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.

What is a more important consideration — higher salary vs. better benefits? As someone who has experienced the best of both options, I compare two below. 

14 years with one company is a long time in today’s employment market. My tenure was never been about loyalty or career advancement, and it certainly didn’t earn me a gold watch.

The company paid me a salary above the market rate for the job I did. That’s why I stayed.

The benefits 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 decided I was done sacrificing my higher salary for better benefits.

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

So I finally left my employer and started a new job with my ideal company.

Why were the Benefits so Bad?

Before I get into the details, I acknowledge I was fortunate to have an employer that had benefits and paid 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 from my previous were bad compared to similar employers in the area.

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

  • Healthcare for our family was much more expensive (2x) compared to better plans at larger employers
  • Same for dental; the lowest cost dental plan wasn’t even accepted by dentists in our area
  • The 401k fees were outrageous; a third party siphoned off adviser fees and the fund selection consisted of only 12 expensive managed mutual funds
  • No official maternity or paternity policy; women got 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 never had a dedicated benefits specialist. We had the owner and an admin. So every year, they pieced together a package that was suitable for them and kept their costs down but never considered everybody else. And they never compare themselves to competitors.

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

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

It’s a situation I struggled with for years.

Chief Forgetful Officer

Every year I received a salary increase. But I’ve never received a benefits increase. Most years, I got a decrease in benefits 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 for so long held back my career. Maybe I maximized my earning potential 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 job was 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 did have some perks. Once, I asked for a $22,000 raise and got it.

If I didn’t like a company benefit, I told the boss. He listened.

Then would forget.

The problem was I didn’t want to ask for better benefits. I wanted excellent benefits to be ingrained in the company’s DNA.

For example, I told my boss the 401(k) sucked. He didn’t understand why so I explained it. No change.

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

In a way, I was stuck with my company and they were stuck with me.

That’s what I was so relieved to find a better employer. 

Quantifying a Higher Salary vs. Better Benefits

Being a spreadsheet wizard and numbers nerd, I looked at some hidden costs of my previous employer. I found some potential savings.

The cost of the so-so HMO plan for our family jumped $2,500 one year. The boss blamed politics, but he avoided 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 were 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 health 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 401(k). I lost thousands over the years because of the lousy fund selection and high fees. Nonetheless, I managed to save more than $300,000.

The 401(k) balance had to stay in the administering account until I left the company. 

I was fully vested, so that’s not an issue. The problem was the fees. The expense ratios on the funds were 1.0% to 1.5%. So staying employed in that plan cost me up to $5,000 annually.

When I did ultimately switch employers, my healthcare costs dropped by more than half and the coverage was better. The 403(b) plan has more 200 fund options instead of 12, with plenty of low-cost options. 

The matching is about 10% compared to 4%.

All told, I calculated that my benefits were worth about $20,000 more than my former employer. Crazy, but true. 

Two Options When I was Still at my Former Employer

When I was still with my former company, I sat down with Mrs. RBD and told her I wasn’t thrilled with my employment situation. This wasn’t the first time.

I had a 14-year history with them, mostly on good terms. Prior to the job I was broke, unemployed and living with my parents.

But we often disagreed on how to run the business and my opinions were often ignored.

The company was 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 the year I would leave. That turned out to be true as a left in October of that year. 

I saw two options in 2017:

  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

But then something different happened!

#1 Stay and hope that a better company buys it

Most of the work I did I enjoyed. I was an IT consultant working for a large institutional organization. I interacted with smart people and solved difficult problems. The day-to-day customer interaction was fine.

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

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

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.

What actually happened?

Turns out, another similar mediocre company bought my employer. They were unimpressive from the start. It was unclear if they were going to keep our current benefits or move us under the parent company. 

Key admin people were subsequently laid off. This was a bad omen. 

Then something forced my hand. The partnering company I worked under lost funding on my project and there was no longer any funding for my position. Instead of trying to work something out with my employer, I resigned. 

That gave me four months to focus on my side business and spend quality time with my family before finding my ideal job. We lived off of savings and seven income streams that I built prior to leaving my employer. 


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

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  1. 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!

    1. DFG,
      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.

    2. 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???

  2. 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!

  3. 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

    1. Rich,
      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. 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.

    1. DD,
      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. 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)

    1. DGI,
      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. 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 says:

    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. “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. 🙂

    1. Jacq,
      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. 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!


    1. 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.