Dad, Are We Rich? | Hacker News Reader

Dad, Are We Rich?

wealthydoc.org

97 pointsredm159 comments

My measure of rich is "Can I live my current lifestyle without regular income from a job?". If the answer is yes, then you are rich. The trick here is to make sure to keep your lifestyle costs in line with your salary when you first start out, so that as your income grows you can save.

So yeah, if you want a big house and nice cars and nice vacations, you wouldn't consider yourself rich compared to people who don't have those things and don't want them.

But at some point, no matter how you live your life, you get to a point where my initial statement is true, usually around a few tens of millions, which is why we can draw a definitive line around there and call everyone above it rich.

Warren Buffet had an interesting take on "being rich". He defined it as being able to withstand economic, medical, etc catastrophe and still being able to maintain your standard of living and be able to rebuild your wealth in a reasonable amount of time. I think he set "rich" as having $25 million of liquid assets. He said have that amount of liquid assets will shelter you from a few medical or economic disasters and leave you enough to rebuild your wealth without affecting your standard of living.

If you had $3 million, a medical crisis or a business failure could wipe it all out and it would affect our standard of living and make it difficult to rebuild your wealth. $25 million cushions you against catastrophes. Of course he noted that it doesn't shield you from self-afflicted disasters like drug or gambling problems.

If you have $3m, sure, a business crisis could wipe you out, but if a medical one does, it's your own fault. Health plans can't even have maximum lifetime payouts in the US anymore. They will have to pay for everything over your out of pocket max.

There are plenty of exclusions in the fine print for out of pocket max in most policies though. It seems more cut and dry than it is.

I agree with you. For example, if I had 100 times my current yearly income in savings/investments/etc, I could live my current lifestyle indefinitely (barring eg, a market crash) because even with zero interest, the money would last 100 years, and with minimal effort (ie index funds) the money would grow over the long term at a rate greater than 1%.

Of course, that would require persisting in my current lifestyle in the face of a massive increase in wealth, which takes nontrivial self-discipline.

Look up the 4% rule and firecalc.com to learn how this 100x multiple is a lot less, more like 25x realistically.

A lot of people are irrationally intolerant of risk. Try not to let fear dominate your intuition about investing.

That 4% is empirically derived from data covering the 20th century and is appropriate for earlyish retirement. There's two reasons to be more conservative:

1) We may be in a low-yield world for a long time.

2) Those studies were based on earlier retirement, not on people leaving the workforce in their 20s and 30s, the way that some very lucky HN readers may do.

To follow up with your first point, there's been some analysis suggesting that financial markets today are more efficient than they were in the 20th century, which means that price discovery happens more quickly. Historically, the markets returned 8-10% for people invested in indices. I've heard that the market returns today are closer to 3-4%, so even with FIRE you'd realistically need to budget for 1-2% to accommodate for market fluctuations.

I'm not sure that the cited figure of 3-4% return today is truly representative of recent years.

For example, for the popular pick VTSAX (Vanguard's Total Stock Market Index Fund), if you look at the average total return % for recent windows of time:

- YTD: 16.23%

- 1-Year: 4.43%

- 3-Year: 13.28%

- 5-Year: 9.97%

- 10-Year: 14.15%

- 15-Year: 8.91%

The 1-year number is just skewed by the late 2018 market correction in the short term.

Source: https://www.morningstar.com/funds/xnas/vtsax/betaquote.html

Although on the flip side, the number also assumes you have no flexibility and don't change your spending according to how much you have left.

It's a tricky one to work out, and 4% is (as you say) definitely not a number you can easily use for retiring in your 30s.

Definitely. If you're willing to constrain consumption when required and work again if you have to, things change. Especially if you continue to work just enough in your professional field during early retirement that you can go back to earning an appreciable fraction of your previous earnings on a temporary basis if/when required.

> Of course, that would require persisting in my current lifestyle in the face of a massive increase in wealth, which takes nontrivial self-discipline.

And you must maintain that self-discipline in a world where you are constantly bombarded with messages to "spoil yourself" because "you're worth it" and "you can afford it". It's not easy.

Also, you better never have children.

In my case, my current income provides a comfortable lifestyle for my family of five. But yes, if you have kids, your expenses are definitely going to go up.

What is so special about "current" in "my current lifestyle"? I am not saying it's a bad definition, but it highlites the choices that one can make, and so subverts the whole concept of "rich".

The purpose of "current" is to ground you and give you a baseline. If you're relatively happy with your current lifestyle, can you lock it in now and stop working? If yes, then rich, if no, then keep saving/investing/growing your income.

My overall point is that there is an upper limit to that number, after which no lifestyle (barring crazy outliers like buying a yacht a week) would require you to keep working.

You are converting (like many of us do) something tangible - let's say money, to something less tangible, let's say happines. To simplify things it's like reducing a fraction where you focus on numerator and I am saying that denominator has a role in the overall result as well.

You can work on achieving the desired numerator or consider that reducing the denominator can result in increased "happines" too.

> You are converting (like many of us do) something tangible - let's say money, to something less tangible, let's say happines.

I'm converting in the other direction, which is a big difference. I'm saying first reach happiness, then take that amount of money to set your baseline.

I think a better way to say this is, are you a capitalist or not. Most people are NOT capitalists (don't own capital) that they live off of.

I guess I should have added a caveat that "my current lifestyle" needs to meet basic needs and make you at least relatively happy.

That also makes those with a truly extravagant lifestyle part of not-rich - I think you'd need to be in the billions to rich a level that you truly could maintain without working - one can always rack up an extraordinary bill buying a new personal jet or private yacht every week.

My definition throws away extreme outliers of people who buy a new yacht each week. But even if you include them, I suspect someone with that much money has figured out to set aside enough to eat and have very comfortable clothing and shelter.

> "Can I live my current lifestyle without regular income from a job?". If the answer is yes, then you are rich. The trick here is to make sure to keep your lifestyle costs in line with your salary when you first start out, so that as your income grows you can save.

My argument was that that initial statement isn't true - the incredibly rich can live lifestyles that don't hit that criteria.

That makes rich relative though?

If you're into fast cars and faster women but you're only earning $1million a year you aren't rich, whereas if you live like me, you're rich because you have $1million in the bank.

While I don't think your definition is bad per se, if you start mixing with people who define wealth as $10 in the bank, you aren't going to have a very useful conversation, so I think you at least need a different term.

BTW this guy spent nearly £10million in 4 years, I don't think he could ever be rich by your definition. https://en.m.wikipedia.org/wiki/Michael_Carroll_(lottery_win...

Edit: Also this only takes account of assets, not income. If you're earning $1million a year in a safe steady job you are rich, even if you don't yet have enough to retire.

> That makes rich relative though?

Yes, that was my main point. But my other point was that there is an upper limit, probably in the tens of millions, where no matter what your lifestyle is you can afford it without work.

I don't think there's an upper bound on spending though.

There will always be some subset of people that will spend everything, as my example attempted to show.

That situation would be better described as “independently wealthy” rather than rich. Independently wealthy is specifically the scenario where your investments are your major source of income and you can maintain your lifestyle without extra income.

Rich for me is about current liquid assets, and doesn’t relate to income. Rich vs wealthy is cash pool versus cash generation.

A cleaner who wins the lottery is rich. A homeless person with enough investment income to cover food and transport is wealthy.

>My measure of rich is "Can I live my current lifestyle without regular income from a job?"

I would say that's wealthy. Rich, to me, is if you have the means to buy and do what you want for a reasonable set of desires. In other words, you can buy a nice house in a nice area, drive a new luxuryish (i.e. BMW level) car, go on vacations, and buy stuff like a big TV without worrying. Somewhere between 150k and 300k salary depending on the area.

So then if you lose your job you're no longer rich? Are you then poor? The problem, to me, in differentiating rich vs wealthy based on how you get your money is that it makes things too fluid.

>So then if you lose your job you're no longer rich?

A rich person will have enough of a buffer to still spend like a rich person until they find their next job. If you can't find one then yeah eventually you slide down from rich.

But to me (at least) how you get your money is the fundamental difference. The rich guy has to go to work - the wealthy guy has to do whatever he wants.

That's wealthy, not rich. Rich people live off income, wealthy people live off net worth.

Everyone lives off income, it's just that some people get that income from their investments (ie. net worth) and some work for it (and business owners do both). And some people still work when they don't need to anymore. But still, being rich means not needing to work (in my mind).

My measure is can I buy whatever toys interest me. This will probably never be the case so I'll never be rich. I have plenty to eat and a lot of toys and a great savings: my world standards I'm doing very well, but I will always have to be careful.

I don't think anyone makes rich by my definition: there is always a nicer boat...

It's a bit ridiculous to see the hoops that some of the wealthy will jump through so they don't have to feel guilty about their position in the world.

The person writing this article is almost certainly "rich" by any reasonable standard. Meanwhile, most families making 60k in the US (especially in areas with the best job markets and high COL) - are not. The world income comparison thing at the end is not meaningful in the slightest. If that is actually what he's telling his children, he's doing a great disservice to them.

The difference between 60k income and 200k income matters for a lot more than vacations. It impacts things that will directly affect opportunities for your children. This includes:

- Being able to live in a neighborhood with good public schools - Being able to live in a home without having concerns about the safety of it (both neighborhood safety and environmental safety factors come into play) - Being able to afford additional educational experiences for your children - things like tutoring, summer camps, musical instrument lessons - Having higher status professional connections that can help your child get into schools, internships, jobs, or just expose your child to higher paying career options in general.

The difference in long-term opportunity between middle and upper-middle class is admittedly much smaller than the difference between middle class and poverty, but it's still a real difference. It doesn't do anybody any good to pretend like the children of the wealthy don't actually have a leg-up just because their parents worked hard to get there or achieved class mobility on their own.

I agree. I’m from an upper-middle background and my parents always try to downplay it. They’ll say things like ”well, they say we’re rich but you know we don’t see how we could afford going abroad this year, you know with the renovations going on” and I’ll respond ”yeah, you do have less money after you spend it on a vacation home, a boat (with a luxurious boat house) and on fixing it up. I think everyone would agree that you can’t indulge yourself in luxuries like travelling abroad before you’ve covered your basics like you’re doing now”.

I’m very thankful for the economic position I was born into. I have a lot of personal problems with my parents but as I’ve listened to other people’s upbringing I have realized I owe a substantial part of my success to luck. If my kids ask me about our financial position I’ll tell them the truth and if they feel entitled to being spoiled then that’s a different problem entirely. Telling them that their good home, their schools and their health care are not indicators of wealth will give them the impression everyone has it, or that it comes easy. That is a really bad message.

It must be where i grew up but in St.Louis and Kansas city, you could give your children most of these opportunities with roughly a middle class dual parent income. The smartest kids in my class became doctors, stanford phds, etc... None of them were what i consider upper middle class (provided they came from both parent educated households).

Curious what decade?

I was born in the 80s and that was the case in my Boston suburb - most people started out middle class, and where you ended up had more to with how smart & hardworking you were (and how much you took your good fortune for granted) than what your parents did.

I'm not sure that holds for kids today, looking around at my Silicon Valley suburb. If you're a tech worker with a Ph.D from MIT, IIT, or Chinghua that now works for Google, married to a fund manager from Stanford, your kid is going to have dramatically different opportunities from the children of a single immigrant mother from Mexico that cleans houses for a living. You'll likely grow up in a house with a yard rather than sharing an apartment with another family. All of your parents' friends will be similarly educated, and you'll have time to see them and socialize with them regularly. You'll go to an expensive preschool where kids get individualized attention, rather than a home daycare where one caregiver is trying to manage 8 kids. You'll end up in a different school district where everybody else had similar backgrounds and the teacher can teach to that level. Your parents will be able to help you with homework and do school projects for^H^H^Hwith you, and won't be exhausted and overworked when they come home.

I grew up during the 90's and 2000's. I would hate to use Silicon Valley as an example for a normal american life. In most of America, you could give your kids pretty good opportunities without earning 500k. As for the immigrant mother struggling, this was true even 30 years ago when things were supposedly better.

Silicon Valley has a track record of being just like the rest of America, just 10-20 years ahead of it. My wife grew up here during the 80s and 90s; the middle-class lifestyle was very achievable then. When I compare her childhood with mine, it wasn't that different - the main differences are outdoor school hallways, bigger high schools (it was my school that was atypical here), more non-white people, and everybody liked hip-hop instead of rock music.

It's worth noting the median income in around $60k per household, not individual. That's split between single income households and dual income households. A large (and growing) portion of households are dual income and $60k is roughly equivalent to two people in minimum wage, or slightly above wage, jobs. Being single in the Bay Area and making $100k as a software developer and jokingly "feeling poor" is not the same as being middle class. It's not even in the same realm of possibilities for most middle class people.

I know that most people don't think about the people who make their coffee, butcher their meat, bring gasoline to their gas stations, package their products, stock shelves, and deliver their Amazon packages… but these are people. This is the "silent majority" of America. These aren't all young people doing temp jobs for the summer. These are people in their 30's and 40's living paycheck to paycheck working their ass off to support their kids.

Doesn't this "silent majority" get disproportionate political power in America due to the constitution's bias towards rural, White states (by, e.g. the senate and electoral college)?

Rent and other living expenses are also much higher in the Bay Area than in, say, Montana. So a dollar-to-dollar comparison that doesn't consider purchasing power isn't very useful.

It does give them disproportionate political power. But they’ve not had much choice in recent times because the political establishment ignores them. All Trump had to do to win was acknowledge they exist.

It is useful. It’s not like you don’t get anything for living in San Francisco. Wealthy people love to pretend like their is some kind of equivalence in terms of lifestyle because the big coastal cities are so expensive to live in. But they aren’t arbitrarily expensive. You pay more money and you get more things—things that people in Montana don’t have access to. You get access to jobs, technology, amazing food, cheap international flights, public transit, museums, parks, amazing weather, the list goes on and on. Making $100k in San Francisco still gets you $100k worth of stuff. Making $50k in Montana still gets you only $50k worth of stuff. Different stuff, but not even close to equivalent lifestyles. You’re not magically middle class just because you happen to make $120,000/yr and live in a $3,000/mo apartment. Do you realize how insane that sounds?

Studies show that money can, in fact, buy happiness, but its effect starts to plateau at the point someone makes enough to not worry about whether they can pay their monthly bills.

IMO that's the real separator you're getting at here - which, of course, fluctuates based on location.

The world income comparison thing at the end is not meaningful in the slightest.

Why not? I would say that it's very important to understand that even middle class Americans are quite well off when compared to the vast majority of the rest of the world.

It's not meaningful because it doesn't address the heart of the question the kid was asking.

A child doesn't ask if their parents if they're rich because they looked up the GDP of various nations. They ask their parents if they're rich because they see differences between the things they have access to and the things their peers have access to.

Even a child knows that when they have a bigger house, receive better gifts, visit more places - that they are different from their peers and even families on TV. They deserve to know that most everyone they actually interact with will consider them "rich" and treat them accordingly. They also deserve to know that being "rich" is truly not the norm and that acting like everybody in the USA has the exact same opportunities as them is going to leave them out of touch with reality.

This is a great answer. Thanks.

Because Americans aren't buying groceries or paying rent in the rest of the world, they're doing that in America. Knowing that you're theoretically well-off in comparison to people living in other places doesn't put food in the fridge, and it tends to be deployed to shame people who are having a tough time making ends meet.

Knowing that you're theoretically well-off in comparison to people living in other places

It's not theoretical. It's factual.

It's also very important as a step on the way to understanding how precarious that position is. That inequality is unsustainable in the face of increasing ability to have someone do the same work elsewhere for a fraction of the cost. People need to adjust and plan accordingly, but first they need to understand how anomalous the US "middle class" has been.

I think the author is a bit too narrow in their definition of "political clout". They seem to define it as the ability to personally influence federal policy. However, as a class, people with $4M in wealth or more have an immense amount of political clout. Most contemporary US local, state, and even federal policies are geared toward attracting and retaining these people. Think property tax caps, mortgage interest deductions, zoning, traffic and transit policy...etc.

If you have $4M in wealth, you might not be able to personally call up a lawmaker and get them to pass your pet law, but governments everywhere are bending over backward for you and people like you.

Remember the audience is doctors. Doctors make bank but work hard and don't have the time to participate in the political process.

A small/mid time real estate guy with a similar net worth will have much more political clout because he has the time to do political events and interact with that strata of people.

This is such a weird, backwards way of framing the situation.

People in that income/wealth group fund essentially the entire government budget while also costing essentially nothing, so of course there is an incentive to retain them, but generally governments are trying to just stop one cent short of bleeding them so dry that they move away.

In 2018: "The top 1 percent paid a greater share of the federal tax revenue (37.3 percent) than the bottom 90 percent combined (30.5 percent)." Put another way - your local school would be in trouble if all you had were families on $40k sending 3 kids to public school, it's being funded by the family on $300k and sending their kid to a separate private school.

> In 2018: "The top 1 percent paid a greater share of the federal tax revenue (37.3 percent) than the bottom 90 percent combined (30.5 percent)." Put another way - your local school would be in trouble if all you had were families on $40k sending 3 kids to public school, it's being funded by the family on $300k and sending their kid to a separate private school.

This kind of statistic would benefit from being balanced against the share of income and/or wealth held by the top 1%. Taking wealth, for example: the top 1% owns 35% of the wealth in the USA as of 2014. [0]

This proportion has been increasing over time, so even if governments were attempting to "bleed[] them dry" (I don't believe they are), they're not doing so very effectively.

[0] https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite...

My local school would have problems if that were the case, but median income is over 100,000 in my district.

All local schools basically get money from their surrounding households, and high income families live in entirety different zipcodes from low income ones.

$4M in wealth is certainly enough to get a lawmaker to pass a "pet law" - some minor change to a zoning code or regulatory infrastructure that matters for your business. At least, if there's no concerted opposition to your pet law.

In my opinion, the easiest way to have personal influence on federal policy is to be willing to spend your twenties working for peanuts on the Hill. Those staffers are the ones doing most of the real work.

Some wealthy trust fund babies were asked how much wealth they thought they would need to really feel financially secure long term. They had inherited wealth ranging from tens, up to hundreds of millions. Almost all of them named a figure about double their personal net worth, regardless of what that net worth was.

Humans naturally anchor to their social network. If those people grew up in rural West Virginia with coal miner family income they would tell you that 250k/year is wealthy.

You have to actively resist this anchoring behavior. You have to remind yourself that just because your neighbor has a 50k car, it doesn't mean that your 10k car is not a good fit for you.

I came from a poor area. I used to think 80k/yr was rich.

Time passed, I got work in Silicon valley with a wife and kids. Living there I think 500k would be middle class. Not even upper middle class.

Perspectives change as you are exposed

80k/yr CAN be rich, it all depends on location. 80k/yr would be poverty in the valley, most of that money going to just having shelter.

80th percentile household income in Santa Clara County is $200k/yr [0]. The linked dataset doesn't go any higher, but I suspect 500k/year is 95th percentile or above, which puts you in the upper class. Even in the Bay, $500k/yr is the "own two homes and a few Porches" level.

[0] http://www.vitalsigns.mtc.ca.gov/income

If you are single maybe.

I think of a middle class man being what my old man was. Single income, wife stayed home and he provided for everyone. 4 kids.

Good luck having 2 homes and some porsches with only 500k in the valley supporting a wife and kids

A $2.5m mortgage would cost you around $13k a month, Porsche lease less than $1k a month. You've got about $15k a month left in take home pay what in the world are you going to spend that on and still feel middle class?

Just to follow up here.

500k/yr is around 41k a month. Figure you are going to be paying about 40% in taxes or 16,400 a month in taxes you get 24600 left

Considering you just spent 14k on a house and car you get 10,600k left. Groceries for a family in the bay runs around 2k a month so now you are down to 8k a month. Wife needs a car plus you need insurance gas and maintenance. Parking runs what $45 / day or 1350... lunches run around 30/day or 900... you haven't paid for clothes or extra curricular activities ( karate lessons 1k / month )

Family is not cheap, Family in the bay is hella expensive

Are these karate lessons taught by Bruce Lee reincarnate? Because that is the only way anyone is paying $1000 month.

plenty of people support a family on $60k/yr so take the remaining 440k minus taxes and buy two porsches outright. You should be able to save enough for a down-payment on each house given a year of saving.

No one supports a family on 60k a year. Healthcare alone for a family runs 20k/yr plus simply for insurance

You typically get free insurance when you have a job paying 500k/yr...

Its not free. CFO is very aware of your total cost and its starting to show up on W2's.

that's besides that point? When you quote 500k/yr salary that typically includes perks like insurance. But are we really quibbling about $20k in expenses on a 500k salary? Even if I grant you 80k/yr to run your family that still leaves more than enough for your two porsches.

500k/yr is definitely, at least, upper middle in the bay area.

I grew up with an engineer's family income, and 250k still seems pretty wealthy. That puts you in the top 5% of US earners.

I own a Jeep. That thing keeps increasing in value massively on a yearly basis...

/just add up everything I spend on it...

I know you mean well, but people tend to want to fit in with their milieu.

Milieu is made of people. You can improve your milieu by being a leader, not a follower.

I'd define being 'financially secure', as being confident that you will not need to make changes to your lifestyle for financial reasons. It makes sense that that depends pretty heavily on how expensive your current lifestyle is.

Right. It sounds funny to have a 2x guestimate from many people though. Is that evidence of a common mental heuristic for estimating and mitigating future risk?

I personally can think of a net worth figure which seems like it might be comfortable under lucky circumstances (no major crash or catastrophic health issue). And, right now I also feel like twice that would make me feel pretty secure. In spite of my concerns about the future unknowns, having that amount would probably cause me to essentially retire, turning my career into a hobby so I could shed the less enjoyable parts...

"2x" is the same thinking behind "if you don't have a backup for it, you only have it temporarily" , for anything "it" may be.

The thread starter is ambiguous about whether "secure" means "secure in what you currently temporarily have" vs "secure to have a reasonably acceptable life".

> "if you don't have a backup for it, you only have it temporarily"

Fabulous line. Is that attributable to anyone in particular?

I don’t think that mentality is limited to rich people. If you went back in time to each of the last 20 years and asked me how much savings I think I’m going to need in order to retire, the answer I’d give you (regardless of my current savings in that year) would have been “about 10X what I already have saved.”

At this point I’ve admitted to myself that I will need to work until I die!

Sounds fascinating, got a source for that? Seems to dovetail with the research re: happiness and net worth not being correlated after a point.

I'm guessing GP read in in the interview with Abigail Disney

https://www.thecut.com/2019/03/abigail-disney-has-more-money...

> They did a study at the Chronicle of Philanthropy years ago where they asked people who inherited money, “What amount of money would you need to feel totally secure?” And every single one of them, no matter what they had, named a number that was roughly twice what they inherited. So that’s what you need to know about money, right? If that is your primary measure of success or value in life, then good luck with that, because it will never feel good.

The courts think in a similar manner. When rich couples divorce, the courts mandate that the poorer parent and kids get enough from their other parent to retain the same lifestyle the were used to previously. If that means enough to maintain a private jet lifestyle, so be it.

I think the HN bubble is far detached from the real world. If you own 100k+ of assets, most of the people in the world will see you as incredibly rich. If you own a house in the Bay Area even with a mortgage most Americans will see you as rich. Sure you might not feel rich because you have to go to the office each day and you dont have a sports car, but you are.

Median and mean wealth per adult, in US dollars. USA: 61k World: 4k

https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...

This answer is nonsensical. Yes there are vast swaths of people who are living in areas that are much poorer than the US. But that doesn't mean we need to measure ourselves based on the poorest of the world.

Does that mean that we should ignore the demands of workers who want a liveable wage of $15/hr in the US? Should we tell them "you're rich compared to most of the people in the world"?

The fact is that we measure "richness" by our immediate surroundings. If we have $50k in savings and we could move to Madagascar and live like a king doesn't mean we're rich, not even in the slightest sense.

To that end, we shouldn't also compare ourself to the richest of rich. If you are making $150,000 a year you shouldn't be middle class just because someone out there is making a million.

I think what the parent poster was trying to get at is people tend to lump themselves in the "barely scraping by" bracket, no matter where they actually fall on the economic ladder. It's easier to see the people who have things you don't than to realize what you have that others don't.

The Physician takes for granted that his profession has a monopoly on perscriptions and declaring medical necessity.

>Laughably some consider me rich

I know the article is supposed to hate on the 0.1%ers, but since Physicians always say this crap about their income, it's important to know Healthcare costs are terrible because he is paid so well.

Doctors are way overpaid. The barriers to entry to become a physician are un-necessarily high, and I have a suspicion that that's by design. You only need a moderate amount of intelligence to learn and apply medicine. If the barriers to entry were lowered, then physician salaries would fall precipitously as supply would outgrow demand.

Disclaimer: I'm married to a doctor. That said, I agree with your point that they are over-paid, but I absolutely don't agree with the idea that you only need a moderate amount of intelligence to work as a physician. A slight majority of my friend group is physicians, both through my spouse's education and work and through a collegiate friend group that mostly went into medicine. While I have many, many complaints about the medical profession and many of the people who work at it, they are, virtually without exception, extremely intelligent people. The ones who weren't washed out at some point in the 4 years of university and subsequent 8-12 years of training. Some of the barriers to entry are excessive, but most of them are there because being a doctor is incredibly difficult.

I didn't mean that to across the way it did. I know some doctors, and they are extremely intelligent people, but it's a selection bias due to the high educational requirements required to get into med school. I think my point is that you don't need to be extremely intelligent to learn or apply medicine. I'd say medicine is on par with engineering, but the requirements to become an engineer are way lower than the requirements to become a doctor.

That's their argument, that the barriers to entry are too high. Obviously people who've successfully navigated those barriers will be inteligent and capable, but perhaps we could lower the average skill and knowledge level of doctors by 10% but reduce costs by 50% (by having more people into the profession) and therefore being able to provide appropriate care to more people and detect conditions earlier. This could make for a net-positive result in terms of overall health in society. Similarly, if you use technology to supplement a human doctor, you should likely be able to train doctors less and achieve similar outcomes.

I personally think health care costs are inflated by middlemen like insurance companies.

https://www.cms.gov/Research-Statistics-Data-and-Systems/Sta...

As far as I can tell, insurance companies are the only player in the system providing a check against the providers. The consumer has no idea what they're buying, so you need another similarly educated professional (employed by the insurance company) to vet the provider's charges. Insurance companies also have to spend 80% of their premiums on healthcare.

A small correction: In the US, Nurse Practitioners are able to write prescriptions. These are nominally under the authority of a supervising doctor, but in practice their scrips are mundane and approved with minimal scrutiny.

You can easily look at physician income over time to see that this isn't true. However, hospital administration and billing have shot up considerably over the last few decades.

Says the software developer that makes about as much as a doctor for writing Jenkins pipelines or something else essentially valueless to most people.

Most software devs aren't even close to doctors in terms of salary.

To be fair I also think this article's author is far detached even from the HN community. I could be wrong.

My kids asked me this and I said we are "comfortable". We are easily 1%-ers in terms of income level but we don't consider ourselves rich.

I consider someone rich who has the luxury of not working and still maintaining a very good lifestyle. In Silicon Valley you can't do that without substantial net worth.

The reason why we don't consider ourselves rich is because both my wife and I have to work very hard. We love our jobs and don't mind working hard, but we do have to work very hard. My work-life-balance is better than my wife's so I do more of the child-rearing, but I still jump online to finish some work after the kids are asleep.

It's volatility that makes people feel not rich, even though they are 1%-ers. Annual income is meaningless if you feel like there is a substantial risk of you losing that income and having to make lifestyle adjustments. In a dual income household, if you live in a high CoL area and want to send your kids to the best schools, then you're competing with other dual income households, so if one spouse loses their job or has a health issue, it will cause financial instability.

Question is are you willing to downgrade to a single income lifestyle (while still earning two incomes and investing the rest), in exchange for sending the kids to a school in a lower income area and whatever consequences that would have.

The way I look at it is that there is a significant difference between being 1%-er by income, and 1%-er by net worth. The former is not terribly uncommon in the tech industry, but the latter is what counts as real wealth.

I very strongly suspect that the overlap between people in the 1% income level and people in the 1% wealth level is extremely high.

That may very well be true, but I don't have any good data. To hit 1% in income, you need to make about 750K a year. To hit 1% in net worth, you have to clear a bit more than 10M. So the question would be how many people hit 750K for a year, or a few years of their life, without accumulating 10M in net worth? Depending on lifestyle and location, I bet there are plenty of people who make a load of money but also spend a load of money.

Look at it from the other direction: How many people are in the top 1% of NW but fail to be in the top 1% of income? Surely some but I bet not a ton.

EDIT: I found this - https://economix.blogs.nytimes.com/2012/01/17/measuring-the-...

"Some readers wondered if the 1 percent by wealth weren’t an entirely different group of people from the 1 percent by income. But there is substantial overlap: the Fed data suggests that about half of the top 1 percent of earners are also among the top 1 percent in the net worth category.

Almost all the rest of the top earners are still in the top 5 percent when it comes to net worth."

Going by the thresholds above (I don't know that they are correct), sitting on $10M in assets would require a 7.5% annual income return to reach the $750k threshold. That sounds very unlikely, if the person is living on passive investment income.

Even with a well-performing stock or real estate portfolio, to have that level of returns you are mostly talking about unrealized gains. Those would not count as income if someone is living in equilibrium, growing their assets over time. You would only realize those investment gains as income if you were liquidating your assets to fund a lavish but limited duration lifestyle.

Edit: noting your addendum, I guess we're looking at the difference between a technical implication (you must have this income if you have these assets) versus a behavioral trait (most people don't live frugally or complacently with big piles of assets)...?

> To hit 1% in income, you need to make about 750K a year.

Source? Looks like the cutoff is just 300k a year. A pretty large fraction of developers at big companies like Google and Facebook should get above that in their lifetime.

https://dqydj.com/top-one-percent-united-states/

I skipped past the dqydj.com hits on Google beacuse I don't recognize the name. Which isn't to say that it isn't valid data, just that I was looking for something that I felt was plausibly accurate. For example, this Investopedia article puts it at $718K when written [1]. CBS News puts it at 421K. CNN Money put it at $388K ... in 2014. In 2018 Forbes put it at $488K.

So it depends on who you think ran the numbers right. Or what they mean by 1% (some sources try to combine income and net worth to make a hybrid definition of 1%, which just muddies the water even more).

1. https://www.investopedia.com/personal-finance/how-much-incom...

Even in the tech industry it is uncommon to make top 1% income, even if it is household income.

Agreed. It's higher than I remember. OP mentioned making 1% money, but he may be under the same delusion I am :). 1% is 750K, and that is exceedingly rare in tech. Aside from some niche cases like self-driving car engineers at Google, it probably only happens in senior management.

We are easily 1%-ers in terms of income level but we don't consider ourselves rich

I'm forced to wonder how many policy problems in America are due to people like this failing to acknowledge just how good they have it and thus failing to be comfortable contributing to the greater good because they "don't consider themselves rich."

I thought that the point of the article was that he was reflecting on wealth, and answering his children in such a way that they did not walk around like privileged gits, while still being truthful.

Comfortable is also my answer that I've prepared for the same question.

I'm considerably less wealthy than OP, I suspect, but, supposing things continue roughly as they have been, my child will never really know hunger or want.

We are _comfortable_. Which, in my understanding of my religion, gives us an obligation to help the less comfortable and to never take our assets for granted.

The distinction between rich and wealth that you point out is, I think, astute - it's something like the difference between poverty and being broke. For some of us, it's a state of being, for others, it is temporary.

you are rich

You don’t consider yourself rich because you are tone deaf and lack perspective, not because you work hard. I doubt you have any idea what it means to work hard.

Jumping online to finish some work on a computer isn’t working hard. Lmao. Working hard is sitting on an assembly line putting clamshells together all day until your hands hurt, then having to wake up and do it again the next day.

I too get to live the luxury of pretending I work hard while sitting behind a computer in a comfortable environment. But seriously man, get some perspective.

> The bad news is that 1M isn’t what it used to be. It would take 20M to match the buying power of 1M from a century ago.

Wholly disagree with the purchasing power notion. I have lived frugally for years and 1M is enough to set me up for life (providing I don't have kids). This is because budgeting is now an ingrained habit and I wouldn't suddenly stop budgeting just because I can now spend more on things.

That just means you can live on a budget of $40K a year, which is totally reasonable for a single person who isn't in a big city. And that's great! If that's what you want to do, then by all means. But that life isn't for everyone. And if you plan to have kids and go on vacations, then purchasing power is important.

I have a friend who did exactly that. We worked together in tech for 10 years, he lived super frugally here in the Bay Area, and then when he had saved $1M, he retired back to his native Kansas, bought a house for under $100K, and just kicks back enjoying his time.

Except it's not that realistic. I have more than that generating passive income and I still can't yet quit my job even though I live in moderate cost of living state. That COL is rising, especially insurance and upcoming education costs.

I've been trying to work it out, but mostly I just need to add to the pile until the passive numbers work out better an do so reliably in good and bad years. $40K on $1M means you have to be 100% in risk assets (stocks). Technically, if you had your whole million in say, an S&P 500 index fund, you could probably safely withdraw 4%, e.g. $40K/year and still grow your principal "most years." You couldn't last year, though.

I earned somewhere around $55K last year without lifting a finger except to judiciously manage the accounts (which takes around 1hr a day), file taxes (10-20hrs once a year), and manage few other things like the odd 401K rollover and what not. It takes the edge off of my main career, but I'm not ready to depend on just that side yet. Inflation is a cruel bitch, always moving the goalposts further away.

My main "plan" is to ditch the coding job if I can find some $40-50K role someplace not in tech, but that would probably still have to be a 40hr/FTE deal so that doesn't give me any additional free time although it probably would be a hell of a lot less stressful. I'm weary of the stress and outsized corporate nonsense, but I still love tech.

I'm open to any ideas.

Instead of ditching programming, why not find a remote coding job that pays less but only requires you to work 20 hours a week to get everything done?

Having kids is the wrench in the gears for many people I'd guess. There's a reason for the term DINK (Dual income, no kids).

Edit: Also to clarify, I absolutely agree with the living frugally thing, and think most people would be in general better off if they focused less on spending every penny they make.

The second you have dependents, the equation changes. Now you're optimizing not just for your remaining years of life, but for your children and possibly their children. Which, in most cases, means living in higher cost of living areas to get them in better schools and access to wealthier networks. Also, any adverse health events can sink your whole family, so you need to keep on the treadmill until you have sufficient passive income to keep any health issues from causing financial insecurity.

I have noticed that my friends and family that grew up in higher cost of living, higher income areas and went into the standard higher paying careers (doctor/lawyer/finance/engineering) are more financially secure than those who weren't as fortunate or focused on the rat race. At what mental/other cost though, I can't say.

Edit: The most financially secure are those who invested in commercial real estate and development.

Yeah, the author curiously neglected to factor dependents into all his numbers, which makes a massive difference. I think lots of people have kids as a "default option" in their life roadmap, without considering how big of a sacrifice it will be in terms of time and money (and the fact that it's optional!). It's important to put things in perspective before making that kind of decision; making kids may be free, but raising them is anything but.

The costs of having children are dramatically over-costed on internet forums.

People going the DINK route are mostly prioritizing careers over life. It's a vicious cycle for many, who end up changing their mind and spending alot of money and opportunity cost trying to make up for it.

It's not the cost of birthing/feeding/clothing/daycaring. It's the cost of having a house in the best school district you can afford, sending your kids on ski trips or international vacations with their friends who also have higher income parents, and various other activities that are involved with being in the "up and coming" social group.

I think that's an America-centric view. In a lot of places in Europe it wouldn't matter what neighborhood you lived in - the schools available would be equally good.

That covers one segment of the conversation, but "move to Europe" isn't a solution for most people not in Europe.

It's not event an America-centric view, it's an urban America view. Live in a district that has only one school for each grade level, and suddenly the rich kids and the poor kids get the same education opportunities. I personally believe that's one of the reasons the upper midwest consistently has the best overall ranked schools in America.

That's just pride and puffery. Extravagant kid stuff is about you, not the kids!

If you choose to join the cool kids club, you're paying the price of admission. I coach little league ($120/season) and do all sorts of activities with the kids that are fun, enriching and not outrageous. My kids will not see the Louvre or work on their Spanish in Barcelona on a school trip, but will somehow muddle through.

It is the cost of daycare and regular living stuff. At least for me with my 2 year old.

- Daycare is 18k per year.

- Extra seat on airplanes, depending on your travel habits could be 2k

- Food, diapers, increased medical premiums might all total around 1500

That's like a 30% pay cut for a lot of people.

I agree that the costs are over-estimated. I think for me it is more the thing the sibling post pointed out of your risk profile changing dramatically when you have dependents. Most things in life these days, I don't really worry about how it will affect me, I worry how it will affect my wife / kids. Makes me much more cautious than I otherwise might have been.

So “comfortable” (or what I will equate with upper-middle) is now somewhere between 100k and 15m?

Even excusing cost of living differences (BFE Kansas vs Market District, SFO or Manhattan), that’s a hell of a range.

Assuming I’m single and have no kids one of those is, to me at least, comfortable to the point that I’m comfortable traveling pretty much whenever and wherever I want. The other is quite literally “f* you” money.

I tuned out there as well. To describe upper middle class as those earning between 112k and 1.5MM a year... well sounds exactly like what someone peddling financial advice to doctors might say.

I have some Pacific Islander friends that consider me rich because I live in a nice house (rented), own three cars (bought used), and have a steady desk job (after many years of recurring job instability).

Of course, that's wealthy compared to most of the world.

I think the questions following 'are we rich' can be harder to answer, because the answer may produce a different (bad/good) lesson in a child. Like...

why are we rich? / why are we not rich?

or maybe...

if we are rich, what are we doing for those who are not?

etc...

The Cosby Show had a great take on this question: https://www.youtube.com/watch?v=gJ92MLZSMXM

Being rich is a measure of assets generating income relative to future expenses.

Once your passive income can cover your monthly expenses, you are already veering into rich territory.

The wealth figures for X percentile seem low. I wonder where he's getting them. When I Google it, 2.4M was the 95th percentile two years ago.

The income levels are also way off on globalrichlist.com

$60,000 a year makes you the 11,425,788th richest person in the world? US median household income was $59,039 in 2016 and if there are 125 million households in the US, then that means you are only the 62th million richest person in the US alone let alone the world.

Due to the mixture of children and adults and eldert, singles and households, it's impossible to correctly combine stats from multiple sources, or even properly understand a single metric.

$60,000 a year is HOUSEHOLD income. In more than half of households there are at least two earners. This perctange rises when you look at median income households.

The typical median income household is where both parents make around $30k–which is right around minimum wage. If you, as an single individual, are making $60,000 you have about TWICE as much money as the average, middle income American.

I don't think you realize just how poor the average "middle class" person is.

They could be going off of per capita income rather than household income - US per capita income is closer to $32k a year[0], so 60k a year would put you quite high on that distribution.

0. https://www.census.gov/quickfacts/fact/table/US/SEX255217

> Using the popular “4% rule” 1M would generate 40K per year before taxes – hardly a way to live in style! That income is less than 80% of the average U.S. household income.

This is hands down the worst way to look at this number. That's income for not doing anything! That's also generational wealth! 1M dollars in the bank is an order of magnitude better than a 40k year salary and it's a bit of a joke to compare them against each other.

I think a massive issue in America is the growing Urban vs Rural wealth divide. Progressive tax brackets that make sense in the countryside are punitive in an urban environment.

Eg: making $150k in SF isnt "that much" yet it's taxed at a higher rate than someone making the same where housing is 50% cheaper (or more). I'm starting to think that tax brackets ought to be converted to PPP within their respective zone.

The vast majority of policy happens at the local level. Zoning, municipal ordinances, occupational licensing, elected judges, etc. Unless you live in NY,LA,SF the 0.01% has little impact on these.

Even making over $100k can have a huge and oversized impact on politics. They are the ones who can afford time to show up to PTA meetins, public hearings, donate to campaigns, etc. The average American city is designed to meet their needs.

I think there's an important distinction to be made between rich and wealthy.

Rich is defined by income level, and often by lifestyle. A high-spending star athlete can be rich AND broke. There's a reasonable argument to be made that a high-income, high-expense lifestyle in the Bay means that you are NOT "rich".

Wealthy is a measure of saved, investable assets. Wealth is not income-dependent, and ideally grows over time rather than diminishing. A person with wealth may also be rich depending on the income generated by that wealth and their local cost of living, however they may also be merely comfortable.

The key point is: if you are Rich, good for you! But use that income to build Wealth which will serve you better.

> I think there's an important distinction to be made between rich and wealthy.

No there isn't, these are synonyms in any decent dictionary. Chambers uses them to define each other.

"Rich: having a lot of money, property, or possessions; wealthy"

"Wealthy: possessing riches and property; rich or prosperous".

Everything else in your post is just stuff you've made up, which is mildly interesting but has nothing to do with those words as they're used in the real world.

It's interesting to me that most classifications put middle class at the point when you earn more then 50% of the population. You would think middle class should be defined as the 50% of people that straddle the middle of the income bell curve.

I don't typically worry about my level of income or whatnot, except when I think of retirement (which I also don't think will happen, honestly).

I'm more concerned on whether my family (wife and dogs - no kids - talk about a money sink) is happy and safe. On that level, we are doing very well.

We have a roof over our head in a relatively safe, if older, neighborhood. We have reliable vehicles (ok, both of mine are money pits - but off-roading ain't cheap). We have electricity, water, cooling and heating. We have time and money for regular entertainment and minor "luxuries". We have good health, and can afford a doctor's or dental visits. We have vision care. We can and do eat well. We have time for leisure and laying around doing virtually nothing if we want. We can afford hobbies and other interests.

By such a measure, and yes it is arbitrary and may not fit with other's ideas - we are "rich". But more than that, we are happy and safe. We have decent incomes, modest savings, and virtually zero debt (other than our mortgage, which is secured debt and doesn't really count - we didn't buy our house as an investment, but rather to live in - amazing idea, huh?).

Yes, we both know we are rich. To that end, when and where and how we can, we also donate to charities and other non-profit causes, respective to our values.

At the same time, I know monetarily I am not "rich" compared to even my local peers in the software engineering realm. I am sure that if I tried and looked (though my age might be a hindrance), that I could probably break six figures as an SWE here in the Phoenix area. It kinda irks me that I haven't yet, despite having over 25 years of experience, but it's mainly because I tend to enjoy and thrive at working for smaller software engineering businesses which tend to have few employees, and smaller client contracts. I'm fine with that, as I am happier in such places than in larger ones with more internal politics; or at least that's how I perceive it.

I don't make as much as I could - but I make enough to keep my family and I happy, safe, and comfortable. That's my definition of rich, for as little as it's worth I guess.

Was anyone else surprised that Dinesh D’Souza defines anyone who earns up to $15 million as "Upper Middle"? That can't be correct, can it?

You just can't fit such a wide range into a small number of levels. And at higher wealth numbers, there is a huge difference in total wealth including past expenditures for the same current wealth.

This isn't a single number in TFA that makes sense. $100K was merely "adequate" in 1970? The whole thing is suspect.

$15M net worth or $1.5M income. Seems reasonable.

Rich = can you live off the interest from the risk free rate(US Treasury coupon)?

In the US - thats about $5mm saving or pretax $100k interest income.

I’m rich, but you’re not: The only suitable answer for a child who asks this question.

Only wealthy people have a hard time figuring out what the correct measurement is for rich. It’s a total lack of perspective.

It’s always laughable to me what rich people consider “middle”. It’s like the word has a different meaning. Middle, to a wealthy person, extends from the middle all the way up to the top 10% by any measure. Maybe even to the top 5% of they want to talk about how expensive it is where they live, which is totally a choice they are wealthy enough to make. Poor people are treated as non existent.

This kind of tone deafness is why Trump won and why he will continue to win. The actual middle class is tired of hearing about how people making $100k+, with $750k in assets who say, “a million isn’t what it used to be” are somehow in the same socioeconomic class as the actual middle class.

I’m not sure that wealthy Americans understand just how many of their fellow countrymen are in their 30s, 40s and beyond making $20 an hour and living paycheck to paycheck. Average household income is two people working just a few dollars above minimum wage to support their kids.

I think you are the one lacking perspective here. The same way you are trying to make a point, I can make a counter point. The person making $20 is considered comparatively rich by someone making less than a dollar a day in some underdeveloped country. Everything is relative. If you make $100k and you live paycheck to paycheck because of housing costs, education costs, grocery cost etc., how can you claim their should shut up because they are rich?

Everything isn’t relative. The middle is still the middle.

When you are in the top 10% by income claiming to be in the middle you are failing to realize that their are some 250 million people in your own country that are below you. The people who make your coffee, butcher your meat, package your products. You are failing to realize that there are 100-200 million people living either an actual middle class life or are in poverty by any standard you would understand.

Living in a place with high costs is a choice. It’s s choice that wealthy people get to make. Living in San Francisco in a small studio on a $100k+ salary and jokingly “feeling poor” is a choice that wealthy and privileged people get to make. It’s a choice I’ve made. It’s probably a choice you’ve made. But I’m not going to pretend for a moment, if I’m being honest, that my life even approaches an actual middle class life. I get to live in one of the best places on the planet with the best food, weather, museums, drinks, bars, technology, etc.. I have access to the best of everything… how the hell is that being in the middle? Go spend a summer in middle America where everything is cheap and see how most people actually live. Hell, take the BART to the end of the line and drive one town further and try living and working there for a bit.

Until we've gotten rid of nation states, don't even bring up undeveloped countries. There's no surer way to break the "unbending arc of justice" than to tell the unfortunate/unlucky in your own country, "Yes, but have you seen what life is like in Indonesia?" It cuts both ways. We should tax the wealthy here punitively, since after taxes, they still would be rich in developing countries after all.

Yes, but the point is that the gap between rich and middle-class in a single nation, under a single political system, perhaps shouldn't be as wide as the gap between developed and developing nations.

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