San Francisco: Where a six-figure salary is 'low income'
bbc.co.uk
bbc.co.uk
Unless you're the sole earner for a big family with bad benefits, it is not hard at all to live anywhere in the Bay Area at $117K a year. Yes, it might be prudent to make some basic sanity checks on your spending, especially when it comes to housing (IE don't rent a 1BR in the most desirable part of one of the most competitive cities in the world unless you're making bank).
I would argue that the data in this article should actually be used to realize what a good financial decision the Bay Area is for many people. 80% of people are making more than $117K. As someone in tech you should not have a problem climbing well above that.
It isn't hard per se, but it isn't good either, compared to what the same salary would buy in terms of quality of life nearly anywhere else in the country. And let's get real: "Bay Area" is overbroad. You can't compare life in SF proper to living somewhere like Redwood City or Milpitas. They are completely different experiences with shamefully small variations in cost.
That same person probably wouldn't be worth $117k outside the Bay Area. Density, network and agglomeration effects are real.
Bullshit. That's what a college graduate with a CS, Finance or Accounting degree from a school targeted for recruiting by the biggest megacorps can make in the Bay Area. Those that didn't attend the right schools or programs aren't nearly so lucky. I can personally attest to that: my firm (still huge, but no unicorn) pays a good deal less than $117k/yr for fresh graduates with degrees in things like Finance, Accounting, Management, Information Systems, etc.
That's not only the Bay Area either. A friend of mine has a sister who graduated from a downright forgettable school and landed a job with Google in NYC right after graduation. The base salary was $120k.
Someone else I am acquainted with received an offer for $180k all-in compensation (base, bonus, RSUs) from Facebook as a new graduate from a middling school.
It has very, very little to do with the school. It's the companies themselves. It's not even outlandish to get hired at the top tech companies without any college degree these days.
$6000 income
($731) 401k contribution of 15% discounted by 50% total marginal tax rate
($2083) savings towards a goal of $150,000 in six years for a down-payment
($3200) rent on a median 1-bedroom apartment
------
-$14
How'd I do?
https://www.zillow.com/homes/for_rent/San-Francisco/20330_ri...
Why are you using 3200 a month?
In reality most people choose a well-below-average place, live with roommates, aren't actually on track for homeownership, or some combination of the above.
[0] https://www.rentjungle.com/average-rent-in-san-francisco-ren...
[1] https://www.zumper.com/blog/2018/01/zumper-national-rent-rep...
[2] https://www.federalpay.org/military/calculator?grade=E-1&yea...
Try another scenario: Madison, WI, where entry-level pay is $80k and the median home is $250k.
4702 income
(717) 15% 401k contribution discounted by marginal tax rate
(700) savings goal of $50k in six years for a down payment
(1017) 1-bedroom rent
-------
2268 left to spend
SF is a very significant lifestyle sacrifice. In a more reasonable market, you could afford baseline middle-class financial health, median-quality living arrangements, and some luxury spending all at the same time. In SF it's "pick at most two." Obviously that's still enough for a lot of people (myself included) or we wouldn't be doing it. But in normal places, those are not tradeoffs that people making even half our incomes need to face.
And sure, SF has urban amenities that Madison doesn't, but if you live in a premium location with lots of shops in walking distance, you can't afford to shop at them. At least not on $6,000/mo.
Living large on an irresponsible budget is not the same as living well.
Or are you saying renting as a long-term plan actually is healthy/responsible? Maybe I have just internalized too much American Dream propaganda. But with SF's rate of rent and price growth, the calculators say "buy even if renting is free."
For instance, my hometown of Grand Rapids, Michigan is also experiencing a housing crisis. This is a place that 10 years ago I could've bought a decent house in a decent neighborhood for well under 100k provided that I weren't a recent high school grad and had money to do so with...this is also ignoring the bubbly job markets and quality of life improvements that come from living in a vibrant coastal city.
For those wondering: the “first rung” is more like $110k plus stock options (which you have to pay for - they’re not RSUs - so calling them “income” is rank nonsense)
The estimates for stock options value on there are also WILDLY high compared to people I know who actually work there.
Very suspect.
Even mature startups (like Airbnb and Uber) don’t offer options.
Private companies/startups are still doing options.
And options are worthless. My employee recently loaded all employee stock options / holdings into a stock trading/tracking system and as soon as the FMV from the latest 409a was loaded in people flipped their shit. Turns out that no, joining a nearly decade old private company with limited stock options and a "mature" FMV isn't going to make you millions of dollars. Especially when you're going to be spending five figgies to exercise.
Something's gotta give. NIMBYism when it comes to affordable housing, the income disparity between 'techies' and everyone else in SF, and lack of sufficient investment in effective mass transit are all clearly driving the city into the ground. My teams in SF are constantly bleeding our best talent to places like Denver, Austin, Seattle, etc. because the youngest and brightest employees are realizing that SF is an unsustainable drain on their finances. It's not going to stop me from doing business there, but it's certainly going to mean that my firm just continues to feed the vicious cycle of wage inflation by attracting talent with higher and higher base salaries.
That's more than double the median income in SF.
Irrelevant. I wasn't trying to optimize for % gain over median income in SF. I was trying to optimize for moderate improvement in overall quality of life compared to what I have now.
So assuming you were making ~200k, doubling that to 400k, it was still impossible to make your standard of living? I find that hard to believe.
But I also built a model that put a lot of guesses about intangibles into numbers. It passed sanity checks when reviewed by several peers, but I could just have a bad model. Who knows.
In CA, you would pay well over $2MM for that same house anywhere within an hour’s drive in rush hour from either SF or Silicon Valley. Anywhere north of Sunnyvale, that house will run you a minimum of $3 million.
Then I moved to Washington State. No state income tax, but comparable sales and property taxes. Much less regulation at every level of government.
The savings in income tax alone paid for my rent, until I bought a house. The house I bought is in an extremely high quality neighborhood. School ratings are almost maxed out. Professional or entrepreneurial neighbors. Responsive government services.
My home costs less than a condo in south San Jose. I pay about half the Bay Area rate for full time childcare. Gas is significantly cheaper. 5 dozen eggs at Costco cost $6-8.
Life is good. No one is dying in the streets. If anything, people are thriving and have hope to create a better future.
It is not until I experienced the totality of difference between Silicon Valley and another west coast city (in my case Tacoma and its suburbs, though I suspect Portland is similar) that I groked the suffering inflicted by CA politics.
If you don't want to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll follow the rules in the future.
The OP couldn't give specifics, can you? Because otherwise we could just point to different population sizes and city history and state size as the reason your experience differs.
I can appreciate the desire for more detail - I would likely ask for the same thing. Yet I decided to paint in broad strokes because I'm trying to illustrate the cumulative difference of all policies combined. You have two first world states, one with great services and affordable cost of living, the other with notoriously bad services (e.g. ranked 44th in k12 education) and widely lamented cost of living. I think it is worth trying to figure out the differences. It might turn out that those difference are caused by simple demographic factors, which would be very sad and fatalistic, or it might turn out that political decisions have influenced the direction of society.
As a basic example, consider waste management in SF. The impact of SF instituting a mandatory composting program, which likely requires full-time headcount (with near term salaries and half-century long pensions) to monitor garbage bins, write citations, collect fines, inspect businesses, and carry out other enforcement and monitoring actions, might be small given the wealth and population of the city. But what is the impact when combined with a thousand other similarly small policies?
I don't think population differences is fatalistic, I think it just means a sharper analysis is required than "why don't we try how Portland does it?" Hence the existence of states at all, at least originally. I'm not opposed to the idea that Portland's strategy is better than SF's, I just don't want to fall into the trap of assuming differences between quality of life are blamed on arbitrary things that may not at all be relevant. Maybe demographic differences are one of those arbitrary things!
Picking the given case specifically, thus I would immediately ask "what is the environmental impact? Maybe it's worth the cost?"
I don't have the data on hand. I had asked my questions hoping perhaps you did have specific policies etc that were working better in Portland that I could start researching but again it's fine if you don't, this is all in service of me learning more so anything you can teach me I am grateful for.
One that seems to have actually worked was the ban on plastic bags.
Care to get specific?
For example, the $100 shirt off Amazon is suddenly far cheaper relatively speaking. So is the new phone or laptop. Ditto, overseas trips become much more affordable relatively speaking.
I know it's not related to your original point much except that we're discussing regional cost-of-living disparities. I've just been thinking about this a bit, as I come from a high-cost-of-living country (Australia) and am considering moving overseas to locations that offer a lower cost of living (not that it's my impetus for doing said move). It's a factor I hadn't previously considered and does actually have some significance.
A factor in my favor: I'm a native, so it doesn't bother me. Same goes for most others that have lived in swamplands during the summer (even places like DC and Chicago have nearly identical summer weather compared to Houston).
However, one of the things you lose in high-cost areas is freedom. You lose the freedom to pursue passions, take time off from work, try out a job you think you might love but pays 30% less, etc. I can delay or forego the purchase of a new shirt or laptop to prioritize something else in my life. Maybe I want to work for a non-profit I find compelling or spend time with my children. The high-cost area isn't high-cost for discretionary spending. It's high cost for essential spending.
If I need $75,000/year on housing, I can't afford a pay cut; I can't afford part-time job and part-time parenting; I can't afford passion. $75,000/year might sound like a lot, but the median home in San Francisco is going for $1.35M. After a 20% down payment, mortgage payments would likely be around $65,000/year. Add on another $10k for taxes and we're at $75,000 for a median home.
Let's say I could earn $250,000/year in San Francisco and $100,000/year in Chicago. In Chicago, the median home is $300,000 so we're talking $15,000/year in mortgage payments instead of $65,000. Let's assume that I pay 30% of income in tax on $250,000 and I take home $175,000. After $65,000 in mortgage payments, I'm left with $110,000. In Chicago, If I pay 25% in tax and $15,000 in housing payments, I'm left with $60,000. That's certainly less, but I've also gained a lot of freedom. If I want to take time off, my expenses are low. If I want to switch to a career earning $50,000/year, I can still live my life. I'm not being forced into specific employment based on cost of living.
If we adjust the numbers slightly and make SF $200,000 and leave Chicago at $100,000, the gap quickly closes. Assuming 28% tax on the lower income, we're talking $79,000 vs $60,000. A little more disposable income, but very little freedom.
SF salaries are certainly high. Are they 2.5x higher? Even if they are 2.5x higher, do you really feel good? I guess a part of me feels like life should be easier and more comfortable. I'm not looking for fancy shirts and yearly expensive laptops. I'm looking for the comfort of knowing that if something goes medically wrong, my cost of living isn't so high that I'm very quickly on the bubble. I'm looking for the ability to be able to choose different life priorities in my future if I desire. We all make our own decisions, but I think there's something intangible that lower cost of living provides.
Yep - this is something I hear a lot from my colleagues in the Bay. "Can I afford to keep my kids here if my wife gets hit by a bus?" ; "If home values dip, will I ever be able to pay off my mortgage and move elsewhere?", etc.
Yes, yes they are. Sure, the economic boom has contributed to the skyrocketing value of equity compensation leading to some pretty insane incomes. But it is what it is... for now at least.
"Equivalent quality of life outcome" is also tricky. Growing up, my parents drove ~7 miles from our sleepy, affordable suburb to the city center in 20 minutes. 7 miles in 20 minutes! Could you imagine such a thing? When I first moved here, I chose a similarly-distant unsexy suburban location; the transit commute worked out to 80 minutes door to door. To get a 20-minute commute here, I had to move to one of the most central, premium locations.
Ditto. And I live in Manhattan. That said, it's important to think in terms of absolutes versus relative figures. You may not save 20% of your income. But the 5 or 10% you save may be more than 20% of your non-Bay Area income.
I don’t mean to pry, but I’m having trouble imagining an income that is so comfortable in Texas, but so uncomfortable in SF when doubled. There must be at least one major factor that doesn’t apply to my calculations, perhaps child care or private school or something.
That’s a big difference when you talk about doubling income. Taxes and housing; that’s the problem with California.
It makes sense if you’re single and in your 20s or early 30s but as soon as you start factoring in kids, childcare, and owning a home it gets crazy.
To elaborate, I looked through this guide: https://www.numbeo.com/cost-of-living/compare_cities.jsp?cou... and while a one-bedroom apartment in the centre of SF would cost around $41,000 a year in SF compared to $17,000 in Houston, that means that if your salary is Houston is around $100,000, you would still have around $70,000 more dollars a year in SF after rent has been taken care of, not accounting for taxes. How does the higher cost of living in SF manage to eat up all that money in just a year?
I made the calculation. I could get a nice mortgage for a 500k house in Austin, TX, or I could move to SF, save for 4 years and go back with enough cash in hand to buy the home outright. The decision wasn't hard to make....
It probably isn't polite to say this but if you're young and single, you can really leverage that. Most of my coworkers in TX were getting married, buying houses etc. In other words, they simply could not move to SF, since they are tied down by their situation. I could, and I did.
> not accounting for taxes
That would be a large mistake. California has huge income taxes, Texas none. It's not just state taxes, a doubling of your income puts all that additional income in a much higher federal tax bracket.
I would expect renting a parking spot in SF to cost a pretty penny, too.
Oh wait I misread that as some people find great weather in the pacific northwest.
I wouldn't count on it. Seattle just passed a city income tax, despite it being against the state Constitution, trying to gerrymander it around the wording of the Constitution. At the state level, the Democrats in the last election got control of both houses of the legislature, as well as the governorship. High on their agenda is finding a way to tax income.
He said his salary would be twice as high in SF, so for a 100k salary in Houston, we're talking about 200k - 41k vs 100k - 17k, which is roughly a 70k difference (actually closer to 80k, but I wanted to make a conservative guess).
> Because the U.S. tax system is a progressive one, as income rises, increasingly higher taxes are imposed. But those in the highest bracket don’t pay the highest rate on all their income. For example, for 2017 taxes, single individuals pay 39.6% only on income above $418,401 (above $470,001 for married filing jointly); the lower tax rates are levied at the income brackets below that amount, as shown in the table below.
What he is saying is that if you make $100k in Houston and $250k in SF, the extra $150k is tax entirely at the higher rate.
The part above $128K is actually taxed at a lower rate; crossing the Social Security maximum taxed earnings level (and thus losing 6.2% in marginal tax on income) more than makes up for the 5% higher marginal income tax rate.
24% $82,501 to $157,500
32% $157,501 to $200,000
35% $200,001 to $500,000
I.e. 8% to 13%, not 5%.
On top of that, everything else is more expensive as well, especially anything based on labor, because people have to pay the rent: - food, especially eating out - car insurance - services such as car repair, dry cleaning, housekeeping
It would be imperative to save at least 100% of the "extra" $70k to make reasonable progress towards a down payment.
First, taxes start being a good chunk of your income at higher income brackets, especially in California. Taxes in 50k in TX will be a good chunk less than half of taxes on 100k in CA.
Second, a city like SF will have expenses on things that you don't have in Texas. For example, owning a car in SF means you will probably be paying at least a couple hundred a month for parking and insurance will probably be higher.
Finally, major cities with high COL and rent tend to be more expensive for consumers. Things like higher rents for business and higher wages for workers will, at least partially, get passed on to customers. If you eat out a lot or have kids needing to go to day care, this can be a huge chunk of your income.
I'm not saying OP is, but I know I've met some people who exaggerate for effect when they say things like "You could double my salary and it wouldn't be worth it to move to the bay area", but pretty much everything in San Francisco is more expensive than in Houston.
And note that Texas has 0% income tax. Zero. Somewhat higher property taxes than average, but it's arguable that it still works out in our favor compared to states like CA.
If I were trying to move to the Bay Area to fulfill a personal goal, things would be different. But when I'm working for others? Fuck that. I'm not going to compromise on comfort and quality of life.
The weird, but predictable thing to me is that those complaining about effectively increased taxes due to loss on the unlimited SALT deduction, don’t complain when there is a clamor to raise federal taxes: in fact, most of those people seem to support higher taxes — except when they have to pay them. There is a lot of intellectual dishonesty with many Bay Area voters — they oppose tax cuts, but then complain when they pay higher taxes. California needs to lower taxes across the board but you don’t see Brown or Gavin suggesting tax relief to account for the now higher tax burden experienced by the upper brackets.
The California economy is booming despite the taxes, not because of it. Apple, Google and Facebook are driving much of the Bay Area economy — and they make the majority of their money somewhere else. Local companies thrive because of the large base of high income people that are present because of the massive tech companies. If you took away Big Tech, the high California taxes would quickly become unsustainable. But since everyone around here can afford a Tesla, people seem to think that high taxes are the cause of all of this “success.”
As far as California quality of life, the weather isn’t a result of tax policy and the beaches and mountains also aren’t either. That’s 80% of what makes California have a higher apparent quality of life compared to Houston. The point is, the higher taxes aren’t the cause of a better quality of life compared to Texas. Outside of some obvious places like Cupertino, California schools aren’t particularly good — and Cupertino’s school success is a function of the culture of 60%+ Asians who tend to value education more highly than other groups. It certainly isn’t because of taxes. Washington, DC spends more per student than almost anywhere and yet have some of the worst performance. So when we talk about quality of life — it’s good in California for sure — but it isn’t because of fiscal policy, the 71 degree temperature is a big part of it.
I live in Mountain View and little things definitely cost more. At a restaurant the other day, I paid 5% “to account for increased labor costs.”
I am happy living in Mountain View now (I grew up in Houston,) but if it weren’t for a substantial salary and stock, I could see how anyone with a family would run for cheaper pastures.
Housing isn’t the only thing more expensive in the Bay Area. When you ran those housing cost numbers, that automatically took into account property taxes, now add 5-9% for California income taxes, and it starts to become a significant amount of money on just that basis alone. Add in every other California and local tax and the difference becomes even more pronounced. Texas is ranked 33 on overall tax burden while California is 10. Additionally higher Bay Area salaries also often kick people into a higher federal bracket as well. There is no cost of living adjustment for federal taxes — or state taxes for that matter.
I actually had no idea Vegas workers were mostly unionized but apparently you can make $25-$30/hr + tips and live a pretty good life as a service worker.
Anecdotally the per mile rates were much higher in Vegas than SF. Likely Uber algos know people are less price sensitive if they're in Vegas.
Some people just like driving & side hustles
I think they're off by a couple thousand dollars...
Edit: Removed a cynical remark.
Is there that much of a weather penalty?
Still yet, prospective renters shudder when I say the words “easiest transit is the 36 Bus from Forest Hill Station.”
Property Crime is only a problem on Christmas Tree Point and down on the East side terraced streets - Burnett/Corbett. The worst thing I’ve encountered personally in MT would be the coyotes that roam the night in the woods that appear occasionally on Marview or Farview.
One wouldn’t think ~$4K a month for a 4 Bed 3 Bath fully detached single family house, split up amongst roommates, would have any hangups for people looking to rent in SF - though it’s been tough finding people who’re “ok” with the location.
It’s for sure high up - I’ll give in to that.
I indeed use the excess garage space to charge and house my Bolt EV for most trips outside of SF; though most of SF is ~$12 for uberX.
I say, people can enjoy their overpriced $4000 (barely) one bedroom apartment in a “walkable” hood, next to a Philz and their favorite brunch place. I’ll join on foot after hiking on Mount Sutro. I’ll even pick up the tab - and indeed I work part time as a QA Engineer making a bit less than six figures annually.
(Midtown Terrace is a illogical land use nightmare... a subdivision of fully detached single family homes on Twin Peaks.)
If we can stretch the Commerce Clause to banning growing and consuming corn or pot that never leaves one person’s plot of land, much less a state, I don’t see why it can’t cover abrogating NIMBY regulations.
Maybe its just me, but I had a hard time even imagining selling my work for the kinds of sums necessary to maintain an inner-city lifestyle in S.F.
I have a friend at Google who pays $900/mo for a large room in a very central spot in Lower Haight.
If not, they also all have offices in Seattle, where the suburbs are even closer and all have access via company buses.
- household income (i.e. the sum of income of all members of the household, not just that of a single individual, which is implied by the singular term 'salary')
- a family of four (two adults and two children)
So if you're a single, twenty-something software engineer earning six figures, and have no kids, you're probably not eligible for this.
Not renting a one bedroom and eating $14 avocado toast with your roommates.
$110k before tax is $77k after tax. That's enough to cover:
Avocado toast for every meal: 3653$14 = $15k/year
Rent without roommates: 12*$3.5k = $42k/year
Misc other expenses: $20k/year
0: http://www.socketsite.com/archives/2018/06/a-six-figure-sala...
There is no way you would need a second income for you and your family to live very well on $250k in San Diego.
That said a boat does get you pretty great sea views! I have a friend who slept on his boat near work in Irvine to avoid having to brave the commute back to San Diego during the week. Was cheaper (and nicer) than buying a place up in Orange County.
The cost the latter extract from the former expresses itself in inflated rents. In the long run, it's probably self-defeating. But in the long run we're all dead.
The lack of any semblance of civic culture amongst technologists is starting to show its wounds, and I suspect this will have to get worse before it gets better.
As resident aliens, they cannot vote.
Yet 34% of eligible voters turned out for June's primaries [1]. (A figure that is elevated relative surrounding counties.)
[1] http://abc7news.com/politics/june-primary-voter-turnout-upda...
In New York City, there is a general expectation that once you make money or ensconce yourself in the community, you start giving a shit about it. You volunteer. You donate to local charities. You stay informed about community issues, voice up for yourself and those around you, and vote. That sense of civic culture and underlying duty is far more suppressed in the Bay Area.
And before someone decries these art forms as inapplicable to modern life, remember that most ballet and opera contains political and social commentary. I can't count the number of times I've left the Metropolitan Opera to get embroiled in a debate about the nature of democracy or relation of Verdi's Don Carlo to the White House, at a nearby restaurant with a table of newly-found acquaintances.