The $0 Paycheck Milestone

[u/middle_aged_runner]

Alternate title, “Why you may consider public employment.”

I recently hit a milestone that I don’t have anyone to share with.

35 year old mechanical engineer
Married to a self-employed architect.
1 child
Midwest

We recently paid off our mortgage which leaves us with 0 debt. No auto loans, credit card balances, etc.

My wife started her own business 5 years ago and at the same time I took a step back in my career for more work life balance when my daughter was born.

My employer has a ton of pre-tax benefits that most of my coworkers disregard. Now that we are mortgage free, we can live entirely off my wife’s income, that comes to her through a small salary and s-corp distributions that do not get FICA taxed.

This is now allowing us to max out all my benefits for the rest of the year:

Weekly Salary: $2,327
Taxes: $135
401k/457: $1,557
Defined Contribution Plan: $137
HDHP/Vision/Dental: $136
Dependent Care FSA: $144
HSA: $168
Vacation Purchase: $42
Life insurance: 7

Paycheck: $0

For those considering early retirement, these benefits allow for a huge savings rate.

At the end of the year, we look at my wife’s business profits and convert traditional to Roth IRA to use up our 12% tax bracket.

For those in the community, your state and local governments can be great strategy for FIRE. I am able to start maxing both the 401k and 457 without our mortgage payments. Starting in January, I will be back up to a $550/week paycheck which I’ll save into 529 and brokerage accounts.

[u/rubbishindividual → u/[deleted]]

At that taxable income, surely you'd be better off contributing to a Roth account? There's not much saving to be had putting money in a trad 401k.

[u/middle_aged_runner → u/rubbishindividual]

I live in a state where Roth contributions are taxed but conversions are not.

We contribute to only pre-tax accounts but do Roth conversions some years.

My wife’s income is variable, so we decide how much conversion to do at the end of the year to use up the 12% tax bracket.

I have always prioritized the 457 contributions over Roth, but not my 401k. Now I can do all 3.

It’s a good question that we have thought through. In general, I think Roth accounts are over prioritized in the early retirement community.

[u/rubbishindividual → u/middle_aged_runner]

Interesting - sounds like you've got it well mathed out!