Front-Loading and a $12 Pay Check

Front-loading at the Winter Carnival in Quebec City, Canada.
Winter Carnival – Quebec City, Canada

Since Max OOP doesn’t need much cash from my paycheck these days, I figured I would continue my front-loading strategy for 2019. My 403(b) retirement bucket can hold $19,000 in 2019.

Front-loading is basically paying myself before the federal government. I defer taxes now instead of slowly all year. It gives me more time in the market. The Mad Fientist can explain it much better than I can here.

Trust me, if I can do it, you can do it.

My fourth paycheck of 2019 hit 2/15/2019 and I purchased another large section of the US economy. I grossed $3,882 on that check and I front-loaded 87% of my pay into my 403(b).  How did I do it?  I simply ran some numbers and asked my HR department if they would increase my 403(b) contributions to 87% of my paycheck. Oh, and a reasonable standard of living and over a decade of an extremely high savings rate helped as well.

Why only 87%?

87% seems to be as high as I can go while still having enough left over to pay my voluntary Medical Premiums and non-voluntary Medicare and Social Security “premiums”.  These tax-deferred accounts only defer/shelter federal taxes, not FICA (Social Security/Medicare) taxes.  It left me a whopping $12 for my checking account. Yeah, I needed some cash for happy hour at my favorite pub – that is about 3 beers worth.

Here is where the rest went:

So I took $3,377 of my pay (87%) and purchased 13.35 units of VINIX at the price of $253.01. This fund contains 507 of the nation’s largest stocks and basically tracks the S&P 500.

Normally you would need $5 million in assets to be able to invest in a fund like this but thanks to my company’s 403(b) options, I can get in for much less.

The expense ratio is a paltry 0.035% for an annual expense of $1.18. I would say that is a low barrier of entry to own some of the best companies on the planet.

$3,377 X 0.035% = $1.18

Max Out of Pocket for next year = ~$1.18.

What 403(b)/401(k) index fund options does your company offer?

*If you plan on implementing a strategy like this yourself, make sure you understand your employer “match” requirements and leave the room if necessary to capture the match.

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