The Life-Changing Impact of Summer Salary

Congratulations! You got a research grant that supports your salary. Should you spend it on course releases or summer salary?

Options for Salary Support

As an academic on a 9-month appointment in an undergraduate-serving institution, you generally have two options for how to spend your salary support from an internal, NIH, or similar grant (the rules differ across institutions though so read the fine print):

Course buyouts: With the agreement of your institution, you pay a given percentage of your salary (at my institution it’s 15% of my 9-month salary) to release yourself from the responsibility of teaching one of your courses.
Summer salary: You pay yourself for some of your summer time, with the expectation you’ll spend that time on research outside your 9-month contract. One month of summer salary typically costs 1/9th (about 11%) of your 9-month salary.

The Standard Advice: Prioritize Course Releases

The standard advice that I received from my mentors was to prioritize course releases first. This makes a ton of sense for several scenarios:

You’re on the tenure track. If so, your most important task, professionally and financially, is to secure lifetime employment.
You want to move to a better or better-paying position. If so, maximizing research publication counts and impact is how you typically do that, so buying back as much of your time as possible to focus on research makes a ton of sense.
You don’t have to do your research on campus. If so, buying back your research time buys you daily flexibility as well. This could be huge for those who prefer to work at home, don’t live near their university, and are juggling work and dependent care responsibilities at home.
Your university works on a semester (rather than quarter) system. The longer in calendar months a course buyout covers, the longer you have fewer balls to juggle and likely lower stress. I’d weight course buyouts more heavily at a semester-based university than a quarter-based university.

If one or more of the above scenarios apply to you, then using your grant salary support on course releases could make a lot of sense.

The Case for Summer Salary

However, it’s worth considering the huge long-term financial advantages of summer salary before making a decision on how to allocate your salary support:

You can increase your salary by 20-33%

This is the most obvious benefit of summer salary compared to a course release. Course releases buy back some of your time for the same compensation; summer salary actually increases your total compensation. If you’re a great teacher or publish a high-profile publication, you might get an extra 1% raise that year. If you write a funded grant, you can increase your compensation by much more.

Summer salary is often paid in a lump sum — and that’s a good thing

Since my institution uses a 9-in-12 pay structure, my summer salary comes on top of my regular monthly paycheck. In June this year for instance, I received my normal 1/12 of my 9-month salary, plus an additional 1/9 of my 9-month salary, meaning that my paycheck more than doubled. Other colleges at my university allow professors to take up to an extra ‘week’ of salary support every month of the year, thereby spreading things out. The latter approach is mathematically optimal, but probably not psychologically optimal for most people.

Mathematically, you want your income as soon as possible so that it can begin to compound ASAP in savings/investments. Money now is worth more than money later. I don’t dispute that at all.

But! Getting your summer salary in a few lump sums rather than spread out throughout the year makes it much psychologically easier to invest most of the ‘extra’ money. If you’re used to $5,000/mo in take-home pay, then suddenly get $10,000 in May and August and $15,000 in June and July, it’s much easier to withhold those funds in tax-protected accounts, put it intermediate-term savings, or some other wealth-building behavior. In contrast, if that money is spread throughout the year and you usually get it, that ‘extra’ week just becomes part of your regular pay, psychologically.

Employer retirement matches include summer salary

Saying you can increase your compensation by 20-33% actually understates things, because if you have an employer match on your 403(b) or other retirement account, they will match your summer salary as well as your 9-month salary. So if your employer offers a 5% match, that becomes a 6-6.7% match on your 9-month salary when you add summer salary.

That extra money can compound for decades in an investment account

When you buy out of a course, you enjoy the extra time during that semester, but when the semester is over, it’s back to the usual grind. In contrast, if you take my advice and invest your summer money in a tax-protected account as though you never had it, it will compound throughout your career, and could easily be worth 8-16x the initial amount on an inflation-adjusted basis by the time you retire. That’s why I say that summer money can be life-changing — it’s a way that you can take control of your wealth trajectory to retire earlier or more richly than you otherwise would.

To make the math easy, let’s suppose your 9-month salary is $90,000, your university pays 9-in-12, and your employer offers a 5% 403(b) retirement match. Filling your summer is an extra $30,000 in direct compensation (ignoring fringe and F&A), plus an extra $1,500 in employer match. If you fill your summer and put all the additional funds in pre-tax retirement or deferred compensation accounts like 403(b)s and 457(b)s, assuming a doubling time of 10 years and a 30-year career, then one year of summer salary in your first year on the job would be worth $252,000 (=$31,500×2³) at retirement. At a 4% safe withdrawal rate, that is an extra $10,080 in annual retirement income — from just one year of summer salary. If you do that every year, it will be worth millions in wealth and hundreds of thousands in income.

What I do

How do I balance these considerations? For context, I’m on a 2/2 teaching load, have a course release rate of 15% of 9-month salary (plus fringe & F&A), and need to teach a minimum of 1 course per year. I prioritize spending my grant-based salary support in the following order:

Buy out of a semester of teaching. I’m on a 2/2 teaching load, so that means I spend the first grant money I have on up to 2 course releases. I structure it in a 0/2 or 2/0 load rather than a 1/1 (see below).
Cover as much of my summer salary as possible. Unlike course releases (which you either buy wholly or you don’t), you can chop summer months into percentages. I buy out of as much as I can afford, up to 3 full months, using whatever is leftover after buying out of 2 courses or (if I can only buy out of 1 course but have some leftover) 1 course.
Buy out of the remaining possible course release.

My reasoning is that the more time I spend without teaching duties, the more relaxed my life is and the more productive my research agenda is. That’s a worthwhile tradeoff to me compared to summer salary. But I also think that just buying out of 1 course in a semester is worth much less than half of buying out of two, because I still have teaching obligations and the associated stress, prep time, and need to be on campus regularly. So after I’ve bought out of two courses, I’d rather fill my summer than buy out of a third. YMMV of course. If your primary career goal is to retire as early as possible, or if your position is primarily teaching-focused, you could very reasonably put summer first. I also would probably prioritize summer first if I were required to teach at least one course every semester, since I wouldn’t have the ability to buy back more teaching-free time.

Addendum: Some Important Details

Any salary support you pay will cost more than the above percentages because you’ll also need to pay fringe benefits and institutional overhead (also called indirect costs or Facilities and Administration (F&A) costs.
Some institutions do not allow course releases, or are less supportive of them. In my experience these are typically elite undergraduate-serving research institutions with 2/1 course loads, or liberal arts colleges or other institutions with a heavy teaching mission.
Institutions vary in how they pay your 9-month salary. At my institution, it is paid out 9-in-12, which is to say that I get the same amount every month. Others get 9-in-9 (and aren’t paid at all in the summer), 9-in-10 (for reasons I don’t understand at all), or probably some other weird arrangements. For more on these issues, see Should You Take Your Money over 9 Months or 12 Months?
Internal grants (e.g., seed grants supplied by your college or research institutes at your university) sometimes come with a flat rate course buy out policy. At my institution, it’s $7,500, regardless of salary, including fringe. This is likely unusually generous, however. If you have such a grant in a university with flat-rate course buyouts which also allow summer salary support, you should almost certainly use it on a buyout rather than summer — it offers much more bang for your buck.
Many institutions have a minimum number of courses you’re expected to teach per year. At my institution, it’s 1. So the max 12-month salary amount I can externally support is (15 x .75 x 3) + (.11 x 3) = 67% if I buy out of 3 courses and fill my summer. YMMV.
If you’re at a medical school, school of public health, or professional school with a 12-month salary basis, very little of the above applies to you. This is only about faculty working on 9-month contracts where teaching vs. summer are the only considerations.