy is strong and opportunities are abundant for educated IT workers. ”
    Every IT guy I know worth his salt is smart and can / will adapt to a system / program that isn’t his specialty. (I have experienced an IT guy who drank coffee and bs ed all day and couldn’t be found when there was an issue.) I’d say explore the actual impact of option 3, but option 2 is a strong second. Look into what other specialties are prevalent and start to explore so you have basic info for when you do interview.
    I have fully admitted I don’t know x or y program or how to do a specific task, but highlight what I do know and examples of being willing to learn, and being quick to learn, in interviews. I don’t think that has been a negative.
    If there weren’t going to be raises at my company this year, benefits wise I was going to have to consider if it was time to look. I like the job is all other ways. They assured us last week now to see the %.

    You’ve also got this big group of people both rooting for you and who will hold you to making a beneficial (pun) change in 2017. 🙂

    • Retire Before Dad February 26, 2017 at 1:43 pm #

      Yeah, now that I’ve put this out there, my peeps will be expecting something this year. I’m expecting something! As is Mrs. RBD and others. So I’ve made it a top priority. I’ll certainly update people when something changes.

  9. Dividend Diplomats February 26, 2017 at 12:58 pm #

    I don’t think you are being too picky with your employer. You’ve brought up issues with him and concerns fro myour end in the past, and he has chosen to forget and address the problems one of his employees have had. It is not that you aren’t voicing your concerns and notifying him of your discontent. Remember, he has had to make the choice to disregard the concerns, so don’t forget about that piece of the equation in this as well.

    Like DGI, I cringed when I read about your 401k benefits. You are absolutely right, those fees are absurd and it is unfortunate that you are stuck with that fund family versus Vanguard or another cheaper option.

    Benefits versus salary is a tough debate, especially when you bring a family into the equation. It isn’t as simple as “maximize your 401k so you can receive the full tax benefit,” you have to consider the cost of care for your family. Smaller companies are at a disadvantage in the benefits game because the pool of employees to spread the cost over is smaller, and you mentioned that in your article. You already know this, but there are a ton of companies out there with better benefit plans for you to take advantage of. I wouldn’t be shocked if you found a new company to work for that would reduce your monthly cost (or at least keep it constant) with SIGNIFICANTLY better benefits out there that will reduce future out of pocket costs.

    Based on the options you have laid out, Options #2 and #3 seem to be the way to go. Option #1 puts too much out of your control and forces you to be dependent on the decision of an irrational boss. But that is just my opinion. If working for #3 is the best option and you are able to work something out with the partner company where you aren’t on the line for any cost, then don’t let the potential of litigation or fear from your current boss get in the way. No boss is happy when you quit and it sounds like this boss is going to take it personally no matter which option you select. So you need to make sure that YOU are happiest with this decision that is best for YOU and YOUR family.

    Hopefully this helps. Sorry if I sounded preachy in my response. Best of luck and please keep us updated with your decision!


    • Retire Before Dad February 26, 2017 at 1:41 pm #

      Not preachy at all. I need to hear it straight. I’m a bit tainted, I think, since I’ve been here this long. Plenty of employers would bring me on, but the high salary is the issue. I spoke to a competitor the other day and we were off on the salary by a lot. Doesn’t mean we can’t meet somewhere, it’s just when you’re dealing with HR people and recruiters, they often say one thing and do another.

      Focusing on me is my primary argument when I have this difficult conversation. He has his best interests, and I have mine. But knowing him, he’ll say others will follow me and the company is at risk. Which is a bit extreme, but I do know some employees are equally frustrated and tell me they only stay because I’m down to earth with them about the situation. He has chosen to forget many of my concerns. That won’t help much in my negotiations because he literally forgets! Then is like “why didn’t you tell me this earlier!”.

      Always glad to see you guys stop by. Thanks for the comment.

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