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A 30-year old engineer making $120,000 a year should become a millionaire easily by the time they are 40. A more interesting question would have been "Do you t

A 30-year old engineer making $120,000 a year should become a millionaire easily by the time they are 40. A more interesting question would have been "Do you think you'll ever sell an app/business for $1M?" - the crux of the question is "Do you think you'll hit the jackpot?", which in today's world, is selling something that took relatively small amount of effort to build.

mattgreenrocks 13y ago
> A 30-year old engineer making $120,000 a year should become a millionaire easily by the time they are 40 How so?
- bluedevil2k 13y ago
  Get married, save $60,000 a year (including 401k matching, etc), get 8% growth per year, 3% raise per year...that's $1,053,000 by my calculations.
  - btian 13y ago
    $60000 is basically after tax income if your pre-tax income is $120k. Also 8% growth a year is quite a stretch given that risk free rate is 2.64% (10-year treasury yield), and inflation eats 2% a year...
    - bluedevil2k 13y ago
      Pre-tax income of $120k would net about $95k in the US for a married man with 2 kids and a house in a tax-free state (Texas, Florida, etc.) 8% growth isn't a stretch, it's the average return for S&P 500 over the past 100 years.
    - nilkn 13y ago
      For a single person without a house and without dependents, the after-tax income is actually about $76k in CA and $87k in TX, according to ADP's online calculator.
    - runako 13y ago
      A 50% aggregate tax burden is a choice a small fraction of Americans make. As others have pointed out, most Americans have far lower aggregate tax burdens.
  - icedchai 13y ago
    Seems unrealistic, given 35 to 40% will go to taxes, benefits, etc. That leaves less than $2k a month to live on. Is it possible? Yes. Is it likely? No. The average person (American anyway) does not have that sort of self discipline, even if they lived in a cheap enough area to make it feasible. This coming from someone who DOES have the discipline.
  - johnrob 13y ago
    Unfortunately, if you use a 401k you can't touch it for quite a while. Time is an important variable. There's no point in becoming a millionaire at the very end of your life (to use an extreme example).
    - jcdavis 13y ago
      401k allows withdrawls at 59.5, which isn't all that late. Anyone planning an earlier retirement is very likely to be investing in normally-taxed accounts in addition (due to 401k caps), which can they draw from before that. Plus Roth IRAs also allow some flexibility in terms of early withdrawls.
    - mahyarm 13y ago
      You can use 401k's as a tax deferral even with the penalty if your current income is high enough.
- bryanlarsen 13y ago
  Buy a house on credit and hope for another real estate bubble?
- liveoneggs 13y ago
  Be 20 and not realize you pay taxes or that salaries plateau quickly in tech or that you may actually need to live and/or eat during those ten years.
- bluedevil2k 13y ago
  So I can't reply to the people who've replied to my comment, so I'll do it here... The taxes you're proposing are WAY WAY off base here. You're completely calculating them incorrectly and overstating the tax burden on people in America. The nominal tax rate may be 28% federal, 6% SS and 3% medicare, but you're disregarding the MASSIVE tax breaks available here - houses are huge tax shields, kids are huge tax shields, getting married is a huge tax shield. Live in a tax-free state (Texas) is like a huge tax shield. For someone making $120,000 that's married, 2 kids, with a house, paying 12-15% federal in taxes is about expected.
  - wging 13y ago
    That's a marginal 28% tax, too. Per https://en.wikipedia.org/wiki/Rate_schedule_(federal_income_tax)#Application https://en.wikipedia.org/wiki/Rate_schedule_(federal_income_..., even without tax breaks a single person making more than $87,850 would only get taxed 28% on the portion of their income above $87,850.
    - icedchai 13y ago
      Most people don't live in tax-free states. Many people actually have local taxes (property taxes, city sewer fees, etc, etc) to deal with, also. There's also social security/FICA. When you factor all this in, staying the typical six figure earning is paying 35%+ "in taxes" is not unrealistic.
- cbhl 13y ago
  @bluedevil2k: Living in a tax-free state (Texas) is definitely a huge tax shield, but lots of people making $120k often live in a tax-happy state (California) which has the opposite effect. (My effective tax rate in California is almost as high as it was in Ontario, Canada, and the Canadians have free government-subsidized health care.)
jsnell 13y ago
> A 30-year old engineer making $120,000 a year should become a millionaire easily by the time they are 40. Really? Let's call that $80k after tax, and $40k after living expenses. To reach a million in 10 years through compound interest would require an annual return of 20%, which sounds far from "easy".
- bluedevil2k 13y ago
  Chances are an engineer would get married before they're 40. $80k after tax? In the US, a single guy making $120k would have $32k in taxes taken out, leaving them with $88k. Only $28k if they're married. Only $40k after living expenses? Depending where you live in the US, $40k for living expenses would be normal for a family of 4. That's about the $60k in disposable income in my other comment, requiring only a 8-9% return per year, which is the long term average of the S&P 500.
  - kd0amg 13y ago
    Depending where you live in the US, $40k for living expenses would be normal for a family of 4. Does this still hold if we restrict ourselves to the subset of the US where an engineer is likely to get paid $120k per year?
    - runako 13y ago
      American families of 4 usually have two wage earners. So there are a bunch of factors involved, but the math isn't far off. Median home price is ~$210k, which finances in the neighborhood of $1400/mo. Keeping the car & childcare budgets reasonable, $40k of living expenses all-in isn't crazy. Add a second wage-earner and the math works even better. Move to a low-cost city and the math works even better (and you're likely to find that the pay delta is smaller than the actual cost delta).
      - Iftheshoefits 13y ago
        Depends on what you're including in "living expenses, yes"? The figure you used for a home is way off, for example--it only factors in the P+I payment--not property taxes and homeowners insurance; when those are factored in, that $16,000/yr mortgage payment suddenly becomes about $20,000 (or more). Add another $8,000 for a single car (payment, insurance, gas, and maintenance), $6,000 for student loan debt (easily achievable for a $60,000--2x the average, one for each earner--load) and that leaves $6,000 for food, childcare, and utilities (and anything else I'm forgetting) before that $40k is gone. I don't know what area of the country you think $500/mo is enough to spread over childcare, phone, water, electricity, and food (no internet allowed; just the "necessities"), but I'd be interested to find out.
jameshart 13y ago
Even if that math worked out, 56% of software engineers are not making 120K at the age of 30. 120K is above the median salary, nationally, even for the most senior bracket of software engineers, with around 10 years of experience (which typically a 30 year old does not have). Seems likely the national median for a software engineer at 30 is probably closer to 85K.

mattgreenrocks 13y ago

> A 30-year old engineer making $120,000 a year should become a millionaire easily by the time they are 40 How so?

bluedevil2k 13y ago
Get married, save $60,000 a year (including 401k matching, etc), get 8% growth per year, 3% raise per year...that's $1,053,000 by my calculations.
- btian 13y ago
  $60000 is basically after tax income if your pre-tax income is $120k. Also 8% growth a year is quite a stretch given that risk free rate is 2.64% (10-year treasury yield), and inflation eats 2% a year...
  - bluedevil2k 13y ago
    Pre-tax income of $120k would net about $95k in the US for a married man with 2 kids and a house in a tax-free state (Texas, Florida, etc.) 8% growth isn't a stretch, it's the average return for S&P 500 over the past 100 years.
  - nilkn 13y ago
    For a single person without a house and without dependents, the after-tax income is actually about $76k in CA and $87k in TX, according to ADP's online calculator.
  - runako 13y ago
    A 50% aggregate tax burden is a choice a small fraction of Americans make. As others have pointed out, most Americans have far lower aggregate tax burdens.
- icedchai 13y ago
  Seems unrealistic, given 35 to 40% will go to taxes, benefits, etc. That leaves less than $2k a month to live on. Is it possible? Yes. Is it likely? No. The average person (American anyway) does not have that sort of self discipline, even if they lived in a cheap enough area to make it feasible. This coming from someone who DOES have the discipline.
- johnrob 13y ago
  Unfortunately, if you use a 401k you can't touch it for quite a while. Time is an important variable. There's no point in becoming a millionaire at the very end of your life (to use an extreme example).
  - jcdavis 13y ago
    401k allows withdrawls at 59.5, which isn't all that late. Anyone planning an earlier retirement is very likely to be investing in normally-taxed accounts in addition (due to 401k caps), which can they draw from before that. Plus Roth IRAs also allow some flexibility in terms of early withdrawls.
  - mahyarm 13y ago
    You can use 401k's as a tax deferral even with the penalty if your current income is high enough.
bryanlarsen 13y ago
Buy a house on credit and hope for another real estate bubble?
liveoneggs 13y ago
Be 20 and not realize you pay taxes or that salaries plateau quickly in tech or that you may actually need to live and/or eat during those ten years.
bluedevil2k 13y ago
So I can't reply to the people who've replied to my comment, so I'll do it here... The taxes you're proposing are WAY WAY off base here. You're completely calculating them incorrectly and overstating the tax burden on people in America. The nominal tax rate may be 28% federal, 6% SS and 3% medicare, but you're disregarding the MASSIVE tax breaks available here - houses are huge tax shields, kids are huge tax shields, getting married is a huge tax shield. Live in a tax-free state (Texas) is like a huge tax shield. For someone making $120,000 that's married, 2 kids, with a house, paying 12-15% federal in taxes is about expected.
- wging 13y ago
  That's a marginal 28% tax, too. Per https://en.wikipedia.org/wiki/Rate_schedule_(federal_income_tax)#Application https://en.wikipedia.org/wiki/Rate_schedule_(federal_income_..., even without tax breaks a single person making more than $87,850 would only get taxed 28% on the portion of their income above $87,850.
  - icedchai 13y ago
    Most people don't live in tax-free states. Many people actually have local taxes (property taxes, city sewer fees, etc, etc) to deal with, also. There's also social security/FICA. When you factor all this in, staying the typical six figure earning is paying 35%+ "in taxes" is not unrealistic.
cbhl 13y ago
@bluedevil2k: Living in a tax-free state (Texas) is definitely a huge tax shield, but lots of people making $120k often live in a tax-happy state (California) which has the opposite effect. (My effective tax rate in California is almost as high as it was in Ontario, Canada, and the Canadians have free government-subsidized health care.)

jsnell 13y ago

> A 30-year old engineer making $120,000 a year should become a millionaire easily by the time they are 40. Really? Let's call that $80k after tax, and $40k after living expenses. To reach a million in 10 years through compound interest would require an annual return of 20%, which sounds far from "easy".

bluedevil2k 13y ago
Chances are an engineer would get married before they're 40. $80k after tax? In the US, a single guy making $120k would have $32k in taxes taken out, leaving them with $88k. Only $28k if they're married. Only $40k after living expenses? Depending where you live in the US, $40k for living expenses would be normal for a family of 4. That's about the $60k in disposable income in my other comment, requiring only a 8-9% return per year, which is the long term average of the S&P 500.
- kd0amg 13y ago
  Depending where you live in the US, $40k for living expenses would be normal for a family of 4. Does this still hold if we restrict ourselves to the subset of the US where an engineer is likely to get paid $120k per year?
  - runako 13y ago
    American families of 4 usually have two wage earners. So there are a bunch of factors involved, but the math isn't far off. Median home price is ~$210k, which finances in the neighborhood of $1400/mo. Keeping the car & childcare budgets reasonable, $40k of living expenses all-in isn't crazy. Add a second wage-earner and the math works even better. Move to a low-cost city and the math works even better (and you're likely to find that the pay delta is smaller than the actual cost delta).
    - Iftheshoefits 13y ago
      Depends on what you're including in "living expenses, yes"? The figure you used for a home is way off, for example--it only factors in the P+I payment--not property taxes and homeowners insurance; when those are factored in, that $16,000/yr mortgage payment suddenly becomes about $20,000 (or more). Add another $8,000 for a single car (payment, insurance, gas, and maintenance), $6,000 for student loan debt (easily achievable for a $60,000--2x the average, one for each earner--load) and that leaves $6,000 for food, childcare, and utilities (and anything else I'm forgetting) before that $40k is gone. I don't know what area of the country you think $500/mo is enough to spread over childcare, phone, water, electricity, and food (no internet allowed; just the "necessities"), but I'd be interested to find out.

jameshart 13y ago

Even if that math worked out, 56% of software engineers are not making 120K at the age of 30. 120K is above the median salary, nationally, even for the most senior bracket of software engineers, with around 10 years of experience (which typically a 30 year old does not have). Seems likely the national median for a software engineer at 30 is probably closer to 85K.