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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.

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.

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

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

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

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?

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

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

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

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.

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.

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

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)

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?

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.

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.

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.

> 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.