3 ms·

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

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.
- bosie 5y ago
  Aren’t 401k taxed? Can you write down the math how a police officer can do this easily (get to 1m purchasing power of today’s value in 10 years) please? I cannot figure it out how to even get a quarter of that
  - ericmay 5y ago
    I highly recommend Reddit's Personal Finance subreddit and this item called the "Prime Directive". Try old.reddit.com . https://www.reddit.com/r/personalfinance/wiki/commontopics https://www.reddit.com/r/personalfinance/wiki/commontopics 401ks are taxed (either a Roth or Traditional 401k) but are tax advantaged. Please feel free to contact me directly. Happy to help. It'll be difficult to get to $1mm in purchasing power of today's value in 10 years without saving around $50,000/year or getting extremely lucky.
- dragonwriter 5y ago
  > The math is easy, but convincing people that becoming a millionaire is a matter of consistent moderate savings is still hard. Consistent moderate savings on top tier income, sure. > $800/month is $9.6K per year. Approximately half of the maximum 401K contribution limit, Also, approximately 1/3 of national median household disposable income after taxes and transfers (NB: not essential expenses, just taxes and transfers) in the United States. > A married couple doing this together makes it even more achievable. Yes, you can become a half-millionaire much faster than a millionaire—brilliant observation. > 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. “Software” includes a lot of different occupations, but most of the nob-management ones have median compensation around or substantially below $100K; so you are suggesting most people are leaving upward of 10-20% on the table. That's...unlikely. > It just requires consistency over 20-30 years. Asserting that that is easy in software would be more convincing if we were more than 20-30 years from a major industry crash, or had some structural guarantee of it not happening again. Not completely convincing even then, but more convincing...
bosie 5y ago
In that time period the cost of your house went from 100k to 700k. You aren’t a millionaire anymore. You are poor. Getting to a million dollars with the same purchasing power (make sure your inflation basked is properly chosen) as of today outside of metro area (as a million in sf isn’t much)
- ericmay 5y ago
  Ok don’t save then. Idk what you want me to tell you.

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.

bosie 5y ago
Aren’t 401k taxed? Can you write down the math how a police officer can do this easily (get to 1m purchasing power of today’s value in 10 years) please? I cannot figure it out how to even get a quarter of that
- ericmay 5y ago
  I highly recommend Reddit's Personal Finance subreddit and this item called the "Prime Directive". Try old.reddit.com . https://www.reddit.com/r/personalfinance/wiki/commontopics https://www.reddit.com/r/personalfinance/wiki/commontopics 401ks are taxed (either a Roth or Traditional 401k) but are tax advantaged. Please feel free to contact me directly. Happy to help. It'll be difficult to get to $1mm in purchasing power of today's value in 10 years without saving around $50,000/year or getting extremely lucky.
dragonwriter 5y ago
> The math is easy, but convincing people that becoming a millionaire is a matter of consistent moderate savings is still hard. Consistent moderate savings on top tier income, sure. > $800/month is $9.6K per year. Approximately half of the maximum 401K contribution limit, Also, approximately 1/3 of national median household disposable income after taxes and transfers (NB: not essential expenses, just taxes and transfers) in the United States. > A married couple doing this together makes it even more achievable. Yes, you can become a half-millionaire much faster than a millionaire—brilliant observation. > 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. “Software” includes a lot of different occupations, but most of the nob-management ones have median compensation around or substantially below $100K; so you are suggesting most people are leaving upward of 10-20% on the table. That's...unlikely. > It just requires consistency over 20-30 years. Asserting that that is easy in software would be more convincing if we were more than 20-30 years from a major industry crash, or had some structural guarantee of it not happening again. Not completely convincing even then, but more convincing...

bosie 5y ago

In that time period the cost of your house went from 100k to 700k. You aren’t a millionaire anymore. You are poor. Getting to a million dollars with the same purchasing power (make sure your inflation basked is properly chosen) as of today outside of metro area (as a million in sf isn’t much)

ericmay 5y ago
Ok don’t save then. Idk what you want me to tell you.