The Wise Cracks Blog by Dan Otter



I Earned $7.92 Last Month for Full Time Work (and I Couldn’t Be Happier)

In my current day job I am something called a Visiting Lecturer III at the University of New Mexico. I teach four classes a semester in the Teacher Education, Educational Leadership & Policy department in the College of Education. It’s a great job. I work with smart, motivated students and colleagues. I teach topics — social studies methods, classroom management principles, and curriculum design — that I am passionate about. I am a full-time employee (non-tenured) with benefits. For all of this work I earned $7.92 last month. And I couldn’t be happier about this. What gives? Am I overly generous and/or exploited? No. Thanks to savings, my amazingly talented wife who runs her own web design firm, and the operation of a successful side business (the nationally recognized 403(b) education and advocacy website 403(b)wise) I was able to shelter nearly all of my university pay. How did I do this?

First off, full FICA and Social Security withholding was deducted (on my full income). Plus all of my family health care (health, dental and vision) was deducted pre-tax. That still left a decent amount which I was able to shelter via three retirement plans. As a non-tenured faculty member my employment status is year-to-year (I just found out my one-year contract has been renewed for 2016/2017). As a result I opt to participate in the alternative retirement plan (a 401(k)-type plan) over the more traditional pension plan. For this plan, I contribute a pre-set amount which the state matches. I was able to shelter the remaining amount through a 403(b) and a 457(b). Unlike my K-12 teaching days where my vendor choices were often poor, I am able to invest my money with TIAA and Fidelity Investments, respectively. I am also able to manage everything online. It was easy to enroll and it is easy to change my monthly contribution amount.

Last year I was able to save $24,000 via a 403(b) plan ($18,000 in regular contributions plus $6,000 in age 50 catch-up contributions). Note: I love the term “catch-up”. Catch up to what? Mitt Romney? That’s doubtful. This year, motivated in part by Ed Mills (a.k.a. the Millionaire Educator), who together with his teacher wife, shelter upwards of $100,000 a year, I resolved to save as much as possible. I had been contributing $3,000 per month to my 403(b) and wanted to also contribute to a 457(b) in an effort to get as close as possible to zero earnings. I set my 457(b) contribution at $1,000 and figured that would get me pretty close. I soon got the following email from payroll:

I show that your 403(b) deduction is starting back up in January for $3,000 per pay period and you are starting to contribute to a 457(b) for $1,000 per pay period. Unfortunately, because of the mandated deductions, your salary does not support having both of these deduction amounts taken. However, you can contribute to both (approximately $3,670 towards both plans). This can be allocated as $1,835 per plan, or $1,000 to 457(b) and the remaining to the 403(b). This will take the majority of your check. Is that also what you are wanting to achieve? I responded: Thanks for heads up. My goal is to contribute as much as possible. Ideally I would like to defer enough that I receive zero in pay (if that's possible). Can we do $2,000 to the 403(b) and then whatever is left over to the 457(b)? Thanks again for your help - Dan

And so, at the end of January, $7.92 was auto deposited into my checking account. I am not certain I can do this every month but, I am certainly going to try. They say that because of the time value of money you don’t retire on the last $100,000 you contribute to retirement plans, but you do retire on the first $100,000. I am looking to do both!