6 ms·
Yeah... I literally don't buy it. High Cost of Living city has nothing to do with needing $500k/yr in earnings (post tax). What kind of mortgage and car do you
by kurthr 8y ago
Yeah... I literally don't buy it.
High Cost of Living city has nothing to do with needing $500k/yr in earnings (post tax). What kind of mortgage and car do you have that?
Simple answer... that's a $10M house or a $2M car or half of each of those.
Besides the fact that if you're earning $1.2M salary, you're taking home other bonus/stock that are comparable. Getting locked into this sort of lifestyle is a choice not driven by need. A drug dealer in "low cost" Detroit or Sinaloa might make the same claims...
- dclusin 8y agoThe median annual earnings of palo altans is about $400k/year. That's probably workable for cheaper areas like south palo alto where a house built in the 80s will run you $2.5 mil. Move closer to downtown and you could easily double or triple your necessary annual take.
- zhobbs 8y ago"According to Census data, the median household income in Palo Alto is $137,000 a year, while the US average is $57,600" from: https://www.cnet.com/news/silicon-valley-middle-class-earns-seven-times-the-us-average/ https://www.cnet.com/news/silicon-valley-middle-class-earns-...
- vasilipupkin 8y agoI think this type of Census data understates household incomes. I am not exactly sure why, but Atherton comes in at about 400k a year per household. That is a lot, but doesn't seem like a lot for Atherton.
- glitchc 8y agoNo, this seems right. The typical distribution of income across the pop., even in a distorted environment like the valley, looks far more like a Poisson distribution with a long tail than a typical Gaussian
- vasilipupkin 8y ago137 is a median. Half the people in Palo Alto make less than 137 in household income? Maybe, if you count East Palo Alto. But Atherton at 443 ( https://www.bloomberg.com/graphics/2018-hundred-richest-places/ https://www.bloomberg.com/graphics/2018-hundred-richest-plac... ) ? seems too low
- zhobbs 8y agoI can't find the $400k/year number anywhere. The census puts it at "$250,001" which seems like a fishy number.
- vasilipupkin 8y agohttps://www.bloomberg.com/graphics/2018-hundred-richest-places/ https://www.bloomberg.com/graphics/2018-hundred-richest-plac...
- ryanburk 8y agoI believe it is skewed since many people in these neighborhoods aren't making their money through salary income (anymore), but instead through interest / dividends. If you sold your company, aren't working at FB/goog/etc and are sitting on a ton of stock holdings, your income is going to show as near $0
- vasilipupkin 8y agothat should be accounted for in govt household income calculations, but I could be wrong. For example, ton of stock holdings will pay you dividends or capital gains.
- throwaway-1283 8y agoWhat you put on your tax return every year doesn't really reflect your actual wealth. Even in tech most people top out at ~$200k-$250k base salaries but you may vest and accumulate millions in stock RSUs that you don't sell in a given year.
- ariwilson 8y agoStock RSU vests go on your tax returns.
- deleted 8y ago[deleted]
- throwaway-1283 8y agoAh ok - I'm thinking private shares
- arcticbull 8y agoThose do too. The only thing that doesn't is deferred compensation in the form of an ISO or NSO. The latter is recognized as ordinary income when exercised.
- gthippo 8y agoDon't RSUs show up on the W-2 as income though (even if you don't sell them)?
- arcticbull 8y agoThey do; RSU vesting is a taxable event. It's counted as ordinary income based on the fair market value at the time it vests and taxes are due immediately. Companies tend to withhold a percentage of the shares and sell them to cover your tax burden.
- vasilipupkin 8y agoMy working explanation is that it's actually survey data. the richest people either don't answer the survey or understate their actual holdings when they do answer.
- telchar 8y agoYou don't want to rely on it for means because the high incomes are capped at a relatively low level so that they don't out high-earners in sparse areas. But that shouldn't affect medians.
- poof131 8y agoThose numbers don’t remotely reflect the cost of living for people moving to the area now. Prop 13 has distorted things dramatically. In Palo Alto, there are numerous retired people living in houses paying property tax rates essentially set in the 1970s. In fact, Palo Alto has the lowest tax rate in the country by percent since the houses are so expensive but the people pay so little compared to the value.[1] You could definitely live off $500k, but $137 would be really tough to near impossible with a family. Prop 13 has really broken the California housing market. https://www.bizjournals.com/sanfrancisco/news/2016/12/01/property-tax-prop-13-palo-alto-lowest.html https://www.bizjournals.com/sanfrancisco/news/2016/12/01/pro...
- glitchc 8y agoStock options are not counted as income. They are exactly that: Stock options. Your income is your take-home pay, specifically gross pay on your stub extrapolated to annual salary. Yes, there is capital income from stocks and other market investments, but appreciation for those comes under capital gains, which are calculated (and taxed) separately, and don’t count as employment income, for good reason: You can’t use stock options vesting in 4 years to buy food tomorrow or pay mortgage next month.
- gshulegaard 8y agoWhich makes it ironic that capital gains taxes can bite exercisers before they are actually able to be liquidated.
- caleblloyd 8y agoThe spread between purchase and grant price for Incentive Stock Options actually is counted towards income for Alternative Minimum Tax.
- jhall1468 8y ago100% agree. We recently purchased a car. In our case the "expensive" aspect is that we bought new... a new Subaru Outback. We could certainly afford a brand new Escalade, but those types of behaviors would lock me into my current employer or something that pays similarly and that idea isn't something I'm fond of. And this dude bought that shit despite hating his professional life. Hard to feel bad for him.
- ticmasta 8y agoI've been in a similar position as you for most of my life. One weird aspect: employers/managers/companies have come to rely on you "needing" the pay cheque as a powerful motivator and control. When you can literally walk away from a job because you don't need the money to make your end of month payments it makes the relationship weird in some aspects. I don't even know if the party who traditionally holds this power consciously realizes it, but in my experience they seem to exhibit less confidence or willingness to play the "because I own you" card. It could also just be that I come across as less of a push-over and they respond accordingly. Regardless, interesting phenomenon...
- tqkxzugoaupvwqr 8y agoI’ve heard it given the name “Fuck you money” – the money you have that gives you the ability to just say “Fuck you!” and walk away from your employment.
- uuwp 8y agoMore like a 2M house and a 120K car. 500K/year isn't enough to live in a 10M house because it's 20 years of work (30, accounting for other expenses) and that assumes no cut in income. To get into a 10M house one needs to start a very successful business, which is quite possible after all the experience at such a job.
- throwaway-1283 8y agoUsually when someone mentions a salary figure it's pre-tax. $500k in NYC is ~285k post-tax. If you have a family, a $1.5m house (which barely gets you a shabby 3-bedroom in a high cost city) will, assuming you put $300k down, be around $8-$10k/month in mortgage + property taxes + insurance + any hoa/maintenence, which is by itself 40% of your monthly take home.
- abrahamepton 8y ago> If you have a family, a $1.5m house (which barely gets you a shabby 3-bedroom in a high cost city) Uh... median house price in Seattle is less than half that. $1.5 million for a house in Seattle will get you an extremely nice house. Extremely nice. If you disagree, it's because you have incredibly high standards for what constitutes "nice". That's fine, but it makes it more than a bit silly to complain that you "can't afford" a different lifestyle. You're just making bad choices at that point.
- throwaway-1283 8y agoI didn't mention Seattle...I'm referring to NYC or SF.
- abrahamepton 8y agoSo literally 2 cities. Wildly expensive cities like DC, Seattle, Boston are still highly livable on $1.5 million. Honestly, if you're regretting your life choices so severely but you're unwilling to live anywhere but NYC/SF, you're either not really regretting your life choices that much, or you're just really bad at making good decisions with your life.
- throwaway-1283 8y agoI'm making the assumption that there are more jobs that pay $500k+ in Silicon Valley and NYC. If you can get that salary in 2nd cities like SEA or BOS then of course you're doing better than someone making the same in higher CoL places.
- scottnyc 8y agoArticle says friend is in Manhattan and earned (i.e. total comp) $1.2mm. Very unusual for anyone in finance to have that high a salary short of being a CEO earning $10mm+. Suppose he lives on the UWS in a 2000 square foot 3-4 bedroom condo which he bought for $4mm and has a $3mm mortgage. With a 30year fixed mortgage, that's maybe $180k a year. Don't forget the $60+k a year in condo fees and taxes. Throw in anywhere from $40-80k for nanny/childcare/preschool for the 1-2 kids he may have and you already have nothing left over if he went to a $600k comp. I'm not saying he can't choose to live more conservatively, but when you're used to making $1.2mm a year, it's not hard to imagine how he got here. High cost of living does play a part, especially in NYC.
- refurb 8y ago$1.2M total comp is not that unusual in finance if you've been in a number of years[1]. [1]https://www.wallstreetoasis.com/salary/investment-banking-compensation https://www.wallstreetoasis.com/salary/investment-banking-co...