Hacker News Reader

> A lot of people are saying this is a bad deal because you don't get to keep your entire TC when you leave the region - you effectively end up losing more TC in the long run. True but like... you also can have way lower expenses for housing... and if you move to a state with no income tax, you might not even lose almost any net income.

It's easier to think of your "total compensation" without taking into account cost of living. Lots of people (esp tech folks) don't have a personal budget and don't keep track of their costs / expenses in nearly the same level of detail that they keep track of their income.

The conventional wisdom on HN (for people who aren't going to be founding companies) is that if you join bigco FAANGs and bounce around among them for 20-30 years, you'll end up with way higher expected net worth by retirement than if you play the startup lottery.

Part of this is because of the power of compound interest. You can get that engine started in your early 20s and pour a lot of your "spare" money into it, especially you don't have kids yet.

This same argument applies to lowering your costs. If you live in SF, you could easily be paying $40k/y in rent or $100k/y on a mortgage. If you buy in a small town with 90% of a bay area comp package, you could be plowing all your housing savings into the compound interest machine.

edit: $/y instead of $/mo

Taxes are bigger, but rent is the only real major difference in costs, and your income starts outpacing whatever the rent difference is between say SF vs Seattle or Reno relatively quickly. Quantified it's about $20-50k/yr in pretax income. $20k being the single person and $50k being the person with kids who goes to public schools.

Definitely a good thing to do during covid times, but you might want to move back after covid is over.

> Taxes are bigger, but rent is the only real major difference in costs

Have you ever lived in a small town in, say, Texas for a month? Nearly everything is cheaper there, and not by a little. Gas can be $1.50/gallon instead of $3.89/gallon. Dairy, produce, meat are all cheaper. Utilities/energy is cheaper.

Maybe it doesn't have as big an impact if you don't have kids, but I only have three and man these things eat a lot.

Have lived in the Midwest. Compared to Cali:

Beef was cheaper. Chicken and pork were same as Cali. Produce was a lot more expensive; regular produce cost the same as organic produce in Cali, and the quality dropped off a cliff in the winter.

Gasoline was cheaper, but the only utility that was cheaper was water. Internet was more expensive. Electricity and (natural) gas was significantly more expensive, because A/C was a must in the summer and heating was a must in the winter.

Car maintenance was much more expensive, since the salt they use to melt the snow is corrosive. House maintenance was more expensive, because the humidity year-round meant increased mold growth.

In order to get cheaper than LA/SF, you had to move to a small town...but you can do the same thing in Cali too; such as by moving to San Bernardino or Sacramento, and you end up with a much higher quality of life than a small town in the Midwest.

I have noticed LA has waaay more cheap food options than Chicago, where any full meal is going to start around $12 with tax, even at like divey local Mexican places. Go someplace a little "nicer" or add one thing to your order and you're at $18-$22 a meal easily.

In LA with a little effort you can find endless Asian/Mexican options for sub-$10.

One more essential data point, liquor is way cheaper in CA than the midwest.

Taxes and rent are still bigger. For a senior FAANG engineer making $400k a year, CA income taxes are nearly $40k/year, and rent on a house is perhaps another $60k/year (alternatively, ~$100k/year for a mortgage). All other basic needs are a rounding error compared to that, even with a family.

I earn comparable salary. I paid ~20k in taxes last year. There is a ton you can deduct. And the tax rate is progressive.

Correct me if I'm wrong, but the biggest CA income tax deduction available to most people is the mortgage interest and property tax deductions. So yes, you can deduct a lot of your state taxes - provided you're spending even more on an expensive home.

And yes, the tax rate is progressive, but the average rate is still around 9% at that income level (~36k). Marginal rate is just over 11%.

My overall point is just that almost all of the cost of living delta in CA is from taxes and housing. Didn't mean to get too deep into the numbers.

Wait, you only pay 40k tax on 400k? Or how much other taxes on salary are there in the US?

That’s just state tax (CA being one of the highest). They’ll have to pay the same federal rates as everyone else on top of that. I assume the reason for excluding it is that’d stay constant no matter where you live in the US.

So how high would this be?

Bad math, 110k in federal taxes and 15k in FICA (social security, Medicare, Medicaid).

https://smartasset.com/taxes/income-taxes

Probably between city, state, and federal just under 50% total.

He's just talking about California State Taxes, not Federal Income Tax.

It took me a second to realize you just meant California State taxes....

Lived in Dallas and College Station for far longer than I'd prefer, and I can contrast to NYC - taxes and rent is incomparably different. Everything else just depends on your lifestyle choices. You can buy groceries in Dean and Deluca and your coffee in La Colombe, or you can shop in a dollar store and get a coffee for a buck from a stall. I've never scored a coffee for a dollar in Texas even in the shadiest of gas stations. The breadth of options in NYC is insane, especially when you realize that while gas prices are more in Texas, you don't pay for gas at all in NYC! Of course if you're in the burbs that changes, but it's still arguable that you can live fairly modestly in NYC especially if you're single.

> I've never scored a coffee for a dollar in Texas even in the shadiest of gas stations.

Whole Foods drip coffee is $1 for prime members in many locations and is drinkable if not great.

All excellent points I make myself but let’s say you move out of SF and no longer pay $3000/mo in rent but now pay half that $1500/mo. You’re now saving $18,000 a year which is cool but almost al your other expenses stay the same (car, Xbox, TV, Internet, insurance, etc). You’re going to lose more than $18,000/yr in TC in the near term and long term (after you leave stripe) you sure and he’ll are.

So the moral of my story is don’t move out of a high cost city for the money, it doesn’t add up. Move out for a myriad of other reasons that may be meaningful for you (family, life, etc)

Depends on your needs.

My wife and I both work remotely now. We need a 3BR place to stay sane because we need two offices. Compared to the south bay, we are saving >3000/m in rent. At a high compensation, marginal tax rates in CA approach 50%. So that 36000 saved is worth 72000 in TC difference.

It gets more dramatic if you pay for childcare. Childcare in the bay area can easily run 20000 more than it might cost in a lower cost of living area. A family of four that has two kids in day care might save 60000 just off rent and childcare differences.

On the other hand, for single people who would have a 1BR wherever they chose to live, the rent difference may only be 20000 and the rest of expenses don't change much and then suddenly dropping 20% on your 200,000 TC ends up being a bad deal.

This isn't really true. Everything in the Bay Area is more expensive. A quick Numbeo search, I found that housing in SF is a little more than 2x as expensive as in Austin, so somewhere around the same ratio. Consumer prices, excluding rent, are 43% higher in SF than Austin.

Even your chain restaurants are more pricey. Everyone has to pay rent, ya know?

So in what I wrote above, there are two chunks of money I'm saying you could throw in the CIM: the money you'll make by staying at FAANGs instead of playing startup lottery, and the money you'll save by living somewhere cheaper.

The conventional wisdom (again) is to stay at FAANG and stay in the SFBA. You can also leave SFBA and work at smaller companies that don't offer FAANG comp, and it can still make sense because of the latter chunk of money (lower costs from housing and general CoL).

Also the one time 200-400k down payment on a house.

For some people the housing costs are even more significant. My target house is 6+ acres within 15 minutes of work. I currently have that in our two income family, and it would make moving very hard. Not only are nominal costs significantly higher in these desirable locations, but the quality is also significantly different.

/yr, surely?

ha, I misread your reply and came into this comment box all ready to say "no really mortgages can be like $100k/y there", but then actually read what I typed.

> you could be plowing all your housing savings into the compound interest machine.

What specifically do you mean by “compound interest machine”?

A brokerage account that reinvests dividends with index funds.

Because as we all know, markets never go down.

How much would you have made if you'd invested in a FTSE index fund in 1990 till 2020?

Very little, as it happens. The reason everyone says index funds are great is because the US markets have done well historically. This is not a guarantee.

> markets never go down.

And of course market never recover.

you don't invest in just one region. You invest across the entire world, in all regions. You buy the entire market at market cap weights. This has been shown to have a positive expected return, going back over 100 yrs.

Do you really expect the last 100 years to be predictive of the next 100 years?

Well I don't.

Also, at current interest rates, you'd need to save 65% of pre-tax income to have a good pension, so the likelihood of any of us having a decent pension is very, very low (modulo getting in early at a megacorp).

> Do you really expect the last 100 years to be predictive of the next 100 years?

it's the best you can do. As the saying goes, past performance doesn't indicate future performance. However, it's the best guess you can make.

No, it’s clearly not. You can also understand how the fundamentals have changed and reason about what is going to happen.

> fundamentals have changed and reason about what is going to happen.

and has this been more correct than using historical data?

And the fundamentals and valuations are subjective - people value different aspects of a company differently. Who's to say your valuation is correct? This is the reason behind volatility.

But if you're buying a broad market cap-weighted index, the behaviour of the price is less affected by individual valuations and more affected by macro-economic factors. And historically, a broad market cap-weighted index has had positive returns. This cannot be said about individual companie's performance.

Better put it all in your mattress then. Or crypto.

People have been saying "the markets are fundamentally changed and investing is dumb" for ages. Japan has been the single example people point to over and over and over. Meanwhile, other people are looking at 400% returns over several decades.

True, but the dividend, even reduced, buys you more stock when the market is down. Stocks generally have done well long term.

This is actually only true for the US, other mature markets (such as the UK) have not shown this pattern (look at FTSE 100 returns if you don't believe me). Additionally, sixty years ago, the UK markets were the largest in the world, and I suspect that an indexing strategy would have done well during the height of the British Empire.

I honestly am not sure where to look for dividend reinvestment for ftse 100 returns, so I guess I'll take your word for it, but I know that the european and london exchanges haven't done as well as the US.

What metric are you using to say largest in 1960 though? Not disagreeing, just curious.

1960 was just something I pulled out of my ass, to be honest. I think what I was getting at was that the markets for the dominant power tend to provide above inflation returns, which for the UK is probably pre WW2, to be honest.

> I'm sure many people in SV would move if they thought they could keep 90% of their TC in another area.

I dunno about Stripe, but a lot of folks at Google (and presumably the other FAANGs in the region) have had that option for a decade or more. I've had friends I met at Google Mountain View move to Ann Arbor, Boulder, Toronto, Tel Aviv, Boston, Seattle, etc, usually to be close to family when they're having kids. You do get CoL-adjusted but 90% of SV salary is pretty typical. Only restrictions are that you have to be a solid performer beforehand, and you have to find a team that's either in that location or that's willing to have you work remotely (many teams are happy to have remote workers, particularly ones who are high performers).

> If Stripe IPOs - they could use that stock they earned for 2 years while working remotely to buy a house almost anywhere besides NY/SF. (Effectively meaning they don't need SF/NY income anymore because they have paid the most expensive part of housing off)

That's the case for most people who have worked for ~5-10 years at a Silicon Valley company. When 2009 hit I had a bunch of coworkers who joked about buying up whole city blocks in Detroit and plopping down a Google office and an intentional-living commune there. A lot of mid-career engineers at a FAANG could buy a house for cash in most parts of the U.S. and then have enough left over to retire, but choose not to because at that point they've put down roots in the Bay Area (and gotten addicted to the weather and culture).

> I dunno about Stripe, but a lot of folks at Google (and presumably the other FAANGs in the region) have had that option for a decade or more. ... Only restrictions are that you have to be a solid performer beforehand, and you have to find a team that's either in that location or that's willing to have you work remotely (many teams are happy to have remote workers, particularly ones who are high performers).

Anecdotally, I have never heard of anyone getting a job at a FAANG with that kind of salary working remotely from day 1. On the other hand, I have met several people who started on-site but switched to working remotely later. I'm not saying it's not possible to do the former, but it seems like it's way easier to work remotely for a FAANG if you've already proven yourself, which obviously doesn't work if you have already moved to a lower CoL area and are looking for work.

> Anecdotally, I have never heard of anyone getting a job at a FAANG with that kind of salary working remotely from day 1.

The cities the parent comment mentioned (Ann Arbor, Boulder, Toronto, Tel Aviv, Boston, Seattle) are all cities where Google has offices. So, the folks they mention weren't working remotely, but rather working locally in remote offices.

Source: Google San Diego employee

Many of them actually are working remotely, but have the option to go into the local office if they need anything. Sometimes they also started going into the office a few days a week and then stopped because there's really no point when the team they're working with is remote. (This is before COVID - now everybody is in this situation, and it's likely the whole company will once we come out of COVID. Most of the moves in question were either from my first time at Google [2009-2014] or the period when I wasn't working for them [2014-2020].)

Source: know the people mentioned.

I think it's very rare, I've worked at Google for 8 years and I've met maybe 1 person who works from home on a somewhat regular basis.

Observer bias arguably. If they are working from home, rather hard to meet them.

Also varies a lot by PA. Chrome is very friendly to remote work, because they're an open-source project with a lot of non-Google contributors anyway. Android or Search, not so much. Research, infrastructure, geo, and core - decent. Don't know too much about the other PAs.

A lot of the people I mentioned above actually transferred PAs to make remote work work. If that's a goal of yours, Google's a big enough company that there's probably a role available.

How? You'd still have meetings with them.

The problem is that you need a VP exception for remote work and many VPs don't believe in it at all. So there are entire orgs where the number of remote people is zero.

I was making a broader comment in case someone took that to mean that they can get a remote job working for Google or a similar company without previous experience there, which seems very unlikely.

Yes. 100% remote new hires are extremely rare at FAANGs, and usually reserved for people who are industry superstars (eg. Lars Bak). Going 100% remote after being a valued contributor for 2-4 years beforehand is open to many ordinary employees.

So many comments in this thread assume that people live in SF/NY purely for the money and access to jobs. I think people are missing the point that people actual like living in these places too and are willing to pay a premium it.

I live in New York and like living here. I understand the cost of living here is high, but I also know that there are few places that can offer the lifestyle New York can. Given the option to keep most of my salary and relocate to a lower cost of living city, I think I’d stay in New York.

> and if you move to a state with no income tax, you might not even lose almost any net income.

If you relocate from NY to a no tax state, but are still basically working for the NY office, you might be taxed as a telecommuter in NY and still need to pay NY income tax.

I'm not sure how this works for a multi-state company like Stripe, but I've had to do this when I transitioned to working remotely for a NY based startup.

A lot of people are leaving California anyways, and economies in other states are booming, so jumping on that ship with good compensation, even for the short term, is a win-win for anyone who is looking to get out while the getting is good. I know someone who moved _to_ California from another state a few years ago and got the truck virtually for free because the truck company had so many more people going in the opposite direction. But then they paid very high prices for the truck when they left.

> A lot of people are leaving California anyways

Yeah, but the out-migration is largely at the low-end of the economic scale; with net in-migration at the high end.

This was true in the past but this year with covid and the fires it’s likely the high end will see a big out-migration as well... https://www.theguardian.com/us-news/2020/sep/12/san-francisc...

That article neither says nor supports your “it’s likely that” conclusion (which is about San Francisco not CA as a whole, and is almost entirely speculative back and forth between different advocacy group spokespeople.)

Ben Shapiro, Elon Musk, and Joe Rogan all are on the high end, and all have headed out. I also headed out, but I am only on the high end in terms of total world population, but they are real high enders fleeing the myriad of issues coming to a head in good ole CA in 2020.

> Your savings will be short term gained and you will lose all your friendships locally.

Haha not exactly preaching to the choir here. We all are aware of what sacrifices we make and don't change course for those things.

Its always "lets see what it's like over here, oh cool mountains! oh cool, beaches, oh cool new IPAs" or whatever. Try not to get completely isolated with age and figure it out!

Yeah housing is cheaper in other areas. But everything else costs the same. An iPhone or a Honda Civic costs the same everywhere in the US.

Leaving the Bay Area will lower your housing costs, but everything else you buy will take up a larger percentage of your income than it did before. Plus you'll be making less money -- in some cases, a lot less. Run the numbers and you might find out that even after paying for a Bay Area mortgage you would have more money in retirement in California than you would in a cheaper place.

Don't move for cost savings. The economic benefits are not as strong as they appear to be. Only move somewhere if it's actually where you want to live.

No, not "everything else". Restaurants/coffee shops/clubbing may be cheaper too, children daycare too, even some groceries. And taxes, as already pointed out.

Just an example calculation: If you can save $1000/month on rent and another say $150/month on other living expenses. that's $13800 annually. That's about $138000 annually net salary right now ($124200 after the cut) to break even, or about $180K-$210K pre taxes and pre cut, living in San Fran. Now, if you move to an area with lower taxes that break even point will only go up.

And don't forget car insurance on that Honda Civic. That is not the same everywhere in the US.

And registration fees too! My annual registration fee in CA was ~$900. In Florida it’s now ~$35.

Insurance dropped from $120/mo to $50/mo.

California has registration fees on top of the high gas taxes? I thought they just rolled the registration fees into the gas tax.

Sure, but you generally don't buy a new iPhone or Honda Civic every month, while your mortgage/rent is due every month again.

Furthermore, it is not only housing cost that is lower outside major cities. Your hairdresser also has higher rent in a major city, as do her suppliers. There's more traffic so goods take longer to deliver. This is besides the fact that other states/places can and often do have lower taxes on goods than major cities. So your iPhone might actually be cheaper as well.

Everything is more expensive in a major city because everyone has more expenses and passes those on.

Sales taxes generally go up in states with low income taxes fwiw.

A lot of the high tax states have high taxes in multiple categories. Moving to a high sales tax, low income tax state might actually "reduce* your sales tax.

NYC, where I live, has an 8.875% combined sales tax. And a high income tax.

Texas, meanwhile, has a maximum combined rate of 8.25% and no income taxes. High property taxes.

Moving to Texas would cut the sales tax I pay.

People finance their cars, and increasingly even their phones these days. You DO make monthly payments on your car (and sometimes your phone)

You have to consider the trajectory. SF is already a dumpster fire, if enough affluent people leave, property prices will tank and you will be paying off a mortgage for a larger sum than what the property is worth.

Meanwhile, all these affluent people have to move somewhere, the properties in these places aren't going to stay cheap forever. So you can get a cheaper mortgage in those places to pay off a property that will rise in value.

Of course, that's all speculation. Prices in the "good places" are already high anyway, if you really want to strike a bargain you have to buy into the places that are still up-and-coming.

Have you seen SFH homes prices in SF and larger Bay Area prices ? It is through the roof even in pandemic. Don't believe some random media quotes

The stock market hit all time highs during the pandemic while the economy is in shambles. Why? Because there's a lot of cheap money chasing those assets, and it's going to stay that way for a long while. Therefore, those house prices may still nominally rise or at least stay stable, even while they're losing value.

You have to look at it in terms of opportunity cost. What else could you have bought for that money? If prices rise in SF only because of inflation, prices rise even faster in those places where there's a real increase in demand.

> SF is already a dumpster fire,

I didn't notice this when I went there last year, is it a post-covid thing? What happened?

They must've given you the Potemkin village tour.

I did see some homeless people, but overall it still felt like a nice place. Of course I avoided the tenderloin and other dodgy areas (and this time I didn't use the BART, unlike previous times).

> if enough affluent people leave, property prices will tank and you will be paying off a mortgage for a larger sum than what the property is worth.

Or, as California is a non-recourse state, leaving the bank holding the bag, paying only taxes on the unpaid debt.

> Meanwhile, all these affluent people have to move somewhere

Well, they actually don't have to move, and if they do it may not be to where you predict.

The cost of housing absolutely impacts local prices across the board for basic reoccurring costs like food, fuel, childcare, taxes, etc. This is different and arguably more of an impact on budgets than one-time costs like a car where you can (and people often do) travel to make the purchase if you are able to save money.

I was paying $70-80 to fill my tank of gas in CA, and now am paying $35 in SC. I took my son for sushi the other night, and we feasted and I had two glasses of wine, and the bill was $50 instead of at least $100 in LA, so yea, everything is way cheaper when you aren't paying to live in the "dream" world of LA.

> As soon as Stripe doesn't employ them - they're gonna be competing for remote-only workers wages (or whatever is local too I guess) unless they move back.

And on top of that, they may have to accept a non-compete clause in their employment contract.

All in all, they have a pretty strong incentive to remain a Stripe employee as long as possible. Stripe probably likes this.

There is a good chance state income tax will become deductible again after the election and it won't be quite such a savings.

I think people misunderstand the SV salary situation. If you are a mid to senior level, you are pulling $400k annually, with daily pings from recruiters at Facebook, Google, Netflix, Airbnb, Instacart, Uber, Twitter etc., cost of living is the least of your concerns.

> a state with no income tax

Please excuse a non-american asking a question, but doesn't this mean that no money gets paid into retirements as well? Or is that a federal tax?

There's a 6.2% federal tax for a government-backed pension (social security) that may or may not be around by the time people need it. Most Americans are responsible for their own retirement funding, usually via an employer sponsored plan (401k and others)

Either way, it has nothing to do with a state-level income tax.

whats federal income tax on 400k? Any other Federal taxes on top of income tax and socials

72-111k depending on marital status, house mortgage, and retirement savings. Typically 100k. There’s also ~15k for FICA: Social Security (small 65+ pension) and Medicare (65+ healthcare)[0]

Any other federal taxes to the individual are insignificant or investment related.

[0] https://smartasset.com/taxes/california-tax-calculator#pfVHM...

sibling comment answered your question, but I'll turn it around and ask, how is it elsewhere? Are retirement contributions compulsory?

Outside of the US? In developed economies, you usually have a mandatory retirement "tax" that goes into the public scheme and which pays a minimum amount when you are old enough (65 or 70 usually). It isn't much on its own, maybe enough to clear the poverty line or get close to it so you're also expected to invest for yourself through tax advantaged accounts. Better employers also offer a pension plan for which you pay some and they match it.

Details really depend on jurisdiction.

Eg Australia and Singapore have mandatory retirement funds. In eg Germany, the money you pay for the government retirement scheme, just gets paid out straight to current retirees, ie no savings are made at all.

> just gets paid out straight to current retirees

Well, considering most state pension schemes are also Ponzi schemes this isn't the case in only Germany. Norway might have an actually sustainable pension scheme?

Well, Australian 'superannutation' has private funds. Similar-ish to American 401k.

The Singaporean CPF system is interesting, but perhaps similar to the Norwegian system?

UK: it's basically compulsory to pay "national insurance" contributions if you're earning enough. That gives you a (fairly small) state pension: https://www.gov.uk/new-state-pension

On top of that it's strongly encouraged to make private pension contributions, from pre-tax income; I think this corresponds to the US "401k"?

UK private pensions are similar but much more generous in tax relief (for now) and in the amount you can put into them -even more so if you do salary sacrifice.

There is also a lot more tax advantaged savings for the better off i.e. 20k pa ISA basically put 20k a year beyond the reach of income and CGT is just the start.

VCT's EIS and SIS for some one on a SV engineers wage for example.

Tax on share options is far more sane as well.

About 18% of your income (including social security payments if you are unemployed) are compulsory and set of for your retirement, on top of that many employers may make a tax-deductible 4% payment into the employees private retirement fund.

They could probably buy a house now, in the right location.

What the fuck is a TC man

Edit: Total Compensation on an annualized, repeatable basis. Usually used in the context of compensation packages in the software industry with companies such as Google and Facebook.

Thanks https://www.urbandictionary.com/define.php?term=tc

Motherfuck

When people spend too much time on Blind they don't realize this term isn't something everyone knows :)

Total Compensation I figured out.

Total compensation?