Coaching Buyouts and Contract Extensions Thread

[medinabuckeye1]

I guess I don't define "rich" as purely passive income that would *still* make you a 1%er.

I get your point about the difference between income and wealth. Which of course is the question of what sort of lifestyle you need to maintain in a passive income scenario. If you're trying to maintain a very high-income lifestyle, you need a LOT more wealth than if you're trying to maintain a middle class or upper middle class lifestyle.

That guy who had $2.5M in earned income and only $1M in net worth clearly has a very high end lifestyle, and he's going to need obscene amounts of wealth eventually to maintain it as a passive income.

For me, I live an upper-middle class life. $5M in the bank would probably be enough to sustain that. $10M would definitely do it. $30M would sustain a lifestyle unlike any I've ever known.

I'm in the same boat and probably need a lot less wealth to sustain my lifestyle than you do because I live in suburban Cleveland while you are in CA so obviously my living expenses are going to be a little lower.  

One thing we haven't talked about much through this discussion is age.  Part of the reason I keep putting up large numbers is because I look at this as a "What would I need to retire tomorrow?" situation.  

I'm 45 so my projected lifespan is ~40 years.  Per Social Security you (42) and I (45) have life expectancy of 36.75 (to age 78.75) and 34.06 (to age 79.06) respectively.  In theory we *COULD* dip into our principle a little bit each year but with ~40 years of life expectancy to go not very much.  Also, prudent planning requires that one prepare for the possibility of living longer than SSI's table.  Ie, if you had $5M today and structured your investments to give you the maximum annual payout each year until you turned 78.75 that would be fine unless you lived to age 79 at which point you would be flat broke.  

From my perspective, this exercise at age 45 isn't all that different than it is at age 25 or 35 because in any of those cases the timeframe you need to plan for is sufficiently long that you can't dip into principle for all but perhaps a small fraction of your annual needs.  That said:

• Life expectancy drops below 30 years at age 50.  
• Life expectancy drops below 25 years at age 56.  
• Life expectancy drops below 20 years at age 63.  
• Life expectancy drops below 15 years at age 70.  
• Life expectancy drops below 10 years at age 77.  

As you approach a more typical retirement age your life expectancy gets shorter and that means two things that dramatically reduce the amount of net worth needed to retire:

• Inflation becomes much less of a concern.  Even in the 1973-1982 example that I posted above by the time you are 77 your life expectancy would only see that happen once.  
• You can start planning to dip into principle because your horizon is short enough for that to be reasonable.  

There is also a third issue.  The Medicare eligibility age is 65.  Hitting that likely saves you $20k+/yr.  Even before you actually attain Medicare eligibility you can start treating that as a temporary expense.  However, in your mid-40's that is still a 20 year consideration.  

All of my above comments presuppose that we are talking about a person with at least a 30 year life expectancy such that dipping into principle isn't a prudent option.  

[Cincydawg]

Life expectancy for a 100 year old white male is 2 years.

[FearlessF]

I'm in the same boat and probably need a lot less wealth to sustain my lifestyle than you do because I live in suburban Cleveland while you are in CA so obviously my living expenses are going to be a little lower. 

hah, I live in the middle of dirt farmers

I don't need to live any better than I've been living the past ten years.

about one million will get me to 100 years old from 60 years old with my current life style

[CatsbyAZ]

Month-old news but Jim Harbaugh's contract extension numbers are definitely worth going over.

First off, I'm a huge fan of how Michigan's administration reconfigured Harbaugh's contract because it allows for the needed time-extension (to 2025) to save recruiting face while A) vastly lowering his buyout year by year (see 2nd to last line) and B) cutting his guaranteed compensation in half (from $8Mil to $4Mil) while incentivizing the other half through bonuses he's very unlikely to meet. Without any of the bonuses, Harbaugh's $4Mil guaranteed salary drops him to the 34th highest paid coach nationally.

I want to emphasize how important I believe this type of extension is because I predict this will become the model for contract extensions going forward at MANY schools. For example, UCLA's new AD is already trying to copy this extension for Chip Kelly. Most places probably won't negotiate to lower the guaranteed compensation, but the most attractive part of Harbaugh's extension of minimizing the buyout will be widely copy-catted because it solves the recruiting optics of needing a coach on contract for 4-years out WITHOUT the risk of guaranteeing those 4 years to risk full payout if fired, such as Auburn owing Malzahn north of $20Mil.

ADs should've been negotiating for lesser buyouts years ago, but I guess it wasn't "industry standard" until maybe this pandemic is beginning to dictate where to lower the financial risk of athletic department budgets?

[FearlessF]

Indiana football coach Tom Allen has agreed to a new seven-year contract through the 2027 season that will pay him an average salary of $4.9 million per year, the school announced Monday.

Allen, who was signed through the 2026 season, had an additional year added to his contract after Indiana's Gator Bowl appearance. His average annual salary had been $3.9 million but will climb by $1 million in the new agreement.

The increases come in Allen's outside marketing and promotion income, which is added to $500,000 in annual salary and $500,000 in deferred compensation.

The 2020 Big Ten Coach of the Year and American Football Coaches Association national coach of the year will make $4.3 million in 2021. His salary will increase by $200,000 per year throughout the contract, topping out at $5.5 million. He will continue to receive an extra year on his contract for every future bowl appearance, at a salary of $100,000 more than the final year of the agreement.

Allen, 50, is 24-22 at Indiana with consecutive bowl appearances, a 14-7 record since 2019, and a No. 12 AP poll finish last season. He arrived as Indiana's defensive coordinator in January 2016 and replaced Kevin Wilson as head coach on Dec. 1 of that year.

If Allen leaves Indiana for another job before Dec. 1, he would owe Indiana his full remaining compensation. His buyout then drops to 50% of his remaining compensation for the next year, and then decreases to $4 million, $3 million, $1 million and $500,000 in subsequent years.

Indiana would owe Allen all of his remaining compensation if it fires the coach without cause before Dec. 1, 2024. The school would owe Allen 50% of his remaining compensation in the final three years of the agreement, and 100% of his compensation for years tacked on in future contract extensions.

Allen is a native of New Castle, Indiana, and was a longtime high school coach in Florida and Indiana before entering the college ranks in 2007.

[OrangeAfroMan]

I guess I should coach.
I could win Teacher of the Year for the state of AZ and I won't get a penny added to my salary.  

[FearlessF]

Tennessee parted ways with assistant coach Kevin Steele this week, less than two months after adding him to staff prior to Jeremy Pruitt's firing and owes him a hefty severance package. According to ESPN's Chris Low, the Vols will pay Steele his full $900,000 salary over the next two seasons after new coach Josh Heupel decided not to retain him on staff.

In addition to Steele, Tennessee will pay the buyouts of several assistant coaches totaling $10 million, per ESPN. Steele's buyout would be mitigated if he takes another job elsewhere. Shortly after Pruitt's ousting, athletic director Phillip Fulmer stepped down and the Vols hired UCF AD Danny White.

[MarqHusker]

I guess I should coach.
I could win Teacher of the Year for the state of AZ and I won't get a penny added to my salary. 

Don't feel that special.  Every quarter Banks promote scores of people to AVP, VP, SVP and it never impacts salary.  

[OrangeAfroMan]

So Kansas is now lookin for a HC. 
They need to find a millionaire 50 year old man who's at work 18 hours a day with college coeds running around these massive athletics facilities and hasn't had any incidents.

.
Good luck.

[CatsbyAZ]

LSU will owe Ed Orgeron $17 Million as buyout for the rest of his coaching contract; from Saturday Down South:

“Orgeron will indeed receive $16,949,000 as his contract termination will be considered a “without cause” scenario. LSU will pay that amount out in a total of 18 installments beginning with $5.68 million in December and running through Dec. 2025. The amounts are set to range from $426,000 to $1 million throughout the course of the next 4-plus years.” https://www.saturdaydownsouth.com/lsu-football/ed-orgeron-buyout-official-details-of-buyout-payments-for-departing-lsu-head-coach-revealed/



https://twitter.com/CBSSportsRadio/status/1450537412678098957

[FearlessF]

this is what donors of substance are for

[FearlessF]

Former Washington State coach Nick Rolovich will be suing the university for illegal termination, in part because of "discriminatory and vindictive behavior" by athletic director Pat Chun, an attorney representing Rolovich said Wednesday.

Washington State fired Rolovich and four other assistant coaches Monday night after they refused to comply with a mandate that required all state employees to be vaccinated against COVID-19. Gov. Jay Inslee had set a deadline of Monday for employees to be vaccinated, or to receive an exemption and accommodations from their direct supervisors. WSU athletic director Pat Chun on Monday said Rolovich's firing is a for-cause separation, noting that he could not meet the requirements in his contract, which paid him $3 million annually. Therefore, Rolovich will not continue to be paid by the school.

[medinabuckeye1]

Month-old news but Jim Harbaugh's contract extension numbers are definitely worth going over.

First off, I'm a huge fan of how Michigan's administration reconfigured Harbaugh's contract because it allows for the needed time-extension (to 2025) to save recruiting face while A) vastly lowering his buyout year by year (see 2nd to last line) and B) cutting his guaranteed compensation in half (from $8Mil to $4Mil) while incentivizing the other half through bonuses he's very unlikely to meet. Without any of the bonuses, Harbaugh's $4Mil guaranteed salary drops him to the 34th highest paid coach nationally.

I want to emphasize how important I believe this type of extension is because I predict this will become the model for contract extensions going forward at MANY schools. For example, UCLA's new AD is already trying to copy this extension for Chip Kelly. Most places probably won't negotiate to lower the guaranteed compensation, but the most attractive part of Harbaugh's extension of minimizing the buyout will be widely copy-catted because it solves the recruiting optics of needing a coach on contract for 4-years out WITHOUT the risk of guaranteeing those 4 years to risk full payout if fired, such as Auburn owing Malzahn north of $20Mil.

ADs should've been negotiating for lesser buyouts years ago, but I guess it wasn't "industry standard" until maybe this pandemic is beginning to dictate where to lower the financial risk of athletic department budgets?

I didn't see this until this thread got revived due to the happenings at WSU and LSU but I wanted to agree with @CatsbyAZ and add to what he said a bit.  I concur that the Michigan AD negotiated a much more sensible contract than what seems to be the norm.  

Honestly, the on-field performance bonuses could even be SUBSTANTIALLY higher and it would still be a good deal for Michigan.  When a team wins a league or especially a national title, merchandise sales skyrocket.  There is probably a major diminishing returns issue here (see below) but in general that can be assumed.  Thus, the $1 million for an NC is chump change.  We all know that @Mdot21 thinks Harbaugh is a moron and will never win an NC.  Frankly if he is correct then the NC bonus could be a billion because who cares, it is never going to be paid anyway.  Conversely, if he is wrong and Harbaugh DOES win an NC at Michigan then frankly $1 million is nothing.  They'll sell $1 million in NC gear to the Michigan fans on this board.  

The diminishing returns issue:
I can tell you that I bought a LOT more NC gear when tOSU won the NC in 2002 than I did when they won it in 2014.  I wasn't less of a fan.  Both times I was in a similar life situation (single, no kids, college graduate not extremely rich or wealthy but with a good enough job that I could afford to travel to bowls both times (Fiesta Bowl for the 2002 NC, Sugar Bowl CFP semi-final for the 2014 NC)).  The difference was that in 2014 I already had a bunch of NC gear left over from 2002.  Alabama fans must be swimming in NC gear, thus the diminishing returns.  

When Ohio State won the NC in 2002 they hadn't won one previously since before I was born (1968) so I obviously had no NC gear.  Even middle-aged fans (say 45 in 2002) were kids (11) when tOSU won their previous NC.  Their circa 1968 NC shirts were pretty faded and probably didn't fit anymore so they probably bought LOTS of gear.  Conversely, 45 year old tOSU fans in 2014 were already adults (33) when tOSU won their previous NC so they probably bought less gear.  

Here is the thing for Michigan though.  They haven't won an NC since 1997 or a league title since 2004.  I'm 46.  I was in college when Michigan won their last NC and not far out of college when they won their last league title.  There are LOTS of Michigan fans and they haven't had an opportunity to buy new NC or B1G Champ gear in ~20 years.  They'll buy LOTS if Harbaugh gets them there.  

Why not make that "Maximum Compensation" number REALLY pop by boosting it up to $16 million instead of ~ $8 million?  If Michigan does win an NC, they'll have the extra $8 million anyway and if they don't then they'll never have to pay it so it is win/win for Michigan.  

[FearlessF]

Jeremy Pruitt’s firing from Tennessee this past January was not a pretty one, and that took another step Tuesday when the lawyer representing the former Vols head coach gave an ultimatum. That was to reach a settlement with him by Oct. 29 or face a lawsuit the lawyer claims has the potential to “cripple UT’s athletic programs for years.” The university has no current plans to settle with Pruitt, according to KnoxNews.

"On behalf of my client, I can tell you that he’s not happy that this is the only choice they’ve left him with," said Michael Lyons, Pruitt’s Texas-based Lawyer, "but he’s not going to walk away without getting his day in court.”

Lyons sent a letter Oct. 7 to Tennessee’s general counsel requesting a meeting to discuss a settlement.