Author Topic: How low can you go? (Net Paycheck)  (Read 2481 times)

35andFI

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How low can you go? (Net Paycheck)
« on: December 21, 2018, 07:05:09 AM »
I got on board too late to max my 401k for 2018 but made a 90% contribution for my last 2018 paycheck. On track to max it for 2019.

Net pay was for $16.62. Was shooting for as close to $0 as possible.

If you are contributing to pre-tax accounts, how low have you been able to get your paycheck?

Merry Christmas!

OurTown

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Re: How low can you go? (Net Paycheck)
« Reply #1 on: December 21, 2018, 07:09:00 AM »
I am contributing 88% on my side gig.  I get a direct deposit of about $30 per month.

Smevans

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Re: How low can you go? (Net Paycheck)
« Reply #2 on: December 21, 2018, 07:16:01 AM »
We are limited to 50% on our paycheck.

35andFI

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Re: How low can you go? (Net Paycheck)
« Reply #3 on: December 21, 2018, 07:52:02 AM »
I am contributing 88% on my side gig.  I get a direct deposit of about $30 per month.

Nice, sounds like a pretty good side gig! I brought mine back to 33% for 2019 but found the bi-weekly paycheck of <$20 to be comical.

the_fixer

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Re: How low can you go? (Net Paycheck)
« Reply #4 on: December 21, 2018, 08:45:36 AM »
My company only allows me to put in 75% so my net was $289 biweekly for the first 7 paychecks untill I maxed my pre-tax 401k.

It sure was fun seeing the 401k grow that fast and laughing at my little paycheck.

Planning to do the same this year but not sure how it is going to work out since the wife took her dream job at a 10k per year pay cut but I did receive a raise of $3000, cut cable and she is riding the bus for free so it might work to live off her income alone again this year.

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35andFI

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Re: How low can you go? (Net Paycheck)
« Reply #5 on: December 21, 2018, 09:09:30 AM »
My company only allows me to put in 75% so my net was $289 biweekly for the first 7 paychecks untill I maxed my pre-tax 401k.

It sure was fun seeing the 401k grow that fast and laughing at my little paycheck.

Planning to do the same this year but not sure how it is going to work out since the wife took her dream job at a 10k per year pay cut but I did receive a raise of $3000, cut cable and she is riding the bus for free so it might work to live off her income alone again this year.

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Awesome! I too would max my 401k as early as possible if I didn't lose out on any employer matches. Unfortunately, they will not front load the match.

Congratulations on the dream job for your wife and the raise for yourself!

birdman2003

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Re: How low can you go? (Net Paycheck)
« Reply #6 on: December 21, 2018, 09:37:43 AM »
I am also going to front load my 401(k) contributions for 2019 and I'll be able to report in January what my net paycheck is!

seattlecyclone

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Re: How low can you go? (Net Paycheck)
« Reply #7 on: December 21, 2018, 09:53:45 AM »
I had $0 paychecks for most of this year. My employer's payroll system is perfectly happy to divert 100% of my net pay into the 401(k). Between part-time work, payroll taxes, pre-tax 401(k), after-tax 401(k), daycare FSA, and health insurance premiums, I get regular paychecks for the last portion of the year only.

Goldy

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Re: How low can you go? (Net Paycheck)
« Reply #8 on: December 21, 2018, 09:56:02 AM »
$4030 gross (mine)
$642 net
16%

$4300 gross (wife)
$1020 net
24%

We both max our 401k and after tax space, max roth, max hsa, max esop for both, taxes and health insurance.

partdopy

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Re: How low can you go? (Net Paycheck)
« Reply #9 on: December 21, 2018, 09:56:50 AM »
Question - why would you front load?  I contribute the same amount every month.  Doesn't front loading increase the risk that the market will drop significantly, while I would only have a drop of 3 months contributions or so, and be buying at a steep discount for the rest of the year?

Just like spreading your money around the market, doesn't it make sense to spread out your purchases for dollar cost averaging?

the_fixer

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Re: How low can you go? (Net Paycheck)
« Reply #10 on: December 21, 2018, 10:05:22 AM »
Thanks for posting that tidbit 35andfi I should have mentioned that my employer puts in a fixed amount even if we do not contribute. For most people it makes more sense to spread it out and get the match.

For me it amounts to keeping myself motivated and on track with goals throughout the year.

I have a spreadsheet that shows where the money goes each paycheck and meeting or exceeding the goals gives me satisfaction and if I fall behind it also gives me a kick in the pants to get back on track.

For example 7 paychecks go to pre-tax 401k, then the next 5 paychecks go to add 10k to our emergency fund to account for the instability of the wife's new government job, then it is on to after tax to the 401k limit then extra house payments.

little carrots all along the path to keep this lazy donkey moving on the path to FI and not looking at shiny objects and getting distracted.

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35andFI

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Re: How low can you go? (Net Paycheck)
« Reply #11 on: December 21, 2018, 10:10:01 AM »
I am also going to front load my 401(k) contributions for 2019 and I'll be able to report in January what my net paycheck is!

Looking forward to hearing it!

I had $0 paychecks for most of this year. My employer's payroll system is perfectly happy to divert 100% of my net pay into the 401(k). Between part-time work, payroll taxes, pre-tax 401(k), after-tax 401(k), daycare FSA, and health insurance premiums, I get regular paychecks for the last portion of the year only.

Haha nice! I was shooting for the 0 but couldn't quite make it.

35andFI

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Re: How low can you go? (Net Paycheck)
« Reply #12 on: December 21, 2018, 10:12:11 AM »
Question - why would you front load?  I contribute the same amount every month.  Doesn't front loading increase the risk that the market will drop significantly, while I would only have a drop of 3 months contributions or so, and be buying at a steep discount for the rest of the year?

Just like spreading your money around the market, doesn't it make sense to spread out your purchases for dollar cost averaging?

Front loading has been shown to be statistically better than DCA over the long run. It comes down to time in the market being better than timing the market.

This was a good article on the subject:
https://www.actuaryonfire.com/lump-sum-dollar-cost-average-investing-part-1/
« Last Edit: December 21, 2018, 10:13:51 AM by 35andFI »

35andFI

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Re: How low can you go? (Net Paycheck)
« Reply #13 on: December 21, 2018, 10:15:10 AM »
$4030 gross (mine)
$642 net
16%

$4300 gross (wife)
$1020 net
24%

We both max our 401k and after tax space, max roth, max hsa, max esop for both, taxes and health insurance.

Very nice! I wish my employer offered stock options!

Kroaler

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Re: How low can you go? (Net Paycheck)
« Reply #14 on: December 21, 2018, 11:05:03 AM »
Mine - 75%   -  I will hit the the 18.5 limit before I had to stop.    I got behind this year so Im loading it all in the last 3 months of this year.     Next year will be an even amount every month to slowly make the IRS limit.


Funny story,  my ex(not related to finance)    Had hers set at 100% at Michelin.     Apparently, first employee in the US region to do that because the payroll software couldnt even process it.

rantk81

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Re: How low can you go? (Net Paycheck)
« Reply #15 on: December 21, 2018, 11:15:31 AM »
Mine - 75%   -  I will hit the the 18.5 limit before I had to stop.    I got behind this year so Im loading it all in the last 3 months of this year.     Next year will be an even amount every month to slowly make the IRS limit.


Funny story,  my ex(not related to finance)    Had hers set at 100% at Michelin.     Apparently, first employee in the US region to do that because the payroll software couldnt even process it.

Well, technically 100% shouldn't be possible, because she would still owe taxes for social security and medicare.

35andFI

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Re: How low can you go? (Net Paycheck)
« Reply #16 on: December 21, 2018, 11:22:56 AM »
Mine - 75%   -  I will hit the the 18.5 limit before I had to stop.    I got behind this year so Im loading it all in the last 3 months of this year.     Next year will be an even amount every month to slowly make the IRS limit.


Funny story,  my ex(not related to finance)    Had hers set at 100% at Michelin.     Apparently, first employee in the US region to do that because the payroll software couldnt even process it.

That's awesome!

Mine - 75%   -  I will hit the the 18.5 limit before I had to stop.    I got behind this year so Im loading it all in the last 3 months of this year.     Next year will be an even amount every month to slowly make the IRS limit.


Funny story,  my ex(not related to finance)    Had hers set at 100% at Michelin.     Apparently, first employee in the US region to do that because the payroll software couldnt even process it.

Well, technically 100% shouldn't be possible, because she would still owe taxes for social security and medicare.

I did some research on this previously because I was curious if we had to actively make sure that we will have enough to pay things like healthcare, SS, and medicare. What I came across is that those are deducted before retirement contributions. In other words, if someone selects 100%, they will likely only be paying 93% (or whatever the number is that gets them to a net of $0).

partdopy

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Re: How low can you go? (Net Paycheck)
« Reply #17 on: December 21, 2018, 11:40:20 AM »
Question - why would you front load?  I contribute the same amount every month.  Doesn't front loading increase the risk that the market will drop significantly, while I would only have a drop of 3 months contributions or so, and be buying at a steep discount for the rest of the year?

Just like spreading your money around the market, doesn't it make sense to spread out your purchases for dollar cost averaging?

Front loading has been shown to be statistically better than DCA over the long run. It comes down to time in the market being better than timing the market.

This was a good article on the subject:
https://www.actuaryonfire.com/lump-sum-dollar-cost-average-investing-part-1/

Interesting, did not know this.

Kind of cool because my employer match is a required deduction of 5% that they match 2 for 1 at 10% into a 401a and I cannot change or deposit more into this 401a, so my 401k and 457b can be front loaded with no missing out on a match.  Thanks for the info.

Gin1984

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Re: How low can you go? (Net Paycheck)
« Reply #18 on: December 21, 2018, 11:42:52 AM »
We are limited to 50% on our paycheck.
I'm limited to 30%, it sucks.

35andFI

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Re: How low can you go? (Net Paycheck)
« Reply #19 on: December 21, 2018, 11:52:41 AM »
Question - why would you front load?  I contribute the same amount every month.  Doesn't front loading increase the risk that the market will drop significantly, while I would only have a drop of 3 months contributions or so, and be buying at a steep discount for the rest of the year?

Just like spreading your money around the market, doesn't it make sense to spread out your purchases for dollar cost averaging?

Front loading has been shown to be statistically better than DCA over the long run. It comes down to time in the market being better than timing the market.

This was a good article on the subject:
https://www.actuaryonfire.com/lump-sum-dollar-cost-average-investing-part-1/

Interesting, did not know this.

Kind of cool because my employer match is a required deduction of 5% that they match 2 for 1 at 10% into a 401a and I cannot change or deposit more into this 401a, so my 401k and 457b can be front loaded with no missing out on a match.  Thanks for the info.

You're welcome, happy to help! I just learned this myself after hearing it mentioned in a podcast then researching it myself.

I front load my traditional IRA, and dollar cost average for my HSA, 401k, and taxable account. I front load where I can and DCA elsewhere.

35andFI

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Re: How low can you go? (Net Paycheck)
« Reply #20 on: December 21, 2018, 11:56:40 AM »
I'm limited to 30%, it sucks.

Really? So you can't max your 401k (for 2019) if you make less than $63,333.33/yr?
« Last Edit: December 21, 2018, 11:59:33 AM by 35andFI »

Gin1984

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Re: How low can you go? (Net Paycheck)
« Reply #21 on: December 21, 2018, 11:58:00 AM »
I'm limited to 30%, it sucks.

Really? So you can't max your 401k if you make ≥ $63,333.34/yr?
Yes, I made less than that and therefore cannot max it. 

35andFI

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Re: How low can you go? (Net Paycheck)
« Reply #22 on: December 21, 2018, 12:03:23 PM »
Really? So you can't max your 401k if you make ≥ $63,333.34/yr?
Yes, I made less than that and therefore cannot max it.

You caught me before the edit. ≥ should have been <. That stinks! I wonder why an employer would put something like that in place.

Gin1984

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Re: How low can you go? (Net Paycheck)
« Reply #23 on: December 21, 2018, 12:12:37 PM »
Really? So you can't max your 401k if you make ≥ $63,333.34/yr?
Yes, I made less than that and therefore cannot max it.

You caught me before the edit. ≥ should have been <. That stinks! I wonder why an employer would put something like that in place.
I've asked and no one can give me a good answer.  Most just say no one can afford to put in more than 30%.  They do allow you to put more than the 30%, if you use the non-deductible portion. 

35andFI

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Re: How low can you go? (Net Paycheck)
« Reply #24 on: December 21, 2018, 12:21:24 PM »
I've asked and no one can give me a good answer.  Most just say no one can afford to put in more than 30%.  They do allow you to put more than the 30%, if you use the non-deductible portion.

At least you asked. Who are they to decide what everyone can afford?

It's interesting that people think you need to be making 6 figures in order to viably max your 401k.

PhrugalPhan

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Re: How low can you go? (Net Paycheck)
« Reply #25 on: December 21, 2018, 01:14:53 PM »
You guys make me look like a wimp.  I have mine @ 42% and max out in August.  We can take out up to 80% for our 457 plan.  Since 5% goes to pension and we have HSA & insurance I suppose I could get it to hit $0 if I tried.  Maybe I'll try it for a month to see what happens.

terran

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Re: How low can you go? (Net Paycheck)
« Reply #26 on: December 21, 2018, 01:37:47 PM »
Question - why would you front load?  I contribute the same amount every month.  Doesn't front loading increase the risk that the market will drop significantly, while I would only have a drop of 3 months contributions or so, and be buying at a steep discount for the rest of the year?

Just like spreading your money around the market, doesn't it make sense to spread out your purchases for dollar cost averaging?

Front loading has been shown to be statistically better than DCA over the long run. It comes down to time in the market being better than timing the market.

This was a good article on the subject:
https://www.actuaryonfire.com/lump-sum-dollar-cost-average-investing-part-1/

What do you live off of while your paychecks are this low though? Frontloading only works in the lump sum vs DCA sense if it results in net positive investing. If you have savings you're living off of then an argument could be made that you're actually delaying investing as that could be invested now in a taxable account.

We get my wife's paycheck down to about $230 maxing out a 403(b) and 457(b) the first part of the year. It goes up a bit when those are full and she starts paying all of our tax liability for the year and maxing after-tax which is then rolled over to Roth (mega backdoor Roth). If I don't make enough (self employed) at any point we pull from taxable with the thinking that since her paycheck is being invested it doesn't really matter what the markets doing because anything we sell in taxable is being replaced in her tax advantaged, so we're basically transferring from one account to the other more so than we're either investing or selling investments even though that's what we're doing in a mechanical sense. .

35andFI

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Re: How low can you go? (Net Paycheck)
« Reply #27 on: December 21, 2018, 04:41:14 PM »
What do you live off of while your paychecks are this low though? Front loading only works in the lump sum vs DCA sense if it results in net positive investing. If you have savings you're living off of then an argument could be made that you're actually delaying investing as that could be invested now in a taxable account.

...


To be clear, I only front load my IRA since I can't front load my 401k (and get the full match), or my HSA (employer gives no choice), or taxable (since I won't have the money to put in everything up front for that every year).

The reason why my paycheck was so low this time was because I got on the investment bandwagon late and wanted to get as much into my 401k for 2018 as possible. I didn't need the paycheck to live off of because I already had too much in my checking account. I ended up moving most of that into my taxable account just a day or two ago.

I think that it is important to note that my response that you quoted was answering why lump sum investing is statistically better than dollar cost averaging over time. This means if you have a lump sum of money, contributing as much as possible as early as possible is beneficial over saving it and investing in increments.

Fomerly known as something

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Re: How low can you go? (Net Paycheck)
« Reply #28 on: December 22, 2018, 06:23:51 AM »
We have to contribute 5% in each paycheck to get the TSP match.  I'm to lazy to do the math to front load it so I just go with the yearly dollar cost average.

terran

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Re: How low can you go? (Net Paycheck)
« Reply #29 on: December 22, 2018, 06:38:18 AM »
What do you live off of while your paychecks are this low though? Front loading only works in the lump sum vs DCA sense if it results in net positive investing. If you have savings you're living off of then an argument could be made that you're actually delaying investing as that could be invested now in a taxable account.

...


To be clear, I only front load my IRA since I can't front load my 401k (and get the full match), or my HSA (employer gives no choice), or taxable (since I won't have the money to put in everything up front for that every year).

The reason why my paycheck was so low this time was because I got on the investment bandwagon late and wanted to get as much into my 401k for 2018 as possible. I didn't need the paycheck to live off of because I already had too much in my checking account. I ended up moving most of that into my taxable account just a day or two ago.

I think that it is important to note that my response that you quoted was answering why lump sum investing is statistically better than dollar cost averaging over time. This means if you have a lump sum of money, contributing as much as possible as early as possible is beneficial over saving it and investing in increments.

Right, my point being that given that lump sum outperforms on average, saving money up so you can contribute to an IRA early in the year or front load a 401(k) while living off that savings isn't the way to go. Mathematically you'd be better off investing the money in taxable and selling it to front load the IRA or 401(k).

It sounds like you're doing the right thing now.

TomTX

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Re: How low can you go? (Net Paycheck)
« Reply #30 on: December 22, 2018, 08:10:36 AM »
Had a couple $0.01 paychecks this year. Payroll talked about being able to "net zero" the check - but apparently there was some fractional penny that gets rounded up or something like that.

seattlecyclone

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Re: How low can you go? (Net Paycheck)
« Reply #31 on: December 22, 2018, 12:08:16 PM »
What do you live off of while your paychecks are this low though?

Part of my compensation comes in the form of company stock, which cannot be diverted into the 401(k). Proceeds from the sale of that stock are roughly enough to pay our bills, making it work out fine to put 100% of my cash compensation into the 401(k), HSA, DCFSA, etc. until those have been maxed out for the year.

MayDay

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Re: How low can you go? (Net Paycheck)
« Reply #32 on: December 22, 2018, 01:40:30 PM »
I am less thrilled about this than you guys :)

For 2019 I am carrying all our insurance for the first time, so I'll have 401k plus HSA plus premiums coming out. My paycheck will be very sad.

Gin1984

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Re: How low can you go? (Net Paycheck)
« Reply #33 on: December 22, 2018, 01:42:02 PM »
I am less thrilled about this than you guys :)

For 2019 I am carrying all our insurance for the first time, so I'll have 401k plus HSA plus premiums coming out. My paycheck will be very sad.
I have the same, plus the daycare FSA.  Maybe it is good my 401k is limited, lol.   ;)

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35andFI

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Re: How low can you go? (Net Paycheck)
« Reply #34 on: December 22, 2018, 06:04:52 PM »
...
Mathematically you'd be better off investing the money in taxable and selling it to front load the IRA or 401(k).

It sounds like you're doing the right thing now.

Interesting point! Iíll have to look into this since I was planning on saving up for my 2020 IRA lump sum contribution in my checking account.

Are there any negative aspects of going about it this way?
I guess it doesnít matter if the market goes down when you pull from taxable since youíll immediately be buying into the IRA at that lower price.

use2betrix

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Re: How low can you go? (Net Paycheck)
« Reply #35 on: December 24, 2018, 09:21:03 PM »
I cant contribute more than 8% in 2019 or Iíll go over the max contribution. My employer matches 5% so I canít front load.

I max out my HSA between the first 4 checks of the year.

On a typical month, even after benefits/401k is pulled, my take home pay is usually higher than my gross taxable pay due to $980/wk tax free per diem I receive.

Total for the year Iíll have around $95k of tax free income, which is pretty awesome.

the_fixer

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Re: How low can you go? (Net Paycheck)
« Reply #36 on: December 24, 2018, 10:40:27 PM »
I cant contribute more than 8% in 2019 or I’ll go over the max contribution. My employer matches 5% so I can’t front load.

I max out my HSA between the first 4 checks of the year.

On a typical month, even after benefits/401k is pulled, my take home pay is usually higher than my gross taxable pay due to $980/wk tax free per diem I receive.

Total for the year I’ll have around $95k of tax free income, which is pretty awesome.
Kudos on the income!

Off the top of my head  maxing at an 8% you must be at about 240k income if you are talking about the 19k pre-tax limit or around 700k income for the combined total limit.

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StetsTerhune

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Re: How low can you go? (Net Paycheck)
« Reply #37 on: December 25, 2018, 07:48:37 AM »
My father was just talking about his last few years working. He had a salaried job as well as a small business and investing income. For his salaried job, he would max out the 401k, and then have them withhold the rest for taxes (to cover the taxes for all his income sources and avoid having to pay estimated quarterly taxes). $0 paychecks for the entire year.

use2betrix

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Re: How low can you go? (Net Paycheck)
« Reply #38 on: December 25, 2018, 08:14:38 AM »
I cant contribute more than 8% in 2019 or Iíll go over the max contribution. My employer matches 5% so I canít front load.

I max out my HSA between the first 4 checks of the year.

On a typical month, even after benefits/401k is pulled, my take home pay is usually higher than my gross taxable pay due to $980/wk tax free per diem I receive.

Total for the year Iíll have around $95k of tax free income, which is pretty awesome.
Kudos on the income!

Off the top of my head  maxing at an 8% you must be at about 240k income if you are talking about the 19k pre-tax limit or around 700k income for the combined total limit.

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I wish 700k for the combined total lol.

The approx 95k tax free comes from: $51k per diem, $6k travel allowance (doesnít have to be used for travel though), $19k 401k, $12k 401k match, $7k HSA.

Since retirement contributions canít be pulled from things like per diem, that is what sometimes causes my take home pay to be higher than my taxable pay.