Hacker News Reader

Comment by pault | Hacker News Reader

Okay, it's crass but let's talk numbers. I'm currently earning $210k/year in Austin, TX. My monthly income is about $12k after taxes, and my rent is $1,400 for three bedroom house 20 minutes from the office (wood floors, nice appliances, yadda yadda). I save about $9,000/month, give or take. When I was looking at relocating to the bay area I crunched the numbers and couldn't find a realistic scenario where I wouldn't be taking a relative pay cut.

View on HN

Damn... I may be more underpaid than I realized... I keep hearing from my employer that they won't pay me comparably to my SF-based co-workers as I'm remote, "Texas is cheap", and "No one there makes over 100k". I think it's time to haggle a bit harder...

No way, I have a friend that's a junior front end developer with three years experience making $90k. When I do get numbers in emails from recruiters it's 140-170 for a senior role.

You have a nice situation, but my goal is mostly saving money for the future while living a decent life now (and admittedly I am minimalist so many things people care about don't bother me much). I have obviously higher cost of living expenses (living frugally I do it in $50k-$60k/y), but just my base salary is higher than your compensation, and with RSUs I get easily into ~400k/y total comp or more depending on the year, so basically I end up saving a lot for the future, which is really the metric I'm optimizing for. I'm in my very early 30s and already saved up ~1.5M liquid.

I don't own a house here in the Bay, I dump everything in very diversified index funds and some rentals out of state, since I'm not interested in staying in this place long term and play the million dollar mortgage roulette.

The day I call it quit, me and my partner (she does well too) can move to Austin TX, or anywhere else really (we're both immigrants with citizenships in really really cheap countries), with our fat liquid assets, and not having to worry about necessarily finding work in my 40s. At least that's my very optimistic plan, it might completely not turn out like this, or I might die tomorrow.

Man, if I had 1.5 mil in cash laying around I'd be on the first flight to Spain or Italy.

While that might seem like a lot, if you estimate the money is invested to just keep up with inflation and no real growth (very conservative assumption, but still possible), for $1.5M to last you 60 years (i.e. from 35yo to 95yo, completely depleting the capital at the end of your life essentially) you could just withdraw $25k inflation-adjusted pre-tax every year. I'm not sure you could necessarily live that well in Spain or Italy with that, without working. I happen to be originally from a cheap European country, and it's not that obvious.

So it's really not that much, most people who get private or state pensions get a better deal than that from a cash-flow perspective.

What about the 4% rule (put it in an index fund and hope for an average 7% return, leave 3% for inflation and live off the rest)? I always figured that would work out to $50k per year per mil. Is that naive?

Edit: sorry for the ninja edit. I read your comment too quickly.

A few points:

1) If you keep it under your mattress it will be much less than what I described, because every year your nest egg will shrink due to inflation, so you'll just be able to take $25k non-inflation adjusted, which is a big difference from my $25k inflation adjusted (in 60 years, $25k will be $150k at a 3% inflation). My assumption is 0% real growth, not 0% nominal growth, which is what you'd get by keeping it under the mattress.

2) The 4% rule is based on a shorter retirement interval (30 years) than what I'm looking for (60 years). Try to go on firecalc.com and look for the statistical odds of 1M giving you 50k/y for 60 years: the failure rate is higher than the success rate, and that's based on historical data.

3) Yes, my assumptions are very conservative, but I don't believe index funds will return 7% nominal over the next few decades, the world is going to face too many problems in my opinion. That being said, pretty much all I have is invested in index funds despite my opinions (mainly because I wouldn't know where else to invest it, since both cash and bonds are sure losers to inflation), so in the best case I'll be pleasantly surprised.

I regret trying to give you advice. You have clearly planned your life much better than I have. :)

that is quite conservative. i would think 3% or 45K adjusting for inflation each year is still a very safe assumption.

Totally fair skepticism. If you wanted to make it last just 30 years (standard early-retirement duration) then sure, I'd agree with you, probably even 4% would be totally safe. But 60 years? Too many things can happen, I have to be super conservative before taking the decision (forced or not) to pull the plug, hence my estimation.

Again, quite possibly I'll die much younger without even enjoying any of that freedom :-)

A thing to also take into account is that it is very unlikely you will live the rest of your life without going into some other money-making venture. People who know how to accumulate money tend to accumulate money.

Reply on news.ycombinator.com