According to two salaries on glassdoor, VP of Marketing at Amazon pays around 170k/yr.
Everyone I know pins their lifestyle to base and saves near 100% of equity. Some don’t sell at all. I’m guessing that would change with a hard cap on base.
That’s a different kind of exposure, not just to long term performance, but day to day volatility, and specifically during open trading windows.
Employees at this level tend to have a pretty high level of financial management services to manage scenarios like this. I have two associates, not close enough to call them friends but close enough to have some insights, on the edges of this world. What they do:
- Other investments provide so-called passive income and that cash flow plus base salary is used for minimum expenses.
- Spending on larger-ticket items and services is budgeted out and is drawn from a variety of lines of credit secured against things like stock or the underlying holdings of those earlier investments.
- Most spending is planned in advance, either annually or quarterly, based on past income and future expected income. How much is added on the "future" side is financed by (often very inexpensive) leveraged debt and is calculated based on the risk tolerance of the individual.
Securing the debt with assets makes that debt screamingly inexpensive. Paying a handful of percent on debt that will only be borrowed for a few months at a time is, of course, seen as a reasonable cost to smooth out cash flow and leave the other money invested at a much higher return.
One other person I know who is not a higher-level employee but structures his spend very rigidly goes one step further and prepays all of his non-housing bills out of his annual bonus and one of the stock awards during the year. His annual salary and any other stock awards pay for housing, food, and savings.
It's not just that. They also get to avoid paying capital gains taxes on their shares. So they can borrow against those shares to buy income generating assets that more than cover the interest costs and they can do so while avoiding having to pay the taxes on those gains (especially important when those gains are still short term capital gains where they would be taxed as income).
I think you're seriously overestimating how sophisticated the financial management is of your typical software engineer, who could very well be spending beyond the cap with none of those things you mentioned.
In my experience, most Amazon employees just put everything on a credit card, and then they sell stock to cover the credit card payments if their salary doesn't cut it.
That's pretty much the extent of their financial planning.
As a case in point, we had to spend a lot of time educating people at Netflix how stock compensation worked, including a lot of VPs. They just didn't care, it was of no interest to them.
Money goes into bank, money comes out. ETrade account has a big number, yay! That was about it.
Of course some of them were much better than that, but just because they are engineering executives doesn't make them good with money.
I see from your profile that you work there. Curious if you agree with me or not.
I assume my colleagues are capable of managing their finances wisely. I could be wrong.
In any event, I'm not sure a tax strategy discussion is enough to make an overarching conclusion from about someone's financial competency (or, for that matter, an entire group of people's). You can suck at tax optimization strategies without being a reckless overspender.
We discuss salaries and total compensation too, so we are better prepared for our own negotiations.
And also, spending on the credit card and then selling stock to pay it off isn’t necessarily reckless or overspending. Imagine if it were all cash. Would you say they’re overspending because they pay out half their paycheck each month saving the other half? Given that for many amazonians their stock is more than half their compensation, selling some stock isn’t really overspending.
I don't intend to sell my stock except to diversify my portfolio. I intend to live long beyond retirement, and I'll need it.
The median home in the US is 2,300 sq ft. To get that in the Bay Area in a good school district will run you about $2.3M. Assuming you put 20% down, you'll need to mortgage $1.84M. At today's rates, that's about $7,360/mo in mortgage, and about $2,100 in property tax.
So we're already at $113,520 a year just for housing.
You'll also need to pay taxes on your total comp, including the RSUs that you vest in, whether you sell them or not. Assuming you make $250K a year in total comp, and let's say you have a ton of deductions to get a crazy low tax rate, you'll still pay about 30% in taxes between Federal and State. So that's 75,000 a year.
So just in housing and income taxes, we've already spent more than the Bay Area salary cap (you've spent $188K).
And we haven't even talked about insurance, cars, food, or daycare.
I can easily see a middle class family spending more than the base salary.
Obviously it depends on your circumstances. But I would not attempt to live like what you describe in the inner Bay Area. That sort of lavishness--which I know is not particularly lavish elsewhere by American standards--is reserved for the truly wealthy here, or someone who bought their home long ago (even 15 years would suffice; less if you bought in Oakland).
At the very least, some method exists to produce liquidity without actually losing equity, or the whole $1-salary but compensated purely by stock CEO model wouldn't make any sense (if they're just immediately selling what they get, then it might as well be a performance-based, or stock-based, bonus)
You should evaluate what your ideal investment mix is (keeping in mind that you already have a lot of exposure to the company where you work and have unvested equity) and always rebalance towards that. The source of income is immaterial.
Thought experiment. If you got paid the same amount in cash that the company gives you in stock - would you use the equivalent amount of money to buy the company’s stock?
Yes, we can tell sarcasm without listening to verbal inflection.
They give new employees a bonus in their first two years to make up the difference before they start vesting.
After that, yes, they need to sell stock if their expenses exceed the cap. Which is fine as long as Amazon stock keeps going up.
Another side effect of this is that if Amazon's revenue drops, they don't have to move to layoffs so quickly. Everyone's salary will naturally go down, since the shares they get each month are worth less, but it will feel better because "no layoffs and no pay cuts are necessary".
Leaving aside share buybacks, they're still paying the same salary and are still distributing shares from the same allocated pool.
On the other hand, if there is a big share price drop, a lot of your employees have suddenly taken a big compensation hit. (And they may have already paid taxes based on a higher share price at the time of vesting if they didn't immediately sell which is another argument not to hold onto a lot of RSU shares after vesting.)
As an aside, is this materially different than any other FAANG? All the offers I’ve seen when browsing tools like levels.fyi scale much faster in stock/bonus compensation than in salary.
And yes, there is a hard cap at 160K. The hard cap apparently changes based on geographic region, but that doesn't really matter for the people in Seattle (the majority of Amazon's employees) who are under a 160K salary cap.
Just as a point of comparison, an L4 at Google could have a 160K salary.
The point of the entire thread is that "Glassdoor says this person makes 170k" is misleading because Amazon is unique with these salary caps. Even executives do not make higher than 160k (or 185k in SF) salary, so looking at that number on Glassdoor or levels.fyi doesn't tell you much. If you are trying to determine an Amazonian's compensation (as this thread was trying to do) you need to be aware that the salary number alone is not an indicator of total compensation.
It is materially different from other FAANGs, because AFAIK other FAANGs may give high proportions of their pay in stock, but they do not have a hard cap for salary. At Google, when promoted to VP level you may still get a 10% salary bump along with your 50% stock increase. But at Amazon, after you reach $160k you will never get a salary bump again. This leads to confusion for people that aren't familiar with the stock grants because if they are comparing Google vs Amazon pay, they may go to Glassdoor see that a Senior Developer at Google makes $300k salary while an Amazon Senior Dev makes $160k, and not understand why there is such disparity.
I swear half the comments on this site are just nitpicking "nuh uh you are wrong about this tiny one word in your comment" while ignoring the actual point of the discussion.