10 ms·

No, You can't retire rich at 30 if you sell your startup

244 points by charliepark 16y ago

jdc 16y ago
...where retiring rich is defined as spending $300,000 annually. I'd personally move somewhere cheaper once my income no longer depended on my location.
- mechanical_fish 16y ago
  Looks like it's time to recommend The Millionaire Next Door: http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/dp/0671015206 http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/d... Don't bother to buy it: Get it out of the library and skim it. It's not a difficult read and it belabors its own point a bit. My own summary: The secret to retaining a high net worth is the same as the secret to accumulating it: Control spending. Don't waste money. Most of the people you know who look like they're wealthy -- fancy cars, country club memberships, stylish clothes -- are actually spending money as fast as they can get it, or faster. They have no savings and are living paycheck to paycheck. Meanwhile, many of the wealthiest people in your town are wearing four-year-old work clothes and driving ten-year-old trucks that they bought used. It doesn't do your future any good if you make $300k per year and spend $325k per year. Contrariwise, if you make $75k per year and only spend $50k per year you'll be a millionaire in under forty years.
  - StavrosK 16y ago
    So you'll either be a poor-ish young playboy or a rich old guy? Why does the first option sound more attractive? Of course, fast cars and country clubs are all superficial, but being a miser just so you can die with millions isn't that much better...
    - jacquesm 16y ago
      Saving a buck is a lot easier than making a buck. That's one very good reason why plenty of rich people are seen as 'misers', if they let it roll then they'd stop being rich pretty quickly. The secret to that is to not make it plain what your financial situation is and to live well within your means.
      - leot 16y ago
        The tax situation on work you do for yourself (saving money) is also as favorable as it gets. There's a sense in which dollars saved are like tax-free income.
    - mechanical_fish 16y ago
      You've got the dichotomy disease. There is no need to go to either extreme. You can belong to a country club and still live within your means. You can certainly drive a fast car and live within your means. Fast cars can be bought for well under $10k, especially in California where a fast car can last for thirty years and more without rusting. Most of the stuff on more expensive cars is just bling, or comfort features that have nothing to do with high performance. What you have to do is pay attention. Don't spend more money than you have. Don't spend at an unsustainable rate. That doesn't mean "spend no money at all". There's a happy medium there. And you don't have to be a miser. Though, in fact, you probably do have to die with millions, or at least several tens of thousands, unless you plan your own suicide and stick to that plan. To ensure that you're living as comfortably on your last day as your first, you need a bunch of money in the bank. And you don't know which day will be your last. So, die with a million in the bank and endow an amusing trust fund in your will.
      - jacquesm 16y ago
        Anybody can buy a fast car, but few can actually afford to maintain it. A $10K fast car you buy might cost you a good bit of money per year to drive and keep in shape. Especially when it's thirty years old. That's mostly the reason it's only $10K to begin with (and the fact that the market for impractical cars is not too large).
        vaksel 16y ago
        well the car doesn't really need to be 30 years old. sure if you buy some unreliable piece of crap...but there are plenty of fast cars that only require regular oil changes to keep in shape. granted there are different definitions of fast, some people are fine with 14 second cars, others need 12s...and others don't consider anything fast that doesn't run 10s. But overall, $10K is plenty to get yourself a reliable 6-7 year old car that's quick/fast.
        Daniel_Newby 16y ago
        Fast, fun cars are emphatically middle class these days. The Subaru Impreza WRX is $25k new, for example. A millionaire who started collecting fast bargainmobiles would be killed by garaging and insurance, not maintenance.
    - lotharbot 16y ago
      As others have pointed out, with the buyout presented in the article, you can live forever spending low six figures (like $120k, with inflation adjustments.) That's not "rich young playboy" territory, but it's not "miser" territory either. At that level, you can raise a family in a comfortable house in a nice neighborhood, drive a nice car, have an RV or a boat or a cabin in the woods, have a country club membership and season tickets for your favorite sports team. Or you can live a little bit cheaper, still doing most of that stuff but maybe skipping out on the country club membership or something, and become a rich old guy who can leave a huge estate to his kids... and still not be a miser. The key is to position yourself in that middle ground.
    - jerf 16y ago
      "Living frugally" isn't what it used to be in the pain department. I have a Netflix subscription for one DVD and unlimited streaming instead of a $70 cable subscription (or an expensive antenna for my area), and while I made this choice to be "frugal" in the end I've actually been happier than I was with the cable. Do you need a smartphone with unlimited Internet? I can't speak for you, but I'm almost always within range of a computer and Wifi, and when I'm not I don't really need it. Does a new car bring you proportionate joy to the cost? It doesn't me, so mine are chosen to be relatively cheap to buy and operate, and I don't miss out on much I care about. (And I'm examining doing without my car; without going into my personal analysis it isn't a drop-dead win for my real numbers, but I'm looking at it. Note: I do not live in an area where I can trivially use public transportation.) And so on. You don't really have to eschew the pleasures of the flesh entirely to be a "miser" nowadays; you can eat well (cooking yourself), drive adequately, be entertained for a reasonable price, etc, and still save enough money to retire comfortably. You do have to avoid credit card debt, not overcommit on your housing, and there's some tricks and issues (can you psychologically deal with having $10K+ in the bank without spending it, without relenting on the discipline?), but the days of actually facing the choice you outline are gone for most of the people who would be on HN in the first place. Oh, recently internalized "trick": Take all "monthly fees" and mentally multiply by 12 to get the yearly cost, then treat that as the real cost. $24.95 a month for a service may sound reasonable; does $300 a year sound just as reasonable? I've been using this as part of my cell-phone upgrade resistance; there's a lot of ways I'd personally rather spend $300 than on a cell plan upgrade, up to and including not spending it at all. My Netflix savings is ($70 - $9) x 12 yearly, or $732/yr. My only regret is that I didn't do it about a year earlier!
      - tocomment 16y ago
        Any tips on finding a reliable, inexpensive car?
        bconway 16y ago
        Used Japanese. Any of them.
        jerf 16y ago
  - maxawaytoolong 16y ago
    The millionaire next door makes too much of a deal about stuff like clothing and cars. You have to control your bleed, sure. I've found that if you have half a brain and live somewhere with a lot of money flowing around like NYC you can buy fancy shirts, go out to dinner, AND save 6-10 grand a month, which is the best of all worlds. Millionaire next door is more for people running a landscaping business in the suburbs, and saving every extra dollar instead of blowing it on a new home theatre system or an expensive vacation to somewhere that isn't as boring. I.e. it's more for lower middle class people trying to get a leg up. In my experience it's better to become a "millionaire next door" ... next door to multimillionaires or billionaires. It's way easier if you're around a bunch of people with a lot of extra dough.
    - RK 16y ago
      Hmmm... I hang around with two distinct groups of people a lot: grad student types with essentially no money and young professionals (doctors, lawyers, etc) with nice, solid salaries. From my experience, it's much easier to not spend money when I hang out with the first group, because they have no expectation of spending a lot of money. On the other hand, you'd feel out of place with the other group if you don't spend some higher base level for doing "normal" things like going out to eat, trip to Vegas, whatever. I assume this scales if you are just the millionaire and you hang out with multimillionaires.
      - illumin8 16y ago
        It depends. In NYC if you work in finance you'll probably find yourself getting taken out to nice cigar bars or steak houses after a good Friday trading session and running up several thousand dollar bar tabs on somebody's corporate card, rather than paying anything out of pocket.
- kscaldef 16y ago
  Yeah, I'm not getting where that number comes from. (And I love the suggestion that it's merely "upper middle class".) Personally, I can live a pretty nice lifestyle on "only" a couple thousand in disposable income a month. I really can't imagine what I would do with $20-25,000 / month to spend. With that in mind, I tried a few numbers in the spreadsheet. Just to be more "realistic" I dropped the payday back down to $4.5mil. I'm also assuming that the first thing I would do is to pay off my mortgage, so what remains is basically entirely discretionary spending. On a restrained budget of $50K/yr ($4K/mo), my assets grow faster than I'm spending, and I die with $20M in the bank. On a more extravagant $100K/yr (over $8K/mo), things are a bit closer, but still earning more than I spend and leveling out at about $7M in the bank. The crossover point is about $125K, leaving you broke at 70. So, I'm going to say that, yes, I really could retire and not work again with a $5-10M payout.
  - sambe 16y ago
    I seriously don't mean this in an insulting/trollish way but I think you are either lacking imagination or underestimating how quickly you can adapt to a richer lifestyle. Given you are even here and thinking about entrepreneurial rewards I'd guess the latter. On the other hand perhaps I underestimate how... modest you like to live? Whilst I also raised my eyebrows at "upper middle class", I know people in that range who have spent rather too much and fallen (not totally) in only a handful of years. They never seemed stupid or excessive. It's probably partly to do with expectations: exactly the bias this article tries to correct.
    - kscaldef 16y ago
      It was more of a rhetorical device. It's not that I can't imagine how to blow through tens of thousands of dollars a month. It's that that lifestyle just isn't appealing to me.
      - drusenko 16y ago
        Spending 10's of thousands a month is getting up there, but "blowing through" more than $4k per month isn't necessarily an extravagant lifestyle. My guess would be that you don't live an as expensive a metro area as the author is basing his calculations on. In a place like San Francisco, a few non-frivolous expenses can add up quickly: - Your residence. A decent 2 bedroom place in a desirable part of San Francisco will run $3,000 per month in rent, a mortgage will be much higher. We're not talking anything extravagant here, just 600-900 sq ft. - Travel. Paying for more than one person to travel to visit family/friends a few times a year can easily add up to $1,000 or more per month. We're not talking luxury vacations here, either -- just basic airfare (coach) and accommodations. - Health expenses. As you earn more, you'll probably be more likely to spend more on optional health items. Things like LASIK for example. Also, as you get older, these expenses will get much larger. - Kids. It doesn't even have to be private school we're talking about, but I imagine that clothing/feeding/entertaining more than one person adds up quickly. - Any time/money trade-off. You have a limited amount of time and, similar to health expenses, you will be more likely to spend money to save time as you earn more. Each person's choices will be different here, but again, we're not talking luxury. Maybe paying for parking instead of a time intensive bus trip? Or arranging for laundry service? Or paying an unjust $40 bill that would otherwise take you 5 hours to fight? Notice there's no talk of fancy cars, big screen TVs, luxury trips, large mansions, or extravagant dinners. I think this is the definition of "upper-middle class" that Tony is talking about. Nothing fancy, but a few things to make your life more convenient.
- strlen 16y ago
  > "Let's assume you want to live in a major metro area, send your kids to private school..." That's his problem. When we moved to this country, my dad had an H1B visa and was making far below what an entry level Google employee is making. Nonetheless we had quite a comfortable life: rented an apartment in a suburb with a good school. Later, my parents (both of them finally rising to market rate) were able to afford a house and send me to college (two years of community college and then transferring to a university) without taking a penny of financial aid. This isn't just a rant against the OP and this has nothing to do with "fuck you money" (I have my own opinion on it, but I am not qualified to state it). I am sick and tired of the premise that these days a comfortable family life is two six digit incomes. No, you don't need a private school, no you don't need to live in San Francisco or a New York (try a suburb instead, which also solves the "private school" problem), no you don't need a single family home, no you don't need two BMWs. Even if you don't retire, it makes sense to live below your means to have money available for a rainy day. If you know how to live below your means than even as an employee (looking to make a few hundred thousand from options) you have the chance of earning de-facto "fuck you money": the sum of money which means you no longer have to accept a boring/stifling job just to have a job; the money you need to take the time off to work on a "science project" (a technical project that doesn't have an immediate business model).
  - ora600 16y ago
    Agree, except the single family home. Because the quality of life in US apartment buildings is appalling. I don't want to hear every step that my upstairs neighbors take. I don't need to know when they go to the restroom in the middle of the night. I don't need my downstairs neighbor ask me not to walk after 10pm. This is ridiculous. I'll live in a US apartment once the sound insulation issue is resolved (hint to US architects: It was solved by 1930 in the rest of the world).
    - houseabsolute 16y ago
      Maybe you just picked the wrong building? The only noise I hear from my neighbors is when the windows are open and the kids are screaming two doors down. But no insulation is going to fix that problem.
- dedward 16y ago
  Defining "rich" as a fixed amount is silly - define "Rich" as "all your time is your own, and the passive income you make on the side is enough to cover your expenses, whatever they are".
wccrawford 16y ago
Or, and here's an idea, don't spend $200k a year. When you were creating that startup, you lived on a lot less.
- quanticle 16y ago
  That gets to the idea at the bottom of the piece: "You can live rich, or you can retire early. But don't think you can do both."
daveschappell 16y ago
I think the 'retire' desire is more of something that first-timers or non-wealthy (at some level) most aspire too. I've realized that it's more about getting comfortable to the point of being able to do things that you're passionate about, and being able to say no to the opposite, that's most important.
- martyhu 16y ago
  Agreed. while exiting one startup may not be enough to retire, its a pretty good start for plowing it into your next one.
wallflower 16y ago
I think I could get by on $30,000 a year and working on my own ISV in a nice Latin American country. Is anyone doing that here?
- TheEzEzz 16y ago
  Hell, I'm getting by on $15,000 a year right now, and could make do with a lot less if I was living some place cheap. I eat well, sleep well, and live well. I don't fly first class, but it's not exactly killing me.
- philwelch 16y ago
  I have similar ideas. I've gathered that Buenos Aires is nice, incidentally.
  - GFischer 16y ago
    I'm not a fan of Buenos Aires personally, but you can visit there for cheap :) . (I live in Montevideo, Uruguay which is quite close to Buenos Aires)
    - wyclif 16y ago
      Why not BA? Curious why you say that.
      - GFischer 16y ago
        If you're into Tango, or more bohemian, or from the US, you probably will like Buenos Aires. But I see it much like I expect Canadians see the US: something like my home city (Montevideo), with both the good and (especially) the bad things magnified. There are beautiful parts of Buenos Aires (I recommend Recoleta and Palermo), and lively parts of Buenos Aires (not my speciality :) ), and they're both nice.
- dstein 16y ago
  I quit my day job last year and began my ISV/web startup after I calculated I could live very comfortably in Costa Rica on $20,000 per year. I haven't made a full time move there quite yet though, I go there for the winter to surf and code.
geophile 16y ago
I've been doing startups since I was 31 (22 years ago), and figured that out quickly. And I've been at successful startups (IPO, acquisitions). Much more realistic to aim for being employed (you do love working for startups, right?), but having your kids' college paid for, buying nice vacations, taking long unpaid leaves, buying nice toys for yourself and your family, having retirement (in your 50s or 60s) taken care of, and so on. Also, for someone who really does love startups (technology, business side, whatever), "retirement" probably means doing the same thing you've been doing, but at a more leisurely pace, and that will probably earn something.
- TotlolRon 16y ago
  > I've been doing startups since I was 31 (22 years ago), and figured that out quickly. When you are 31 it is easy to figure out you won't retire rich at 30. Just saying.
charlesju 16y ago
I don't think stock options have "zero" value. For a lot of people working on a salary it's hard to save money, so when a startup sells and an employee gets a sizable chunk of money from the sale, it's huge relative to their cash-flow perspective.
- maxawaytoolong 16y ago
  Except a liquidity event rarely happens. When they do, it's often a shell game for the investors to mask losses. The early stage employee's options are from the common pool; the investors get preferred options which are paid out first. Generally it's quite easy for the board to zero out employee options if things aren't going as well as hoped.
  - gaius 16y ago
    Many years ago, at the first company I worked for that IPO'd, I think I was something like employee number 30. Employee number 1 was a good friend of mine, and after the event we and a few others decided "I'll show you mine if you show me yours". Jewel was big at the time, total honesty was all the rage. Now I had made "a bit" of money on my stock options, not an amount to be sniffed at, but far from a life-changing amount. Think on the order of, a car, or a year's tuition, or an amazing vacation. What was shocking tho' is that we'd all made that much. We all had exactly the same options package. Executives hired well after me, mere months before the IPO, were buying racehorses. Go figure.
    - maxawaytoolong 16y ago
      Yeah. I've worked at a company where I was middling employee 250 but had the same number of options as important employee 8 simply because I was bros with the founder. I think hackers think the non-technical side of the business is going to be merit based and "fair" but that's generally not the case in my experience.
      - gaius 16y ago
        The difference here was 5-figures for the technical types who'd been there for years vs 7-figures or more for business types who'd been there for months. If nothing else it was a real eye opener into how the world really worked. Not that I'd had any illusions that I was going to retire there and then, mind. But still. I believe they were "bros" with the VCs rather than the founders, tho'. The founders didn't do too badly but today, they aren't retired either...
sabat 16y ago
As someone who just witnessed two non-founders of a startup that had a recent IPO become wealthy enough to retire -- B.S. You can do it with stock options (even without an IPO). Tony seems to be making a binary argument: it's not guaranteed, so you may as well give up on the idea. Of course I'm doing it for the money. I'm also doing it for other reasons. Did someone die and tell Tony Wright that the world is only comprised of on/off states?
- sosuke 16y ago
  I couldn't agree with you more sabat, it isn't an either or scenario. I'm hoping for my first success to just be a springboard into more money making ventures.
  - sabat 16y ago
    A good point that I'd thought but not expressed! Who says any one startup experience will be your only one? If you like startups and the kind of people they attract, you'll want to spend some time in those kind of environments. It's not wham-bam-thank-you-startup.
- gamble 16y ago
  You can also get your FU money playing the lottery. It's probably a better deal overall, since the odds are about the same and you don't have to pull any all-nighters to win the lotto.
  - sabat 16y ago
    The odds are nowhere near the same. Besides the raw odds -- obviously much better than the zillion-to-one odds on the lottery -- you can actually affect the outcome of your startup to some degree.
    - gamble 16y ago
      As an employee, you start out with such a small grant and have so little control over vesting conditions and dilution that participating in a liquidity event to that degree is essentially an act of charity on the part of the investors.
muhfuhkuh 16y ago
Can we conclude that this is the wistful daydream equivalent of the "Maserati Problem"[1]? I can definitely say that if 30 years we're looking at half a million dollars as a "cost of living adjustment", that world will for the people who don't make that kind of money be Thunderdome. I mean wages have barely kept up with inflation. In the last 40 years (between 1967 and 2007), median wages have only gone up US$10000 (from 40k to 50k). How the hell are all of our parents going to fare when you need 500,000 to maintain an upper-middle class lifestyle? I see the numbers adding up (and it is a nicey-nice spreadsheet), it just doesn't make any kind of a sense. I guess that's why I'm only middle-class. I don't see this heinous future coming for all of us. [1] http://news.ycombinator.com/item?id=1444003 http://news.ycombinator.com/item?id=1444003
- yummyfajitas 16y ago
  How the hell are all of our parents going to fare when you need 500,000 to maintain an upper-middle class lifestyle? If the past 40 years are a guide to the future, then the lifestyle we currently define as "upper-middle class" will be redefined as "poverty" and will be available to virtually everyone, including people who can't even be bothered to find a job. People will continue to complain about the declining middle class, how the median family can barely afford to live in a 4000 sq ft house with a robotic kitchen/laundry/bathroom and about how unaffordable their stem cell therapy and cloned organs are [1]. They'll watch TV news reports lamenting the bad economy on their 108,000p 10' 3d full immersion TV's, while the uber rich (income inequality will go up as well) do much the same thing, but in a 100,000sq ft house and a 50' TV. Also, the quality of stem cell therapy and robotic surgery available to the rich will be slightly greater. [1] They will of course lump all medical goods and services together under the catch-all term "health care". [edit: clarified that I'm thinking about 40 years here.]
  - cageface 16y ago
    If the past is a guide to the future, then the lifestyle we currently define as "upper-middle class" will be redefined as "poverty" and will be available to virtually everyone, including people who can't even be bothered to find a job. For many reasons I doubt that the last few hundred years are going to tell us much about the next hundred. So many critical trends are following exponential curves that can't continue on indefinitely.
jonknee 16y ago
A more accurate title would be "No, you can't retire rich at 30 if you sell your startup and not think about money ever again". It's perfectly doable to retire at 30 with $4m just as it's perfectly doable to blow through $100m at 50.
noodle 16y ago
most people can live quite richly on around $50k/year, depending on where they live and what they're doing. especially if you're willing to pony up some cash up front to buy your house/car if you want to own one. but, if your idea of richly is tainted by popular culture, and you want to buy some yachts and collect expensive cars, then yeah, you're going to go broke.
- sliverstorm 16y ago
  It depends on your idea of yachts and fancy cars. My dream boat is one of these: http://yachtpals.com/files/userimages/laserworlds.jpg http://yachtpals.com/files/userimages/laserworlds.jpg
_pius 16y ago
I think it was Jadakiss who said "Entrepreneurs don't retire, they just get chubby and become angel investors." I don't know of many people in this business who actually plan on being utterly retired while they blow hundreds of thousands of dollars a year. Most just want to not be obligated to work on things that don't interest them.
- webwright 16y ago
  But you ARE. Or at least you are obligated to work on things that throw off meaningful amounts of money. What if what interests you is poetry? Raising foster kids? Working on open source projects? If what interests you is not an income source, then you're going to need to avoid "living rich". Which, IMO, is fine and dandy. I get very little joy out of huge houses, expensive wines, and 1st class travel.
  - sigstoat 16y ago
    all kinds of things can be turned into income sources if you're serious about them and any good. making money off of poetry and open source is obvious. (not at the sports car level, but below that, sure.) i'll admit it isn't not immediately obvious to me how you could profit from raising foster kids in a moral fashion, though that does not mean there isn't one.
    - Luc 16y ago
      Easy. Set up a non-profit dedicated to the foster kids' well being. Accept donations and funding from other organisations. Pay yourself a wage as an administrator. Sell the movie rights and retire rich!
  - robryan 16y ago
    The question is what percentage of successful entrepreneurs are really concerned with living rich and how many are just after the freedom. Looking at it in terms of expected value of a startup there would be far better ways for one to focus solely on making money if that was the only goal.
maxawaytoolong 16y ago
He's right that you won't get rich as an early stage employee unless you worked somewhere like Google. I learned that the hard way. He's wrong about not being in it for the money. I've known about 10 serial entrepreneurs in Boston and Silicon Valley who were in it for the money, and they were all focused and successful at it. The key is to have a clear idea and a clear exit plan, and adjust to the market as quickly as possible. These guys were all like minor versions of Mike Cassidy. 3+ successful exits, each more money than the previous. All doing stuff you've probably used as a part of another product, but you've never heard of the original company or the founders. A lot of guys know can't decide whether they are in it for the money, or the love, or to be famous on Hacker News, so they fail. Lack of focus and not knowing why they were in it is why they failed. Guys who know they are in it for the money and can execute often win. If you're really in it for the money and lose, you might just suck. That's just the way it works. YMMV. The other thing he's wrong about is living to 90. Working at a desk 16 hours a day, living on soda and junk food, no exercise, estranged from families and friends... most hackers are going to need a lot of luck or serious medical breakthroughs if they want to make it to 70.
rchi 16y ago
1. If 4 mil at 30 is not enough, it would never be enough. 2. Someone with the drive, intelligence etc to accumulate 4mil by age 30 would be extremely bored retiring at 30. 3. There are different forms of wealth (relationships, experiences, reputation, health, intelligence, peace of mind etc), and money is merely one kind.
quizbiz 16y ago
What startup entrepreneur would want to retire at 30?
- crpatino 16y ago
  One who wants to devote himself to philanthropic pursuits for marginal pay (or none at all)?
deleted 16y ago
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aarong 16y ago
Depressing.... but,
jacquesm 16y ago
I'd be rather more worried about retiring at 65 when your 'contributions' have been locked away in some pension fund than if you sold your startup at 30 for a good chunk of cash. Who knows, you might not even live that long, life is fickle.
jmhobbs 16y ago
I live in the Midwest, and I think I would have a hard time spending 200K a year. Maybe my idea of happiness is wrong?
- markstansbury 16y ago
  You would be surprised.
- loewenskind 16y ago
  Right or wrong is difficult to pin down but living in the Midwest isn't something that most of the developed world would aspire to.
sbov 16y ago
> There are too many mechanics out there to make sure that the folks taking the real risks (investors and founders) make the real money. If a founder invests little to no money in the startup, what is the founder risking that someone working under her isn't? One could argue that employees are risking more - in hard times they are more likely to be out of a job.
jim-greer 16y ago
15% tax on $4M is only if you live in a state with no capital gains tax. In California it would be 15% + 9.3% = 24.3% - this makes a big difference. State by state rates as of a few years ago: http://www.thereibrain.com/realestate-blog/2007/10/capital-gains-tax-rates-state-by-state/ http://www.thereibrain.com/realestate-blog/2007/10/capital-g... Luckily, my take from the Kongregate sale was enough to be real FYM (though I enjoy running the site enough to want to keep doing it for a long time anyway).
jackowayed 16y ago
To play with the numbers yourself, File->Make a Copy. My personal numbers: I upped cap gains to 30% since apparently that's coming. If I get a $4M check when I'm 20, I get $2.8M after taxes. At a $100k burn rate (leaving the investment yield and inflation at 5% and 3% respectively), I'm set 'til I'm 68. I'm pretty happy with that. That gives me 48 years to angel invest, do another startup, marry someone who works and cuts my burn rate, etc.
pg 16y ago
There's little that's specific to startups here. What he's arguing is that being independently wealthy doesn't work the way one might naively think. But few things do work the way one might naively think. Certainly his title is false though. Obviously it depends how much you clear.
- huhtenberg 16y ago
  > But few things do work the way one might naively think. A bit cryptic. Can you elaborate?
  - kragen 16y ago
    Everything that has been written about how anything works explains how it doesn't work the way one might naïvely think. So, read everything that's ever been written about how anything works, and you'll have your answer.
deleted 16y ago
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dgallagher 16y ago
Microsoft held a launch event for the original Xbox back in Fall of 2001 for retailers. It showed what it was all about, let people play almost-complete versions of Halo and several other launch titles, etc... One of the speakers started talking about demographics, such as who they expected to buy the console. One point of their market research jumped out: The average male Xbox consumer in the (approx) 18-25 year old range expected to be a millionaire by age 30. Hmmm, that's me! (I was 21 at the time) But this would be an impossible goal for 99.9% of us. At the time a lot of paper-millionaires were recently minted in the dot-com boom, likely throwing off my perception and that of others. It turns out I felt "entitled" to be a millionaire by 30. But in reality, entitlement usually disappoints since it discourages hard work, dreams get shattered, and expectations are eventually lowered. It's a chronic disease best avoided. Fortunately this triggered a wake-up-call and encouraged me to work harder. Being a millionaire by age 30 isn't as important anymore. Instead, being intelligent enough and positioned properly by age 30 to do great things, and maybe eventually become a millionaire, is far more important. The goal of money is still desired as it brings elevated freedom, and the sooner you get it the better, of course. But it can be blinding if that's all you care about.
ichverstehe 16y ago
Screw that. I want to retire rich at 23.
bialecki 16y ago
I don't really get the obsession with wanting to be retired at 30. What would you do for the next 60 years? Honestly, the math here is pretty encouraging. If you're the founder of a company that makes a smallish exit, you've just freed up about 20 years of your life when you've only been alive for 30 years.
illumin8 16y ago
The main problem with the premise of this article is that someone with $4 million is just going to stick it in a money market fund and live off of the pitiful interest. The interest rate in a money market fund is below inflation, so of course your money is going to dwindle. If you took the same $4 million and invested it wisely, in something like the Permanent Portfolio, which has averaged 9.3% annual returns over the last 40 years and avoids all market timing, you'd probably be fine for the rest of your life. http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-historical-returns/ http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-...
- robryan 16y ago
  Similar things were said about property in America to, that it was a sure thing that had gone up every year for 50 years. Unless your somehow beating the market in general return is going to correlate with risk being taken on.
nadam 16y ago
I don't want to be rich, for me being free on my (an my family's) current standard of living is enough. I live in Eastern Europe (Hungary) and my current net income is $24000 per year. $30000 per year would be enough. (It is a very strong middle-class level here, maybe I can say upper-middle class especially if you don't have debts and already have a reasonable house.) I am 35 years old and let's say I want this money to last until I am 80. So I need $1.350.000. Provided that I will most probably always be a single founder and most probably will always bootstrap because no one will want to give me money, it will be enough to sell my company at $1.350.000, which I think would be more than doable if I would succeed with my current idea. Edit: and also it is hard to imagine that I would absolutely not make any income with the lots of fun-projects I would do after my 'retirement'.
erikstarck 16y ago
If you want to retire at 30 you're not the kind of person that can execute a startup and retire at 30.
JoeAltmaier 16y ago
> There are too many mechanics out there to make sure that the folks taking the real risks (investors and founders) make the real money. I resent this attitude, that somebody investing a fraction of their (somebody else's) money is taking the "real risk".
vanhouse 16y ago
This is true! Instead I'm looking for a scenario where I wouldn't have to retire
zmmmmm 16y ago
I can't imagine needing $200k / year to live comfortably. I'd like to see this analysis performed with a $100k / year income. That is still very comfortable, especially if it means you can afford to live somewhere cheaper and cut a lot of your other expenses.
- asmosoinio 16y ago
  Open the spreadsheet link, File / MAke a copy, and enter in 100000$. Voila: it works, you never run out of money with the 4M$.
wonginator1221 16y ago
The second major programming assignment I was given during my freshman year of college was a retirement calculator. Although the main goal of the assignment was to implement a interest compounding program, I believe my professor used this assignment to get us out of the get rich retire early mentality. If I recall correctly, an average single person would need to save well over $1 million USD by retirement if they wanted to live comfortably for the next 10 years.
mattmaroon 16y ago
While the math isn't glaringly erroneous, the assumptions used are. For one thing, it's looking at nearly risk-free rates of return while assuming a long-term horizon. (30 year treasuries are paying 3.65% now.) Sure it's easy to point out during the worst financial crisis of the last 70+ years that the S&P has fared poorly over the last decade. However even now, in a time of relative disaster, over the last 50 years (the timeline we're looking at if we're retiring at 30 and dieing at 80) it's returned about 8.5%. (That's using this chart http://moneycentral.msn.com/investor/charts/chartdl.aspx?symbol=%24INX&CP=0&PT=11 http://moneycentral.msn.com/investor/charts/chartdl.aspx?sym... and a little math). Average since the Great Depression is more like 10%. While many people now believe it will be lower going forward even the worst skeptics are talkinng more like 7-8%. I don't know that I buy it because, as the old joke goes, economists have predicted 9 out of the last 5 recessions, but even if so that's a vastly different picture than 4%, and excludes the fact that there are many investments with higher ROIs to be found readily if you're either willing to do more work or accept more risk. That's not to mention, FU money doesn't have to mean a jet-setting lifestyle. It just means enough to do what you want. One could live very happily in most of America spending $100k/yr, including their home. That's actually quite a bit when you consider that you're not paying income taxes, just capital gains. It's like making $150k, or 3x the national average. With $4m this is achievable even at money market rates.
stoney 16y ago
It's interesting how the calculation is quite sensitive to your initial capital - if you start with 6.2 million then at age 70 you have about 4 million remaining. Which you then burn through in the next 7 years.
jdvolz 16y ago
Let me make sure I understand this: The supposition is that if you take your millions and put it in a money market account you're not going to earn enough interest to offset inflation? No kidding. How about putting your money into something that makes money at a much greater rate - like a business. Is your risk increased, sure. Is your potential profit considerably increased, absolutely.

244 points by charliepark 16y ago

jdc 16y ago

...where retiring rich is defined as spending $300,000 annually. I'd personally move somewhere cheaper once my income no longer depended on my location.

mechanical_fish 16y ago
Looks like it's time to recommend The Millionaire Next Door: http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/dp/0671015206 http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/d... Don't bother to buy it: Get it out of the library and skim it. It's not a difficult read and it belabors its own point a bit. My own summary: The secret to retaining a high net worth is the same as the secret to accumulating it: Control spending. Don't waste money. Most of the people you know who look like they're wealthy -- fancy cars, country club memberships, stylish clothes -- are actually spending money as fast as they can get it, or faster. They have no savings and are living paycheck to paycheck. Meanwhile, many of the wealthiest people in your town are wearing four-year-old work clothes and driving ten-year-old trucks that they bought used. It doesn't do your future any good if you make $300k per year and spend $325k per year. Contrariwise, if you make $75k per year and only spend $50k per year you'll be a millionaire in under forty years.
- StavrosK 16y ago
  So you'll either be a poor-ish young playboy or a rich old guy? Why does the first option sound more attractive? Of course, fast cars and country clubs are all superficial, but being a miser just so you can die with millions isn't that much better...
  - jacquesm 16y ago
    Saving a buck is a lot easier than making a buck. That's one very good reason why plenty of rich people are seen as 'misers', if they let it roll then they'd stop being rich pretty quickly. The secret to that is to not make it plain what your financial situation is and to live well within your means.
    - leot 16y ago
      The tax situation on work you do for yourself (saving money) is also as favorable as it gets. There's a sense in which dollars saved are like tax-free income.
  - mechanical_fish 16y ago
    You've got the dichotomy disease. There is no need to go to either extreme. You can belong to a country club and still live within your means. You can certainly drive a fast car and live within your means. Fast cars can be bought for well under $10k, especially in California where a fast car can last for thirty years and more without rusting. Most of the stuff on more expensive cars is just bling, or comfort features that have nothing to do with high performance. What you have to do is pay attention. Don't spend more money than you have. Don't spend at an unsustainable rate. That doesn't mean "spend no money at all". There's a happy medium there. And you don't have to be a miser. Though, in fact, you probably do have to die with millions, or at least several tens of thousands, unless you plan your own suicide and stick to that plan. To ensure that you're living as comfortably on your last day as your first, you need a bunch of money in the bank. And you don't know which day will be your last. So, die with a million in the bank and endow an amusing trust fund in your will.
    - jacquesm 16y ago
      Anybody can buy a fast car, but few can actually afford to maintain it. A $10K fast car you buy might cost you a good bit of money per year to drive and keep in shape. Especially when it's thirty years old. That's mostly the reason it's only $10K to begin with (and the fact that the market for impractical cars is not too large).
      - vaksel 16y ago
        well the car doesn't really need to be 30 years old. sure if you buy some unreliable piece of crap...but there are plenty of fast cars that only require regular oil changes to keep in shape. granted there are different definitions of fast, some people are fine with 14 second cars, others need 12s...and others don't consider anything fast that doesn't run 10s. But overall, $10K is plenty to get yourself a reliable 6-7 year old car that's quick/fast.
      - Daniel_Newby 16y ago
        Fast, fun cars are emphatically middle class these days. The Subaru Impreza WRX is $25k new, for example. A millionaire who started collecting fast bargainmobiles would be killed by garaging and insurance, not maintenance.
  - lotharbot 16y ago
    As others have pointed out, with the buyout presented in the article, you can live forever spending low six figures (like $120k, with inflation adjustments.) That's not "rich young playboy" territory, but it's not "miser" territory either. At that level, you can raise a family in a comfortable house in a nice neighborhood, drive a nice car, have an RV or a boat or a cabin in the woods, have a country club membership and season tickets for your favorite sports team. Or you can live a little bit cheaper, still doing most of that stuff but maybe skipping out on the country club membership or something, and become a rich old guy who can leave a huge estate to his kids... and still not be a miser. The key is to position yourself in that middle ground.
  - jerf 16y ago
    "Living frugally" isn't what it used to be in the pain department. I have a Netflix subscription for one DVD and unlimited streaming instead of a $70 cable subscription (or an expensive antenna for my area), and while I made this choice to be "frugal" in the end I've actually been happier than I was with the cable. Do you need a smartphone with unlimited Internet? I can't speak for you, but I'm almost always within range of a computer and Wifi, and when I'm not I don't really need it. Does a new car bring you proportionate joy to the cost? It doesn't me, so mine are chosen to be relatively cheap to buy and operate, and I don't miss out on much I care about. (And I'm examining doing without my car; without going into my personal analysis it isn't a drop-dead win for my real numbers, but I'm looking at it. Note: I do not live in an area where I can trivially use public transportation.) And so on. You don't really have to eschew the pleasures of the flesh entirely to be a "miser" nowadays; you can eat well (cooking yourself), drive adequately, be entertained for a reasonable price, etc, and still save enough money to retire comfortably. You do have to avoid credit card debt, not overcommit on your housing, and there's some tricks and issues (can you psychologically deal with having $10K+ in the bank without spending it, without relenting on the discipline?), but the days of actually facing the choice you outline are gone for most of the people who would be on HN in the first place. Oh, recently internalized "trick": Take all "monthly fees" and mentally multiply by 12 to get the yearly cost, then treat that as the real cost. $24.95 a month for a service may sound reasonable; does $300 a year sound just as reasonable? I've been using this as part of my cell-phone upgrade resistance; there's a lot of ways I'd personally rather spend $300 than on a cell plan upgrade, up to and including not spending it at all. My Netflix savings is ($70 - $9) x 12 yearly, or $732/yr. My only regret is that I didn't do it about a year earlier!
    - tocomment 16y ago
      Any tips on finding a reliable, inexpensive car?
      - bconway 16y ago
        Used Japanese. Any of them.
      - jerf 16y ago
- maxawaytoolong 16y ago
  The millionaire next door makes too much of a deal about stuff like clothing and cars. You have to control your bleed, sure. I've found that if you have half a brain and live somewhere with a lot of money flowing around like NYC you can buy fancy shirts, go out to dinner, AND save 6-10 grand a month, which is the best of all worlds. Millionaire next door is more for people running a landscaping business in the suburbs, and saving every extra dollar instead of blowing it on a new home theatre system or an expensive vacation to somewhere that isn't as boring. I.e. it's more for lower middle class people trying to get a leg up. In my experience it's better to become a "millionaire next door" ... next door to multimillionaires or billionaires. It's way easier if you're around a bunch of people with a lot of extra dough.
  - RK 16y ago
    Hmmm... I hang around with two distinct groups of people a lot: grad student types with essentially no money and young professionals (doctors, lawyers, etc) with nice, solid salaries. From my experience, it's much easier to not spend money when I hang out with the first group, because they have no expectation of spending a lot of money. On the other hand, you'd feel out of place with the other group if you don't spend some higher base level for doing "normal" things like going out to eat, trip to Vegas, whatever. I assume this scales if you are just the millionaire and you hang out with multimillionaires.
    - illumin8 16y ago
      It depends. In NYC if you work in finance you'll probably find yourself getting taken out to nice cigar bars or steak houses after a good Friday trading session and running up several thousand dollar bar tabs on somebody's corporate card, rather than paying anything out of pocket.
kscaldef 16y ago
Yeah, I'm not getting where that number comes from. (And I love the suggestion that it's merely "upper middle class".) Personally, I can live a pretty nice lifestyle on "only" a couple thousand in disposable income a month. I really can't imagine what I would do with $20-25,000 / month to spend. With that in mind, I tried a few numbers in the spreadsheet. Just to be more "realistic" I dropped the payday back down to $4.5mil. I'm also assuming that the first thing I would do is to pay off my mortgage, so what remains is basically entirely discretionary spending. On a restrained budget of $50K/yr ($4K/mo), my assets grow faster than I'm spending, and I die with $20M in the bank. On a more extravagant $100K/yr (over $8K/mo), things are a bit closer, but still earning more than I spend and leveling out at about $7M in the bank. The crossover point is about $125K, leaving you broke at 70. So, I'm going to say that, yes, I really could retire and not work again with a $5-10M payout.
- sambe 16y ago
  I seriously don't mean this in an insulting/trollish way but I think you are either lacking imagination or underestimating how quickly you can adapt to a richer lifestyle. Given you are even here and thinking about entrepreneurial rewards I'd guess the latter. On the other hand perhaps I underestimate how... modest you like to live? Whilst I also raised my eyebrows at "upper middle class", I know people in that range who have spent rather too much and fallen (not totally) in only a handful of years. They never seemed stupid or excessive. It's probably partly to do with expectations: exactly the bias this article tries to correct.
  - kscaldef 16y ago
    It was more of a rhetorical device. It's not that I can't imagine how to blow through tens of thousands of dollars a month. It's that that lifestyle just isn't appealing to me.
    - drusenko 16y ago
      Spending 10's of thousands a month is getting up there, but "blowing through" more than $4k per month isn't necessarily an extravagant lifestyle. My guess would be that you don't live an as expensive a metro area as the author is basing his calculations on. In a place like San Francisco, a few non-frivolous expenses can add up quickly: - Your residence. A decent 2 bedroom place in a desirable part of San Francisco will run $3,000 per month in rent, a mortgage will be much higher. We're not talking anything extravagant here, just 600-900 sq ft. - Travel. Paying for more than one person to travel to visit family/friends a few times a year can easily add up to $1,000 or more per month. We're not talking luxury vacations here, either -- just basic airfare (coach) and accommodations. - Health expenses. As you earn more, you'll probably be more likely to spend more on optional health items. Things like LASIK for example. Also, as you get older, these expenses will get much larger. - Kids. It doesn't even have to be private school we're talking about, but I imagine that clothing/feeding/entertaining more than one person adds up quickly. - Any time/money trade-off. You have a limited amount of time and, similar to health expenses, you will be more likely to spend money to save time as you earn more. Each person's choices will be different here, but again, we're not talking luxury. Maybe paying for parking instead of a time intensive bus trip? Or arranging for laundry service? Or paying an unjust $40 bill that would otherwise take you 5 hours to fight? Notice there's no talk of fancy cars, big screen TVs, luxury trips, large mansions, or extravagant dinners. I think this is the definition of "upper-middle class" that Tony is talking about. Nothing fancy, but a few things to make your life more convenient.
strlen 16y ago
> "Let's assume you want to live in a major metro area, send your kids to private school..." That's his problem. When we moved to this country, my dad had an H1B visa and was making far below what an entry level Google employee is making. Nonetheless we had quite a comfortable life: rented an apartment in a suburb with a good school. Later, my parents (both of them finally rising to market rate) were able to afford a house and send me to college (two years of community college and then transferring to a university) without taking a penny of financial aid. This isn't just a rant against the OP and this has nothing to do with "fuck you money" (I have my own opinion on it, but I am not qualified to state it). I am sick and tired of the premise that these days a comfortable family life is two six digit incomes. No, you don't need a private school, no you don't need to live in San Francisco or a New York (try a suburb instead, which also solves the "private school" problem), no you don't need a single family home, no you don't need two BMWs. Even if you don't retire, it makes sense to live below your means to have money available for a rainy day. If you know how to live below your means than even as an employee (looking to make a few hundred thousand from options) you have the chance of earning de-facto "fuck you money": the sum of money which means you no longer have to accept a boring/stifling job just to have a job; the money you need to take the time off to work on a "science project" (a technical project that doesn't have an immediate business model).
- ora600 16y ago
  Agree, except the single family home. Because the quality of life in US apartment buildings is appalling. I don't want to hear every step that my upstairs neighbors take. I don't need to know when they go to the restroom in the middle of the night. I don't need my downstairs neighbor ask me not to walk after 10pm. This is ridiculous. I'll live in a US apartment once the sound insulation issue is resolved (hint to US architects: It was solved by 1930 in the rest of the world).
  - houseabsolute 16y ago
    Maybe you just picked the wrong building? The only noise I hear from my neighbors is when the windows are open and the kids are screaming two doors down. But no insulation is going to fix that problem.
dedward 16y ago
Defining "rich" as a fixed amount is silly - define "Rich" as "all your time is your own, and the passive income you make on the side is enough to cover your expenses, whatever they are".

wccrawford 16y ago

Or, and here's an idea, don't spend $200k a year. When you were creating that startup, you lived on a lot less.

quanticle 16y ago
That gets to the idea at the bottom of the piece: "You can live rich, or you can retire early. But don't think you can do both."

daveschappell 16y ago

I think the 'retire' desire is more of something that first-timers or non-wealthy (at some level) most aspire too. I've realized that it's more about getting comfortable to the point of being able to do things that you're passionate about, and being able to say no to the opposite, that's most important.

martyhu 16y ago
Agreed. while exiting one startup may not be enough to retire, its a pretty good start for plowing it into your next one.

wallflower 16y ago

I think I could get by on $30,000 a year and working on my own ISV in a nice Latin American country. Is anyone doing that here?

TheEzEzz 16y ago
Hell, I'm getting by on $15,000 a year right now, and could make do with a lot less if I was living some place cheap. I eat well, sleep well, and live well. I don't fly first class, but it's not exactly killing me.
philwelch 16y ago
I have similar ideas. I've gathered that Buenos Aires is nice, incidentally.
- GFischer 16y ago
  I'm not a fan of Buenos Aires personally, but you can visit there for cheap :) . (I live in Montevideo, Uruguay which is quite close to Buenos Aires)
  - wyclif 16y ago
    Why not BA? Curious why you say that.
    - GFischer 16y ago
      If you're into Tango, or more bohemian, or from the US, you probably will like Buenos Aires. But I see it much like I expect Canadians see the US: something like my home city (Montevideo), with both the good and (especially) the bad things magnified. There are beautiful parts of Buenos Aires (I recommend Recoleta and Palermo), and lively parts of Buenos Aires (not my speciality :) ), and they're both nice.
dstein 16y ago
I quit my day job last year and began my ISV/web startup after I calculated I could live very comfortably in Costa Rica on $20,000 per year. I haven't made a full time move there quite yet though, I go there for the winter to surf and code.

geophile 16y ago

I've been doing startups since I was 31 (22 years ago), and figured that out quickly. And I've been at successful startups (IPO, acquisitions). Much more realistic to aim for being employed (you do love working for startups, right?), but having your kids' college paid for, buying nice vacations, taking long unpaid leaves, buying nice toys for yourself and your family, having retirement (in your 50s or 60s) taken care of, and so on. Also, for someone who really does love startups (technology, business side, whatever), "retirement" probably means doing the same thing you've been doing, but at a more leisurely pace, and that will probably earn something.

TotlolRon 16y ago
> I've been doing startups since I was 31 (22 years ago), and figured that out quickly. When you are 31 it is easy to figure out you won't retire rich at 30. Just saying.

charlesju 16y ago

I don't think stock options have "zero" value. For a lot of people working on a salary it's hard to save money, so when a startup sells and an employee gets a sizable chunk of money from the sale, it's huge relative to their cash-flow perspective.

maxawaytoolong 16y ago
Except a liquidity event rarely happens. When they do, it's often a shell game for the investors to mask losses. The early stage employee's options are from the common pool; the investors get preferred options which are paid out first. Generally it's quite easy for the board to zero out employee options if things aren't going as well as hoped.
- gaius 16y ago
  Many years ago, at the first company I worked for that IPO'd, I think I was something like employee number 30. Employee number 1 was a good friend of mine, and after the event we and a few others decided "I'll show you mine if you show me yours". Jewel was big at the time, total honesty was all the rage. Now I had made "a bit" of money on my stock options, not an amount to be sniffed at, but far from a life-changing amount. Think on the order of, a car, or a year's tuition, or an amazing vacation. What was shocking tho' is that we'd all made that much. We all had exactly the same options package. Executives hired well after me, mere months before the IPO, were buying racehorses. Go figure.
  - maxawaytoolong 16y ago
    Yeah. I've worked at a company where I was middling employee 250 but had the same number of options as important employee 8 simply because I was bros with the founder. I think hackers think the non-technical side of the business is going to be merit based and "fair" but that's generally not the case in my experience.
    - gaius 16y ago
      The difference here was 5-figures for the technical types who'd been there for years vs 7-figures or more for business types who'd been there for months. If nothing else it was a real eye opener into how the world really worked. Not that I'd had any illusions that I was going to retire there and then, mind. But still. I believe they were "bros" with the VCs rather than the founders, tho'. The founders didn't do too badly but today, they aren't retired either...

sabat 16y ago

As someone who just witnessed two non-founders of a startup that had a recent IPO become wealthy enough to retire -- B.S. You can do it with stock options (even without an IPO). Tony seems to be making a binary argument: it's not guaranteed, so you may as well give up on the idea. Of course I'm doing it for the money. I'm also doing it for other reasons. Did someone die and tell Tony Wright that the world is only comprised of on/off states?

sosuke 16y ago
I couldn't agree with you more sabat, it isn't an either or scenario. I'm hoping for my first success to just be a springboard into more money making ventures.
- sabat 16y ago
  A good point that I'd thought but not expressed! Who says any one startup experience will be your only one? If you like startups and the kind of people they attract, you'll want to spend some time in those kind of environments. It's not wham-bam-thank-you-startup.
gamble 16y ago
You can also get your FU money playing the lottery. It's probably a better deal overall, since the odds are about the same and you don't have to pull any all-nighters to win the lotto.
- sabat 16y ago
  The odds are nowhere near the same. Besides the raw odds -- obviously much better than the zillion-to-one odds on the lottery -- you can actually affect the outcome of your startup to some degree.
  - gamble 16y ago
    As an employee, you start out with such a small grant and have so little control over vesting conditions and dilution that participating in a liquidity event to that degree is essentially an act of charity on the part of the investors.

muhfuhkuh 16y ago

Can we conclude that this is the wistful daydream equivalent of the "Maserati Problem"[1]? I can definitely say that if 30 years we're looking at half a million dollars as a "cost of living adjustment", that world will for the people who don't make that kind of money be Thunderdome. I mean wages have barely kept up with inflation. In the last 40 years (between 1967 and 2007), median wages have only gone up US$10000 (from 40k to 50k). How the hell are all of our parents going to fare when you need 500,000 to maintain an upper-middle class lifestyle? I see the numbers adding up (and it is a nicey-nice spreadsheet), it just doesn't make any kind of a sense. I guess that's why I'm only middle-class. I don't see this heinous future coming for all of us. [1] http://news.ycombinator.com/item?id=1444003 http://news.ycombinator.com/item?id=1444003

yummyfajitas 16y ago
How the hell are all of our parents going to fare when you need 500,000 to maintain an upper-middle class lifestyle? If the past 40 years are a guide to the future, then the lifestyle we currently define as "upper-middle class" will be redefined as "poverty" and will be available to virtually everyone, including people who can't even be bothered to find a job. People will continue to complain about the declining middle class, how the median family can barely afford to live in a 4000 sq ft house with a robotic kitchen/laundry/bathroom and about how unaffordable their stem cell therapy and cloned organs are [1]. They'll watch TV news reports lamenting the bad economy on their 108,000p 10' 3d full immersion TV's, while the uber rich (income inequality will go up as well) do much the same thing, but in a 100,000sq ft house and a 50' TV. Also, the quality of stem cell therapy and robotic surgery available to the rich will be slightly greater. [1] They will of course lump all medical goods and services together under the catch-all term "health care". [edit: clarified that I'm thinking about 40 years here.]
- cageface 16y ago
  If the past is a guide to the future, then the lifestyle we currently define as "upper-middle class" will be redefined as "poverty" and will be available to virtually everyone, including people who can't even be bothered to find a job. For many reasons I doubt that the last few hundred years are going to tell us much about the next hundred. So many critical trends are following exponential curves that can't continue on indefinitely.

jonknee 16y ago

A more accurate title would be "No, you can't retire rich at 30 if you sell your startup and not think about money ever again". It's perfectly doable to retire at 30 with $4m just as it's perfectly doable to blow through $100m at 50.

noodle 16y ago

most people can live quite richly on around $50k/year, depending on where they live and what they're doing. especially if you're willing to pony up some cash up front to buy your house/car if you want to own one. but, if your idea of richly is tainted by popular culture, and you want to buy some yachts and collect expensive cars, then yeah, you're going to go broke.

sliverstorm 16y ago
It depends on your idea of yachts and fancy cars. My dream boat is one of these: http://yachtpals.com/files/userimages/laserworlds.jpg http://yachtpals.com/files/userimages/laserworlds.jpg

_pius 16y ago

I think it was Jadakiss who said "Entrepreneurs don't retire, they just get chubby and become angel investors." I don't know of many people in this business who actually plan on being utterly retired while they blow hundreds of thousands of dollars a year. Most just want to not be obligated to work on things that don't interest them.

webwright 16y ago
But you ARE. Or at least you are obligated to work on things that throw off meaningful amounts of money. What if what interests you is poetry? Raising foster kids? Working on open source projects? If what interests you is not an income source, then you're going to need to avoid "living rich". Which, IMO, is fine and dandy. I get very little joy out of huge houses, expensive wines, and 1st class travel.
- sigstoat 16y ago
  all kinds of things can be turned into income sources if you're serious about them and any good. making money off of poetry and open source is obvious. (not at the sports car level, but below that, sure.) i'll admit it isn't not immediately obvious to me how you could profit from raising foster kids in a moral fashion, though that does not mean there isn't one.
  - Luc 16y ago
    Easy. Set up a non-profit dedicated to the foster kids' well being. Accept donations and funding from other organisations. Pay yourself a wage as an administrator. Sell the movie rights and retire rich!
- robryan 16y ago
  The question is what percentage of successful entrepreneurs are really concerned with living rich and how many are just after the freedom. Looking at it in terms of expected value of a startup there would be far better ways for one to focus solely on making money if that was the only goal.

maxawaytoolong 16y ago

He's right that you won't get rich as an early stage employee unless you worked somewhere like Google. I learned that the hard way. He's wrong about not being in it for the money. I've known about 10 serial entrepreneurs in Boston and Silicon Valley who were in it for the money, and they were all focused and successful at it. The key is to have a clear idea and a clear exit plan, and adjust to the market as quickly as possible. These guys were all like minor versions of Mike Cassidy. 3+ successful exits, each more money than the previous. All doing stuff you've probably used as a part of another product, but you've never heard of the original company or the founders. A lot of guys know can't decide whether they are in it for the money, or the love, or to be famous on Hacker News, so they fail. Lack of focus and not knowing why they were in it is why they failed. Guys who know they are in it for the money and can execute often win. If you're really in it for the money and lose, you might just suck. That's just the way it works. YMMV. The other thing he's wrong about is living to 90. Working at a desk 16 hours a day, living on soda and junk food, no exercise, estranged from families and friends... most hackers are going to need a lot of luck or serious medical breakthroughs if they want to make it to 70.

rchi 16y ago

1. If 4 mil at 30 is not enough, it would never be enough. 2. Someone with the drive, intelligence etc to accumulate 4mil by age 30 would be extremely bored retiring at 30. 3. There are different forms of wealth (relationships, experiences, reputation, health, intelligence, peace of mind etc), and money is merely one kind.

quizbiz 16y ago

What startup entrepreneur would want to retire at 30?

crpatino 16y ago
One who wants to devote himself to philanthropic pursuits for marginal pay (or none at all)?

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aarong 16y ago

Depressing.... but,

jacquesm 16y ago

I'd be rather more worried about retiring at 65 when your 'contributions' have been locked away in some pension fund than if you sold your startup at 30 for a good chunk of cash. Who knows, you might not even live that long, life is fickle.

jmhobbs 16y ago

I live in the Midwest, and I think I would have a hard time spending 200K a year. Maybe my idea of happiness is wrong?

markstansbury 16y ago
You would be surprised.
loewenskind 16y ago
Right or wrong is difficult to pin down but living in the Midwest isn't something that most of the developed world would aspire to.

sbov 16y ago

> There are too many mechanics out there to make sure that the folks taking the real risks (investors and founders) make the real money. If a founder invests little to no money in the startup, what is the founder risking that someone working under her isn't? One could argue that employees are risking more - in hard times they are more likely to be out of a job.

jim-greer 16y ago

15% tax on $4M is only if you live in a state with no capital gains tax. In California it would be 15% + 9.3% = 24.3% - this makes a big difference. State by state rates as of a few years ago: http://www.thereibrain.com/realestate-blog/2007/10/capital-gains-tax-rates-state-by-state/ http://www.thereibrain.com/realestate-blog/2007/10/capital-g... Luckily, my take from the Kongregate sale was enough to be real FYM (though I enjoy running the site enough to want to keep doing it for a long time anyway).

jackowayed 16y ago

To play with the numbers yourself, File->Make a Copy. My personal numbers: I upped cap gains to 30% since apparently that's coming. If I get a $4M check when I'm 20, I get $2.8M after taxes. At a $100k burn rate (leaving the investment yield and inflation at 5% and 3% respectively), I'm set 'til I'm 68. I'm pretty happy with that. That gives me 48 years to angel invest, do another startup, marry someone who works and cuts my burn rate, etc.

pg 16y ago

There's little that's specific to startups here. What he's arguing is that being independently wealthy doesn't work the way one might naively think. But few things do work the way one might naively think. Certainly his title is false though. Obviously it depends how much you clear.

huhtenberg 16y ago
> But few things do work the way one might naively think. A bit cryptic. Can you elaborate?
- kragen 16y ago
  Everything that has been written about how anything works explains how it doesn't work the way one might naïvely think. So, read everything that's ever been written about how anything works, and you'll have your answer.

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dgallagher 16y ago

Microsoft held a launch event for the original Xbox back in Fall of 2001 for retailers. It showed what it was all about, let people play almost-complete versions of Halo and several other launch titles, etc... One of the speakers started talking about demographics, such as who they expected to buy the console. One point of their market research jumped out: The average male Xbox consumer in the (approx) 18-25 year old range expected to be a millionaire by age 30. Hmmm, that's me! (I was 21 at the time) But this would be an impossible goal for 99.9% of us. At the time a lot of paper-millionaires were recently minted in the dot-com boom, likely throwing off my perception and that of others. It turns out I felt "entitled" to be a millionaire by 30. But in reality, entitlement usually disappoints since it discourages hard work, dreams get shattered, and expectations are eventually lowered. It's a chronic disease best avoided. Fortunately this triggered a wake-up-call and encouraged me to work harder. Being a millionaire by age 30 isn't as important anymore. Instead, being intelligent enough and positioned properly by age 30 to do great things, and maybe eventually become a millionaire, is far more important. The goal of money is still desired as it brings elevated freedom, and the sooner you get it the better, of course. But it can be blinding if that's all you care about.

ichverstehe 16y ago

Screw that. I want to retire rich at 23.

bialecki 16y ago

I don't really get the obsession with wanting to be retired at 30. What would you do for the next 60 years? Honestly, the math here is pretty encouraging. If you're the founder of a company that makes a smallish exit, you've just freed up about 20 years of your life when you've only been alive for 30 years.

illumin8 16y ago

The main problem with the premise of this article is that someone with $4 million is just going to stick it in a money market fund and live off of the pitiful interest. The interest rate in a money market fund is below inflation, so of course your money is going to dwindle. If you took the same $4 million and invested it wisely, in something like the Permanent Portfolio, which has averaged 9.3% annual returns over the last 40 years and avoids all market timing, you'd probably be fine for the rest of your life. http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-historical-returns/ http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-...

robryan 16y ago
Similar things were said about property in America to, that it was a sure thing that had gone up every year for 50 years. Unless your somehow beating the market in general return is going to correlate with risk being taken on.

nadam 16y ago

I don't want to be rich, for me being free on my (an my family's) current standard of living is enough. I live in Eastern Europe (Hungary) and my current net income is $24000 per year. $30000 per year would be enough. (It is a very strong middle-class level here, maybe I can say upper-middle class especially if you don't have debts and already have a reasonable house.) I am 35 years old and let's say I want this money to last until I am 80. So I need $1.350.000. Provided that I will most probably always be a single founder and most probably will always bootstrap because no one will want to give me money, it will be enough to sell my company at $1.350.000, which I think would be more than doable if I would succeed with my current idea. Edit: and also it is hard to imagine that I would absolutely not make any income with the lots of fun-projects I would do after my 'retirement'.

erikstarck 16y ago

If you want to retire at 30 you're not the kind of person that can execute a startup and retire at 30.

JoeAltmaier 16y ago

> There are too many mechanics out there to make sure that the folks taking the real risks (investors and founders) make the real money. I resent this attitude, that somebody investing a fraction of their (somebody else's) money is taking the "real risk".

vanhouse 16y ago

This is true! Instead I'm looking for a scenario where I wouldn't have to retire

zmmmmm 16y ago

I can't imagine needing $200k / year to live comfortably. I'd like to see this analysis performed with a $100k / year income. That is still very comfortable, especially if it means you can afford to live somewhere cheaper and cut a lot of your other expenses.

asmosoinio 16y ago
Open the spreadsheet link, File / MAke a copy, and enter in 100000$. Voila: it works, you never run out of money with the 4M$.

wonginator1221 16y ago

The second major programming assignment I was given during my freshman year of college was a retirement calculator. Although the main goal of the assignment was to implement a interest compounding program, I believe my professor used this assignment to get us out of the get rich retire early mentality. If I recall correctly, an average single person would need to save well over $1 million USD by retirement if they wanted to live comfortably for the next 10 years.

mattmaroon 16y ago

While the math isn't glaringly erroneous, the assumptions used are. For one thing, it's looking at nearly risk-free rates of return while assuming a long-term horizon. (30 year treasuries are paying 3.65% now.) Sure it's easy to point out during the worst financial crisis of the last 70+ years that the S&P has fared poorly over the last decade. However even now, in a time of relative disaster, over the last 50 years (the timeline we're looking at if we're retiring at 30 and dieing at 80) it's returned about 8.5%. (That's using this chart http://moneycentral.msn.com/investor/charts/chartdl.aspx?symbol=%24INX&CP=0&PT=11 http://moneycentral.msn.com/investor/charts/chartdl.aspx?sym... and a little math). Average since the Great Depression is more like 10%. While many people now believe it will be lower going forward even the worst skeptics are talkinng more like 7-8%. I don't know that I buy it because, as the old joke goes, economists have predicted 9 out of the last 5 recessions, but even if so that's a vastly different picture than 4%, and excludes the fact that there are many investments with higher ROIs to be found readily if you're either willing to do more work or accept more risk. That's not to mention, FU money doesn't have to mean a jet-setting lifestyle. It just means enough to do what you want. One could live very happily in most of America spending $100k/yr, including their home. That's actually quite a bit when you consider that you're not paying income taxes, just capital gains. It's like making $150k, or 3x the national average. With $4m this is achievable even at money market rates.

stoney 16y ago

It's interesting how the calculation is quite sensitive to your initial capital - if you start with 6.2 million then at age 70 you have about 4 million remaining. Which you then burn through in the next 7 years.

jdvolz 16y ago

Let me make sure I understand this: The supposition is that if you take your millions and put it in a money market account you're not going to earn enough interest to offset inflation? No kidding. How about putting your money into something that makes money at a much greater rate - like a business. Is your risk increased, sure. Is your potential profit considerably increased, absolutely.