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> millionaire is a common outcome for software developers who work hard through their 20s and 30s now. No, it's not. It's common for some FAANG engineers. It's

by sidlls 5y ago

> millionaire is a common outcome for software developers who work hard through their 20s and 30s now. No, it's not. It's common for some FAANG engineers. It's not common at all for the industry as a whole. Look at all these comments doubling-down on the "7%/$10k-per-year" arithmetic, as if the only thing that affects savings rates is knowledge of this basic math. For a data driven community there sure are a lot of people ignoring the data.

denimnerd42 5y ago
Anyone making high 5 or low 6 figures will be a millionaire at the start retirement if they can save a modest amount from a reasonably early start, say 30 years old.
- hatchnyc 5y ago
  While technically correct, this doesn't square with most people's intuitive sense of what "being a millionaire" means. It's not having a solid retirement nest egg, it is being able to jet off to your yacht in St. Tropez on a private jet. I think this is largely due to inflation. A million dollars in the 50s or 60s would be around 10 million today, while at the turn of the 20th century when the term really became popular it would be worth 30 million today. A "millionaire" of the time is really living a different lifestyle and can likely afford a very extravagant upper class lifestyle purely on interest of their wealth. With housing costs having risen so much faster still beyond inflation, today you can easily be "a millionaire" simply by having a bit of equity in a modest home in a costal city.
  - denimnerd42 5y ago
    yeah well that's true about people's intuition but it hasn't been the case for a long time. to "jet off on a private jet" anywhere regularly probably requires a salary on the order of a million per year.
  - closeparen 5y ago
    But most people's intuitive sense of "being a millionaire" informs how they think about tax policy...
  - Matticus_Rex 5y ago
    Who thinks being a millionaire means a yacht and a jet, other than children?
    - hatchnyc 5y ago
      Well a Google Image search for "millionaire" turns up mostly private jets and Lamborghinis.
      - Matticus_Rex 5y ago
        Right, but who believes that stock photos generally represent their keywords?
ericmay 5y ago
I think it's common when compared to other industries, though maybe not generally common. Admittedly I have no data to back up this hunch. If I'm wrong, please correct me, but my interpretation of what the person you're replying to was trying to get at was that modest savings from a 23+ year old software engineer, to the tune of $800/month or $10,000/year (this could be 401k match and contributions) will get you pretty close to a million. Using this calculator[1] with an assumed rate of 6.7%, $0 initial investment, $800/month, compounded semi-annually and a variance of 1 netted $891,000 within 30 years. I think $800/month for nearly all software engineers is doable. [1] https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator https://www.investor.gov/financial-tools-calculators/calcula...
- paulpauper 5y ago
  inflation though...
  - ericmay 5y ago
    No doubt. People usually assume 2% inflation/year since that is what the Federal Reserve targets (and the 6.7% is a little conservative) but that amount of money also continues to grow over time, so depending on your expenses you may never touch the principal at that point with a 4% withdrawal rate. There are a lot of variables too. $800,000 with a paid off house is different than $800,000 and still renting, for example. Depends on your country of residence too, etc. But you can get to that point by saving, using common assumptions.
  - thebean11 5y ago
    Probably only a problem if you're in cash
    - bosie 5y ago
      how so?
- PragmaticPulp 5y ago
  Exactly. The math is easy, but convincing people that becoming a millionaire is a matter of consistent moderate savings is still hard. $800/month is $9.6K per year. Approximately half of the maximum 401K contribution limit, so it can be tax-advantaged as well. If you can swing the full 401K maximum, you’ll hit the millionaire status even faster. Add some taxable savings and it can be done in a decade without getting too extreme. A married couple doing this together makes it even more achievable. Unless someone has maxed out their career options (unlikely) almost everyone in software could get a $10-20K bump in the coming year through negotiation or changing jobs. Allocate that raise entirely to tax-advantaged savings and stay consistent for a few decades and it will add up to a million dollars. It doesn’t require FAANG compensation or extreme frugality. It just requires consistency over 20-30 years.
pjfin123 5y ago
With a $100,000 salary, $50,000 expenses, 30% tax rate, and 5% real returns you could put away $20,000 a year and have a million (2021) dollars in 26 years. Hardly easy but not out of the realm of possibility for a persistent and highly paid software developer.
- PragmaticPulp 5y ago
  Ideally the money would go into tax-advantaged accounts like 401Ks first, which would reduce the effective tax rate and thus boost savings.
- giantg2 5y ago
  But that still doesn't fit the paradigm presented by using Gates as an example. That you work really hard in your 20s and you're set for life.
  - cloverich 5y ago
    If you use his definition of working hard, by the time you are 30-year old software developer you'll have valuable skills and a valuable network in addition to a solid amount of money. You may be unable to _retire_ at 30 but you will, generally speaking, be setup for success for the rest of your life.
    - giantg2 5y ago
      So if I worked hard in my 20s, then why don't I have a solid amount of money and am not set up for lifelong sucess?
      - cloverich 5y ago
        How did you work hard? What kind of career did you choose? What was your budget like? Did you have any bad luck re health or family? There's many possible reasons, many under your control, some not. Should I assume based on your response and the original article, by hard work you mean not just effort on the job, but also effort in finding work you align with, explored other job types, spent real effort networking, studied for job skills a bunch, and didn't have any bad luck to explain it?
SonicScrub 5y ago
The Millionaire Next Door concepts are still as relevant as ever, albeit the specifics are a bit dated. Millionaire status is reasonably achievable for someone whose income and cost of basics allow for modest discretionary income. This is certainly the case for the majority of software developers https://en.wikipedia.org/wiki/The_Millionaire_Next_Door https://en.wikipedia.org/wiki/The_Millionaire_Next_Door
- giantg2 5y ago
  Over what time horizon? How do we factor in retirement needs and inflation? The point is that the vast majority of people are not going to be financially independent by 30, or even 40.
  - PragmaticPulp 5y ago
    > How do we factor in retirement needs and inflation? Use inflation-adjusted calculators. Any good savings and retirement calculator will have an option for this. Inflation is commonly misunderstood in long-term financial planning. It’s important to consider inflation for expenses and future savings amount, but many people don’t realize that inflation will also life their investments to some degree. For example, if a common house costs $5,000,000 on your future retirement date and you’ve been saving your money in cash this whole time, you’re in a bad spot. However, if you buy a house in your 30s that meets your needs, the value of your house will also rise with inflation. Inflation is also loosely coupled to rising stock prices (except for hyper-inflation or other economic catastrophes) and asset prices. Just don’t keep your money all in cash, because that’s the only guaranteed way to lose out to inflation.
    - giantg2 5y ago
      And then your tax bill on that house has inflated too. There are a lot of variables (I work in finance). This is really getting off topic. Do you really think using Gates as an example is legitimate to talk about hard work for normal people? That was the main point.
sidlls 5y ago
All these replies with the typical 7% return for 20-30 years calculations are missing the point. I know what the arithmetic is. It is not common to be in a position to do that, even in the software industry.
- pcbro141 5y ago
  Software Developer Median Salary (2020): $110,140 per year That sounds like a lot of software developers are in a position to put away $10k+/year to me. Source: BLS, https://www.bls.gov/ooh/computer-and-information-technology/software-developers.htm https://www.bls.gov/ooh/computer-and-information-technology/...
  - sidlls 5y ago
    That doesn't account for the events of life, like illness, maintenance on vehicles and property, etc.
- notyourwork 5y ago
  If you start maxing out retirements in your first job and continue to do so throughout your career, raises will be raises and you'll continue to save. If you tap into your max savings per year in start of your career, you'll have trouble pairing that income back and putting it away for savings. Max out your retirement funds early and never look back.
  - joquarky 5y ago
    That's all great until you have to use your retirement funds for medical emergencies.
    - notyourwork 5y ago
      Life can add obstacles, not sure that's basis to dismiss the point.
      - 5y ago
packetlost 5y ago
No, it is. If you don't retire (at 65~) with 2+ million in the bank you did something wrong (or had a rare cataclysmic event that drains your financial resource). I have a modest salary in the Midwest and should retire with $3m+ making reasonable contributions to a 401k, and that's if I don't change anything.
- Sr_developer 5y ago
  Or you could be served divorce papers from your partner and lose a substantial fraction of your net-worth and future income. Or you ( or a member of your family) could have a debilitating/rare disease and your insurance does not cover all the treatments for it. Or you could have been fired and opened your own business and your partners fleeced you out (ask me how I know) Or you live in a country where salaries are below 45 k /y. And so on ... You have a very naive, simplistic and privileged worldview so I hope for your own sake you never have to leave that cocoon.
  - packetlost 5y ago
    > Or you could be served divorce papers from your partner and lose a substantial fraction of your net-worth and future income. This definitely implies a questionable decision. > Or you ( or a member of your family) could have a debilitating/rare disease and your insurance does not cover all the treatments for it Sure, there could be rare cataclysmic events that drain you of your financial resources. That's not really on-topic to what the discussion is about though. > Or you could have been fired and opened your own business and your partners fleeced you out (ask me how I know) This is 100% a bad decision. Do not take money out of your 401k to start a business. > Or you live in a country where salaries are below 45 k /y. Then you likely live in a country where the CoL is significantly lower than in the US and the dynamics of retirement are very different. I'm speaking 100% from an American-centric point of view. > You have a very naive, simplistic and privileged worldview so I hope for your own sake you never have to leave that cocoon. I'm sorry my short internet comment on a technology forum is not comprehensive enough to account for all potential scenarios and nuance. I grew up in poverty, and I'm going to do everything I can to prevent myself from ending back up in that situation.
random314 5y ago
10% of Americans are millionaires. I would say that 90% of full time software engineers will end up becoming millionaires. FAANG engineers become millionaires in their 20s. For others it will take longer.
- giantg2 5y ago
  Will "millionaire" still have the same meaning in 30 years as it does today?
sanderjd 5y ago
It seems like $100k is conservatively a pretty typical salary these days even outside the big companies. That is $4M after a 40 year career, which makes you a millionaire when you retire if you can save 25%, even if the savings appreciate 0%. This seems pretty accomplishable. But perhaps the idea of "being a millionaire" you're thinking of is not that you slowly manage it over a long career, but that it happens more quickly?
- giantg2 5y ago
  BLS says that $110k is the median. It's not about eventually becoming a millionaire. It's about using Gates and other successful outliers as a pattern for normal people. There are tons of smart and hardworking people out there who are not very successful. There's a lot more going on than just hard work.

by sidlls 5y ago

denimnerd42 5y ago

Anyone making high 5 or low 6 figures will be a millionaire at the start retirement if they can save a modest amount from a reasonably early start, say 30 years old.

hatchnyc 5y ago
While technically correct, this doesn't square with most people's intuitive sense of what "being a millionaire" means. It's not having a solid retirement nest egg, it is being able to jet off to your yacht in St. Tropez on a private jet. I think this is largely due to inflation. A million dollars in the 50s or 60s would be around 10 million today, while at the turn of the 20th century when the term really became popular it would be worth 30 million today. A "millionaire" of the time is really living a different lifestyle and can likely afford a very extravagant upper class lifestyle purely on interest of their wealth. With housing costs having risen so much faster still beyond inflation, today you can easily be "a millionaire" simply by having a bit of equity in a modest home in a costal city.
- denimnerd42 5y ago
  yeah well that's true about people's intuition but it hasn't been the case for a long time. to "jet off on a private jet" anywhere regularly probably requires a salary on the order of a million per year.
- closeparen 5y ago
  But most people's intuitive sense of "being a millionaire" informs how they think about tax policy...
- Matticus_Rex 5y ago
  Who thinks being a millionaire means a yacht and a jet, other than children?
  - hatchnyc 5y ago
    Well a Google Image search for "millionaire" turns up mostly private jets and Lamborghinis.
    - Matticus_Rex 5y ago
      Right, but who believes that stock photos generally represent their keywords?

ericmay 5y ago

I think it's common when compared to other industries, though maybe not generally common. Admittedly I have no data to back up this hunch. If I'm wrong, please correct me, but my interpretation of what the person you're replying to was trying to get at was that modest savings from a 23+ year old software engineer, to the tune of $800/month or $10,000/year (this could be 401k match and contributions) will get you pretty close to a million. Using this calculator[1] with an assumed rate of 6.7%, $0 initial investment, $800/month, compounded semi-annually and a variance of 1 netted $891,000 within 30 years. I think $800/month for nearly all software engineers is doable. [1] https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator https://www.investor.gov/financial-tools-calculators/calcula...

paulpauper 5y ago
inflation though...
- ericmay 5y ago
  No doubt. People usually assume 2% inflation/year since that is what the Federal Reserve targets (and the 6.7% is a little conservative) but that amount of money also continues to grow over time, so depending on your expenses you may never touch the principal at that point with a 4% withdrawal rate. There are a lot of variables too. $800,000 with a paid off house is different than $800,000 and still renting, for example. Depends on your country of residence too, etc. But you can get to that point by saving, using common assumptions.
- thebean11 5y ago
  Probably only a problem if you're in cash
  - bosie 5y ago
    how so?
PragmaticPulp 5y ago
Exactly. The math is easy, but convincing people that becoming a millionaire is a matter of consistent moderate savings is still hard. $800/month is $9.6K per year. Approximately half of the maximum 401K contribution limit, so it can be tax-advantaged as well. If you can swing the full 401K maximum, you’ll hit the millionaire status even faster. Add some taxable savings and it can be done in a decade without getting too extreme. A married couple doing this together makes it even more achievable. Unless someone has maxed out their career options (unlikely) almost everyone in software could get a $10-20K bump in the coming year through negotiation or changing jobs. Allocate that raise entirely to tax-advantaged savings and stay consistent for a few decades and it will add up to a million dollars. It doesn’t require FAANG compensation or extreme frugality. It just requires consistency over 20-30 years.

pjfin123 5y ago

With a $100,000 salary, $50,000 expenses, 30% tax rate, and 5% real returns you could put away $20,000 a year and have a million (2021) dollars in 26 years. Hardly easy but not out of the realm of possibility for a persistent and highly paid software developer.

PragmaticPulp 5y ago
Ideally the money would go into tax-advantaged accounts like 401Ks first, which would reduce the effective tax rate and thus boost savings.
giantg2 5y ago
But that still doesn't fit the paradigm presented by using Gates as an example. That you work really hard in your 20s and you're set for life.
- cloverich 5y ago
  If you use his definition of working hard, by the time you are 30-year old software developer you'll have valuable skills and a valuable network in addition to a solid amount of money. You may be unable to _retire_ at 30 but you will, generally speaking, be setup for success for the rest of your life.
  - giantg2 5y ago
    So if I worked hard in my 20s, then why don't I have a solid amount of money and am not set up for lifelong sucess?
    - cloverich 5y ago
      How did you work hard? What kind of career did you choose? What was your budget like? Did you have any bad luck re health or family? There's many possible reasons, many under your control, some not. Should I assume based on your response and the original article, by hard work you mean not just effort on the job, but also effort in finding work you align with, explored other job types, spent real effort networking, studied for job skills a bunch, and didn't have any bad luck to explain it?

SonicScrub 5y ago

The Millionaire Next Door concepts are still as relevant as ever, albeit the specifics are a bit dated. Millionaire status is reasonably achievable for someone whose income and cost of basics allow for modest discretionary income. This is certainly the case for the majority of software developers https://en.wikipedia.org/wiki/The_Millionaire_Next_Door https://en.wikipedia.org/wiki/The_Millionaire_Next_Door

giantg2 5y ago
Over what time horizon? How do we factor in retirement needs and inflation? The point is that the vast majority of people are not going to be financially independent by 30, or even 40.
- PragmaticPulp 5y ago
  > How do we factor in retirement needs and inflation? Use inflation-adjusted calculators. Any good savings and retirement calculator will have an option for this. Inflation is commonly misunderstood in long-term financial planning. It’s important to consider inflation for expenses and future savings amount, but many people don’t realize that inflation will also life their investments to some degree. For example, if a common house costs $5,000,000 on your future retirement date and you’ve been saving your money in cash this whole time, you’re in a bad spot. However, if you buy a house in your 30s that meets your needs, the value of your house will also rise with inflation. Inflation is also loosely coupled to rising stock prices (except for hyper-inflation or other economic catastrophes) and asset prices. Just don’t keep your money all in cash, because that’s the only guaranteed way to lose out to inflation.
  - giantg2 5y ago
    And then your tax bill on that house has inflated too. There are a lot of variables (I work in finance). This is really getting off topic. Do you really think using Gates as an example is legitimate to talk about hard work for normal people? That was the main point.

sidlls 5y ago

All these replies with the typical 7% return for 20-30 years calculations are missing the point. I know what the arithmetic is. It is not common to be in a position to do that, even in the software industry.

pcbro141 5y ago
Software Developer Median Salary (2020): $110,140 per year That sounds like a lot of software developers are in a position to put away $10k+/year to me. Source: BLS, https://www.bls.gov/ooh/computer-and-information-technology/software-developers.htm https://www.bls.gov/ooh/computer-and-information-technology/...
- sidlls 5y ago
  That doesn't account for the events of life, like illness, maintenance on vehicles and property, etc.
notyourwork 5y ago
If you start maxing out retirements in your first job and continue to do so throughout your career, raises will be raises and you'll continue to save. If you tap into your max savings per year in start of your career, you'll have trouble pairing that income back and putting it away for savings. Max out your retirement funds early and never look back.
- joquarky 5y ago
  That's all great until you have to use your retirement funds for medical emergencies.
  - notyourwork 5y ago
    Life can add obstacles, not sure that's basis to dismiss the point.
    - 5y ago

packetlost 5y ago

No, it is. If you don't retire (at 65~) with 2+ million in the bank you did something wrong (or had a rare cataclysmic event that drains your financial resource). I have a modest salary in the Midwest and should retire with $3m+ making reasonable contributions to a 401k, and that's if I don't change anything.

Sr_developer 5y ago
Or you could be served divorce papers from your partner and lose a substantial fraction of your net-worth and future income. Or you ( or a member of your family) could have a debilitating/rare disease and your insurance does not cover all the treatments for it. Or you could have been fired and opened your own business and your partners fleeced you out (ask me how I know) Or you live in a country where salaries are below 45 k /y. And so on ... You have a very naive, simplistic and privileged worldview so I hope for your own sake you never have to leave that cocoon.
- packetlost 5y ago
  > Or you could be served divorce papers from your partner and lose a substantial fraction of your net-worth and future income. This definitely implies a questionable decision. > Or you ( or a member of your family) could have a debilitating/rare disease and your insurance does not cover all the treatments for it Sure, there could be rare cataclysmic events that drain you of your financial resources. That's not really on-topic to what the discussion is about though. > Or you could have been fired and opened your own business and your partners fleeced you out (ask me how I know) This is 100% a bad decision. Do not take money out of your 401k to start a business. > Or you live in a country where salaries are below 45 k /y. Then you likely live in a country where the CoL is significantly lower than in the US and the dynamics of retirement are very different. I'm speaking 100% from an American-centric point of view. > You have a very naive, simplistic and privileged worldview so I hope for your own sake you never have to leave that cocoon. I'm sorry my short internet comment on a technology forum is not comprehensive enough to account for all potential scenarios and nuance. I grew up in poverty, and I'm going to do everything I can to prevent myself from ending back up in that situation.

random314 5y ago

10% of Americans are millionaires. I would say that 90% of full time software engineers will end up becoming millionaires. FAANG engineers become millionaires in their 20s. For others it will take longer.

giantg2 5y ago
Will "millionaire" still have the same meaning in 30 years as it does today?

sanderjd 5y ago

It seems like $100k is conservatively a pretty typical salary these days even outside the big companies. That is $4M after a 40 year career, which makes you a millionaire when you retire if you can save 25%, even if the savings appreciate 0%. This seems pretty accomplishable. But perhaps the idea of "being a millionaire" you're thinking of is not that you slowly manage it over a long career, but that it happens more quickly?

giantg2 5y ago
BLS says that $110k is the median. It's not about eventually becoming a millionaire. It's about using Gates and other successful outliers as a pattern for normal people. There are tons of smart and hardworking people out there who are not very successful. There's a lot more going on than just hard work.