5 ms·

At $5,500 per month is that to rent or buy? I currently spend about 25% of my after-tax salary on rent and I consider it too much for me. $66,000 => $264,000

At $5,500 per month is that to rent or buy? I currently spend about 25% of my after-tax salary on rent and I consider it too much for me. $66,000 => $264,000 after-tax. Californian marginal income tax bracket for $52k - $268k is 9.3% So $264,000 after-tax => $291,000 pre-tax (I know that's not how tax brackets work but I'm just estimating) And that must be base salary since you can't pay rent or buy food with stock options. On Glassdoor a SENIOR developer at Google in SF shows as only $170,000. So can someone either tell me where can I get a $300k job as a MID LEVEL developer or tell me how on earth the author considers $5,500 per month an affordable housing cost? Side note: My marginal income tax rate in Australia is 37%... I feel absolutely robbed looking at these California tax rates

tehlike 8y ago
Rsus do stack up with refreshers.
- dgoldstein0 8y ago
  Yeah that 170k probably doesn't include stock based incentives. With those, >300k sounds plausible.
- null0pointer 8y ago
  But you can't use your options until they vest right? Maybe I don't understand exactly what you mean
  - wffurr 8y ago
    So your first year is tight, but then your stock grants begin vesting and it's basically extra income at that point if you sell immediately.
    - ummonk 8y ago
      Large companies are starting to eliminate vesting cliffs, and moving to quarterly refreshers.
      - ummonk 8y ago
        Can’t edit but meant to say quarterly vesting not refreshers.
  - labcomputer 8y ago
    RSU comp usually works like this (using made-up round numbers and assuming the share price is flat to keep things easy): * Day 1: You are granted $100k of RSUs[1] vesting over 4 years * Day 365: 1/4th of your original RSU grant vests ($25k). Your boss likes you, so you are granted a "refresher" block of $50k of RSUs vesting over 4 years. * Day 730: 1/4 of your original RSU + 1/4 of your new RSU vests ($25k + $12.5k) = $37.5. You continue to do a good job, so you are granted an additional "refresher" $50k of RSUs. * Day 1095: 1/4 of each block vests. You have ($25k + $12.5k + $12.5k) = $50k of shares vesting. You get a promotion and are granted $100k more RSUs. * Day 1460: You have ($25k + $12.5k + $12.5k + $25k) = $75k of shares vesting. You get a refresher of $75k RSUs. * Day 1825: Notice that your original block of RSUs is now exhausted. You have ($12.5k + $12.5k + $25k + $18.75k) = $68k of shares vesting. [1] RSU = Restricted Stock Unit, not the same thing as options. RSUs are like stock, except that it's really a promise to give you real shares at specific dates in the future, provided that you meet certain obligations (like continuing to be employed by the granting company).
nostrademons 8y ago
Hence roommates. $5500/month split 2 ways is $2250/month, which would still be ridiculous in any other city but is doable on a $130-140K base. Split 4 ways (that's doubling up in a bedroom) it's $1125/month, which is basically how non-tech-workers do it.
- null0pointer 8y ago
  The author specifies living alone > $5,500 a month at market rate, which is affordable to a mid-level programmer at a large tech firm living alone I understand what you mean that roommates are the only way it could make any sense. But I'm trying to understand where the author is coming from.
  - nostrademons 8y ago
    Oh, right. He also specifies mid-level developer (eg. Senior SWE or higher). I assume he means someone who's been working at a FAANG or late-stage startup for a couple years at least; by then, your stock options have started to vest and you can cash them out. Including stock mid-level compensation is usually well in the $300Ks for Bay Area large tech companies. You actually can pay for rent or food with stock at a public tech company; just sell it immediately upon vesting. Many mortgage brokers will consider it part of your income for the purposes of qualifying for a mortgage. For non-public late-stage companies, you can often get liquidity in secondary market sales; the banks don't like this and usually won't count it toward mortgages, but once it's cash it pays for rent the same as anything else.
    - null0pointer 8y ago
      Is 'mid-level' really senior or higher? You are probably right about the authors assumptions. Interesting that mortgage brokers consider it part of your income. Though I guess it makes sense. I didn't realise exactly how high compensation was in the Bay Area. People always throw out numbers but I've always struggled to find any actual data. Perhaps I should head to the 'mines' for a bit...
topmonk 8y ago
> Side note: My marginal income tax rate in Australia is 37%... I feel absolutely robbed looking at these California tax rates You're missing federal. You have to add both together to get a final tax. At that income federal would be about 30% after deductions. So totally it's around 37% - 39%, depending on your deduction.
- glangdale 8y ago
  Correct. I had to laugh at the idea of someone at that income level paying 9% marginal. US taxes work out a good deal less than Australian if you are paying Australia federal income tax but filing in the USA at a federal level (joys of dual citizenship!), but Australians often don't add up fed+state+local. So there's a lot of mythology in Australia about the low-tax USA as we don't pay state income tax here.
smivan 8y ago
Here are real numbers. Background: Average of 10 programmers who range ages 22-25 and are 2-3 years out of college. Base: 140k Bonus: 30k Equity: ~60k Total: $230k year pretax. Taxes: - 33% federal bracket - 10% state bracket - 7% FICA+Medicaid. (50% total) Brackets listed are marginal rates, actual rates are noted here: https://smartasset.com/taxes/california-tax-calculator#p9c7YRLmHn https://smartasset.com/taxes/california-tax-calculator#p9c7Y... Let's run the math - $230k comp - $83k taxes = $147k/year - assuming no other expenses, no retirement savings and no other income, that's 147/12 = $12.2k/mo, post tax. At this point $5,500/rent is easy. Realistically, the breakdown is more like this: $147k post tax income - $20k retirement - $18k food/drinks ($1500/mo in SF is reasonable) - $10k car payments - $10k insurance/misc = $89k/year $89k / 12 = $7,400/mo post tax and expenses. A $5,500 rent is still doable, but again extremely stupid because you aren't saving.
- ovi256 8y ago
  > Taxes: ... (50% total) > run the math - $230k comp - $83k taxes Please fix this inconsistency.
  - vertex-four 8y ago
    It’s not an inconsistency because of how taxes work - the first $x gets taxed at a lower rate. Most of most people’s income is not taxed at their marginal tax rate.
- gbustomtv5 8y ago
  20% bonus is not what mid engineers get. 60k equity is probaly over 4 years not 1. 60k over 4 years is actually close to average equity comp for 140k comp bracket. You are off by 50k. Signon bonuses can bring total comp to 200-210k. Background: I write eng offers and know comp brackets.
  - smivan 8y ago
    I do not doubt your work experience, but I would like to respectfully point out that the data I have for those ~10 engineers does indeed match to the numbers I have presented. Either way, with $200k salary the rent mentioned in the article is doable.
woolvalley 8y ago
$5500 is not a realistic rent option for someone living alone. You can get one bedrooms or studios in nice neighborhoods for under $3000-$2500. You can also live 45 minutes away from employment centers and pay less. So the math is significantly different from that inflated price he is talking about. Also by commuting you can use company busses if you work at bigco, subsudizing living far away.
- humanrebar 8y ago
  Single parents generally don't have roommates.
  - woolvalley 8y ago
    Parents tend to not live in SF downtown and have long commutes.
claydavisss 8y ago
When Gavin Newsom is elected Governor there will absolutely be a rise in the State rates for the top brackets. Jerry Brown pushed back and vetoed much of this stuff but he could only get away with that because he has no desire for another elected office. Newsom wants to be President and he knows that to get there he will need the help of the incoming left-wave in Sacramento...and the left-wave is completely focused on building their agenda on a tax-the-rich strategy that has been broadly supported in Propositions over the last few years. tl;dr: Californians should get ready for more State taxes. A lot more.
jiveturkey 8y ago
> On Glassdoor a SENIOR developer at Google in SF shows as only $170,000. That would be the base, not total comp. Sr dev at Google is easily $250k.

tehlike 8y ago

Rsus do stack up with refreshers.

dgoldstein0 8y ago
Yeah that 170k probably doesn't include stock based incentives. With those, >300k sounds plausible.
null0pointer 8y ago
But you can't use your options until they vest right? Maybe I don't understand exactly what you mean
- wffurr 8y ago
  So your first year is tight, but then your stock grants begin vesting and it's basically extra income at that point if you sell immediately.
  - ummonk 8y ago
    Large companies are starting to eliminate vesting cliffs, and moving to quarterly refreshers.
    - ummonk 8y ago
      Can’t edit but meant to say quarterly vesting not refreshers.
- labcomputer 8y ago
  RSU comp usually works like this (using made-up round numbers and assuming the share price is flat to keep things easy): * Day 1: You are granted $100k of RSUs[1] vesting over 4 years * Day 365: 1/4th of your original RSU grant vests ($25k). Your boss likes you, so you are granted a "refresher" block of $50k of RSUs vesting over 4 years. * Day 730: 1/4 of your original RSU + 1/4 of your new RSU vests ($25k + $12.5k) = $37.5. You continue to do a good job, so you are granted an additional "refresher" $50k of RSUs. * Day 1095: 1/4 of each block vests. You have ($25k + $12.5k + $12.5k) = $50k of shares vesting. You get a promotion and are granted $100k more RSUs. * Day 1460: You have ($25k + $12.5k + $12.5k + $25k) = $75k of shares vesting. You get a refresher of $75k RSUs. * Day 1825: Notice that your original block of RSUs is now exhausted. You have ($12.5k + $12.5k + $25k + $18.75k) = $68k of shares vesting. [1] RSU = Restricted Stock Unit, not the same thing as options. RSUs are like stock, except that it's really a promise to give you real shares at specific dates in the future, provided that you meet certain obligations (like continuing to be employed by the granting company).

nostrademons 8y ago

Hence roommates. $5500/month split 2 ways is $2250/month, which would still be ridiculous in any other city but is doable on a $130-140K base. Split 4 ways (that's doubling up in a bedroom) it's $1125/month, which is basically how non-tech-workers do it.

null0pointer 8y ago
The author specifies living alone > $5,500 a month at market rate, which is affordable to a mid-level programmer at a large tech firm living alone I understand what you mean that roommates are the only way it could make any sense. But I'm trying to understand where the author is coming from.
- nostrademons 8y ago
  Oh, right. He also specifies mid-level developer (eg. Senior SWE or higher). I assume he means someone who's been working at a FAANG or late-stage startup for a couple years at least; by then, your stock options have started to vest and you can cash them out. Including stock mid-level compensation is usually well in the $300Ks for Bay Area large tech companies. You actually can pay for rent or food with stock at a public tech company; just sell it immediately upon vesting. Many mortgage brokers will consider it part of your income for the purposes of qualifying for a mortgage. For non-public late-stage companies, you can often get liquidity in secondary market sales; the banks don't like this and usually won't count it toward mortgages, but once it's cash it pays for rent the same as anything else.
  - null0pointer 8y ago
    Is 'mid-level' really senior or higher? You are probably right about the authors assumptions. Interesting that mortgage brokers consider it part of your income. Though I guess it makes sense. I didn't realise exactly how high compensation was in the Bay Area. People always throw out numbers but I've always struggled to find any actual data. Perhaps I should head to the 'mines' for a bit...

topmonk 8y ago

> Side note: My marginal income tax rate in Australia is 37%... I feel absolutely robbed looking at these California tax rates You're missing federal. You have to add both together to get a final tax. At that income federal would be about 30% after deductions. So totally it's around 37% - 39%, depending on your deduction.

glangdale 8y ago
Correct. I had to laugh at the idea of someone at that income level paying 9% marginal. US taxes work out a good deal less than Australian if you are paying Australia federal income tax but filing in the USA at a federal level (joys of dual citizenship!), but Australians often don't add up fed+state+local. So there's a lot of mythology in Australia about the low-tax USA as we don't pay state income tax here.

smivan 8y ago

Here are real numbers. Background: Average of 10 programmers who range ages 22-25 and are 2-3 years out of college. Base: 140k Bonus: 30k Equity: ~60k Total: $230k year pretax. Taxes: - 33% federal bracket - 10% state bracket - 7% FICA+Medicaid. (50% total) Brackets listed are marginal rates, actual rates are noted here: https://smartasset.com/taxes/california-tax-calculator#p9c7YRLmHn https://smartasset.com/taxes/california-tax-calculator#p9c7Y... Let's run the math - $230k comp - $83k taxes = $147k/year - assuming no other expenses, no retirement savings and no other income, that's 147/12 = $12.2k/mo, post tax. At this point $5,500/rent is easy. Realistically, the breakdown is more like this: $147k post tax income - $20k retirement - $18k food/drinks ($1500/mo in SF is reasonable) - $10k car payments - $10k insurance/misc = $89k/year $89k / 12 = $7,400/mo post tax and expenses. A $5,500 rent is still doable, but again extremely stupid because you aren't saving.

ovi256 8y ago
> Taxes: ... (50% total) > run the math - $230k comp - $83k taxes Please fix this inconsistency.
- vertex-four 8y ago
  It’s not an inconsistency because of how taxes work - the first $x gets taxed at a lower rate. Most of most people’s income is not taxed at their marginal tax rate.
gbustomtv5 8y ago
20% bonus is not what mid engineers get. 60k equity is probaly over 4 years not 1. 60k over 4 years is actually close to average equity comp for 140k comp bracket. You are off by 50k. Signon bonuses can bring total comp to 200-210k. Background: I write eng offers and know comp brackets.
- smivan 8y ago
  I do not doubt your work experience, but I would like to respectfully point out that the data I have for those ~10 engineers does indeed match to the numbers I have presented. Either way, with $200k salary the rent mentioned in the article is doable.

woolvalley 8y ago

$5500 is not a realistic rent option for someone living alone. You can get one bedrooms or studios in nice neighborhoods for under $3000-$2500. You can also live 45 minutes away from employment centers and pay less. So the math is significantly different from that inflated price he is talking about. Also by commuting you can use company busses if you work at bigco, subsudizing living far away.

humanrebar 8y ago
Single parents generally don't have roommates.
- woolvalley 8y ago
  Parents tend to not live in SF downtown and have long commutes.

claydavisss 8y ago

When Gavin Newsom is elected Governor there will absolutely be a rise in the State rates for the top brackets. Jerry Brown pushed back and vetoed much of this stuff but he could only get away with that because he has no desire for another elected office. Newsom wants to be President and he knows that to get there he will need the help of the incoming left-wave in Sacramento...and the left-wave is completely focused on building their agenda on a tax-the-rich strategy that has been broadly supported in Propositions over the last few years. tl;dr: Californians should get ready for more State taxes. A lot more.

jiveturkey 8y ago

> On Glassdoor a SENIOR developer at Google in SF shows as only $170,000. That would be the base, not total comp. Sr dev at Google is easily $250k.