Trying to Live on 500K in New York City | Hacker News Reader

Trying to Live on 500K in New York City

nytimes.com

45 pointstransburgh72 comments

> Nanny: $45,000 a year.

Of course, no banker would dream of paying his nanny less than $500,000 a year, considering the difficulty of surviving on such a salary in NYC.

Amen. Every time I hear the "waily waily waily you can't live for less than $90k in California" I think "for God's sake you've interacted with several people today who are doing it -- think back to the last ten times you physically handed money to anyone, they're not making $90k".

This problem is not unique to California or Manhattan. I get the same from people who choose to live in Nagoya apartments which cost about my monthly salary, then whine how impossible it is to get ahead in this city. Hey, I work five minutes from where you work yet my rent is $450... considered a lifestyle change, maybe?

I lived on $50k/year in SF with no problem. Do people really complain about making less than $90k?

to be honest, i think minimum "comfortable" wage in SF is about 200k. i make in the 6figs (as most senior engineers around here), and why I live comfortably as bachelor, I still don't think I make enough for me to afford having a family in SF.

I rent and have a roomate, cook often at home (drink lot of coffee though), but still, when you substract taxes, 401k, medical stuff for the parents, when you add everything up the savings are about 2k a month at best.

Think about it, 24k a year, where the cheapest comfortable place to live go for about 700k+. If you are conservative, and want to put 20% down, (that's about 140k) of savings you need in the bank.

To live in SF, you will have to have at least 200k, as a family to live comfortably. About 100k if you are a bachelor.

Sure you can live with a lot less, but you are probably not saving much for your future.

It seems to me that the problem isn't so much that you're "not saving much for your future" as you're "not saving enough to buy a comfortable house located in San Fransisco". Which might be indicative of a problem in one's expectations more than indicative of the necessity to make six figures as a bachelor.

(Incidentally, in many other places, socking away $2k a month would be considered pretty damn good. The starting salary for an engineer in my neck of the woods is $2.2k a month. You look pretty darn rich compared to him, even considering his vastly lower cost of living.)

You don't really need a $100K salary to be comfortable as a bachelor in SF, but it helps. Raising a family here is a mixed bag. It helps to have a lot of money because the school system sucks. You'll either need the extra $100K for private school or drug rehab if you send your kids to public school. I love SF but if I had kids I'd move somewhere else. Oh, and buying a house here is insane unless you're mega loaded or you buy and sell houses professionally.

Still, the "buying a house" thing kind of got to me when I was fresh out of school. According to statistics, my salary was actually in the top 10% of salaries in Germany (it wasn't that much, just goes to show how little most people earn), yet buying a house or apartment with that salary seemed elusive. The only way to afford it would have been to inherit some money from the parents.

That was one of the major reasons why I became so critical of just being employed and "working for the man". I just didn't feel like I would ever be able to escape the rat race.

If a person is married with two children, the weekly deductions on a $500,000 salary are: federal taxes, $2,645; Social Security, $596; Medicare, $139; state taxes, $682; and city, $372, bringing the weekly take-home to $5,180, or about $269,000 a year, said Martin Cohen, a Manhattan accountant.

Martin needs to check his figures. Social security, for example, is 6.2% for the first 106k of income, which is a weekly deduction of about $127, not $596. This is a difference of almost $25k / year.

It's also highly unlikely that a person in this scenario wouldn't have a range of tax mitigation strategies, from retirement investments to real estate.

EDIT: Here's another one:

The total costs here...are $790,750, which would require about a $1.6-million salary to compensate for taxes.

By and large, people making millions of dollars per year in income do not end up paying effective tax rates of greater than 50%. The highest marginal tax rate is currently 35%, so even once you account for SS/Medicare, city, and state taxes, you're still not above 50%, especially once all deductions are taken into account. Additionally, many of these folks are probably subject to AMT, which is a flat rate of 26-28%.

And you're not even factoring in that most of their income comes in the form of grants or options that pay the capital gains tax rate.

Agreed, though the article specifically said "salary", so I gave them the benefit of the doubt there ;)

It did, I'm just assuming Obama was including incentive based compensation or otherwise it's just too trivial to game.

Actually he is fine with incentive based compensation, but the government needs to be paid back before they can collect the incentive's. What he is trying to avoid is news story's where the government lost money and the bankers got million+ dollar compensation.

I'm sure in the long run he is also fine with >$500k salaries. I would sure hope so.

I assume they're counting New York city and State taxes, which add up to a little over 10%, iirc. However, you're right that, with the help of a decent accountant, they can get out of paying the full tax rate normal people pay.

As I was going through the list I still don't feel any sympathy for these bankers.

The whole idea of budgeting for the majority of people is to make do with seemingly limited resources. It's what everyone does to manage their own money.

Why can't someone who is supposed to manage everyones money practice a little self restraint?

I don't think the article was trying to make you feel sympathy; I think it was playing with subtext.

Either way, are we really supposed to believe these bankers don't know their way around taxes? It's not like they're squeezing paycheck to paycheck.

It's hard to tell, because I've seen a lot of "lifestyle" articles in the Times that seem pitched to appeal to people with seven-figure incomes.

E.g., there was a cover story in the NYT Magazine a few months back about surrogate motherhood, by a woman who was married to an investment banker, and not only dropped $25K to have another woman gestate her baby but hired a nanny--excuse me, a "baby nurse"--to care for the kid. Not that there's anything wrong with either one, but I'd be embarrassed to have my face in the foreground of this picture:

http://graphics8.nytimes.com/images/2008/11/30/magazine/30su...

I think this article is supposed to be a joke... or, to clarify, its supposed to make bankers feel good about themselves while ridiculing them.

I understood the hyperbole.

I was just suggesting that even taking the obvious exaggeration as literal fact, I still don't feel sympathy for these bankers...

I love how two vacations a year, at a total of $16,000, is considered a "living expense."

I feel silly reposting a very recent comment but it's relevant:

Tom Wolfe's "Bonfire of the Vanities" (Going broke on a million a year), p.137

"One breath of scandal, and not only would the Giscard scheme collapse but his very career would be finished! And what would he do then? I’m already going broke on a million a year!

The appalling figures came popping up into his brain. Last year his income had been $980,000. But he had to pay out $21,000 a month for the $1.8 million loan he had to take out to buy the apartment…

Of the $560,000 remaining of his income last year, $44,400 was required for the apartment’s monthly maintenance fee… $18,000 for heat, utilities, insurance and repairs, $6,000 for lawn and hedge cutting, $8,000 for taxes. Entertaining at home and in restaurants had come to $37,000. This was a modest sum compared to what other people spent."

Also UrbanBaby: UrbanBaby is an anonymous message board frequented by some typical New York UES/UWS mothers. Here they talk about not being afford private school on $400k/yr (DC = dear child, DH = dear husband) http://www.urbanbaby.com/talk/posts/50368448

The total costs here... are $790,750, which would require about a $1.6-million salary to compensate for taxes.

Wait a second, 50% taxes? Not the marginal rate, the effective total rate? That is truly gobsmacking if it is accurate.

I did a little math, too, and it doesn't seem impossible, particularly if you're actually spending most of that money (and thus hitting the 8%+ NYC consumption tax). 35% federal bracket, 7% state bracket, 3% city bracket, plus property and consumption taxes, and you'd be paying more than fifty cents out of every dollar in taxes. And since your total tax rate approaches your marginal rate as your income increases, their total tax rate may well be in excess of 50 cents on the dollar.

Glad I don't live there. I don't make anywhere NEAR $1.6 million a year but if I ever do, I will live somewhere that values having me around.

Only stupid people making that much money pay anywhere near that much in taxes. Get an interest only mortgage and suddenly your rent is "tax free". Also options can be counted as capital gains which is 15% etc. There are a lot of tricks you can play with that level of income. Consumption taxes only apply to a smaller subset of spending because so much of your money is spent on services and out of state.

PS: The worst income bracket is single and making ~100k because they are in a high tax bracket and need to pay 15% in SS taxes on all of it.

> Get an interest only mortgage and suddenly your rent is "tax free".

The mortgage interest deduction only applies to the first $1M of the loan.

And, the mortgage interest deduction goes away under AMT.

wait! so in a time when many are without jobs and struggling to survive, the bankers whose salaries are coming largely from taxpayer money might have to keep wearing their old $1k suits, cut back to 1 $8k vacation per year, take public transit, take their children out of elementary schools that cost more than instate college without even giving room and board, and have their personal trainer come only once a week?!

Those poor, suffering souls. I'm sure that someone will form a charity where ordinary people donate small things they don't need anymore, like their old $15k dresses, so that the bankers don't have to risk being starved of their luxuries.

Columbia and NYU grad students make about 25K/year.

...and live like shit! I should know, I'm a grad student just across the river, and I work a second job and live in Harlem just to make ends meet.

Anyone who hasn't lived in NYC will have a hard time understanding. Living in the city definitely has its perks, and even having to work the second job, I wouldn't trade it for the world...

...that said, I don't have a PS3, or an Xbox, or a Wii, or a Plasma/LCD, or a stereo, or a car less than 7 years old, or more than 7 changes of clothes, and I only just got cable last year. Life in the city is about trade-offs.

If you're coming from the suburbs, and expect the same sort of lifestyle in the city, don't take a job that pays less than $80k/yr!

and the costs being prohibitively high have nothing to do with the fact that there are so many people receiving these ridiculous salaries and driving up the costs of services? give me a fucking break. hello supply, meet demand. when salaries go down these ridiculously inflated prices will come down or these houses will be empty and these services going bankrupt.

I really like it. What would be a reward to most of us is a bitter punishment to them. They've created a life as artificial as their balance sheets and then bid it up to an absurd level.

This is a perfect punishment for the epic fail they have foisted on the world. Make them live like the merely rich. The sardonic nature of it all makes me damn near gleeful.

I'm sure there are Indian or Chinese bankers who would be happy to take over the reins at these companies for $400K or even $250K. Viva globalization!

Oh give me $100K and I would build a whole business out of India. $100K is enough gas for at least 2 years for most startups out of here and hopefully start making profit by then.

edit: people as much as it applies to businesses need to learn to live lean, at least when necessary.

There's nothing special about New York City. There are huge financial firms in Omaha, and Goldman Sachs et al can simply move there or other places. Problem solved.

All they have to do is get jobs at profitable companies.

Or get by without the bailout money.

What is a co-op maintenance fee and why does it equal the mortgage payment?

(sorry, I'm from Oregon, never heard of a 96k co-op)

A co-op is (usually) a non-profit that owns an operates a building. When you buy a co-op apartment you effectively buy a share(s) in the co-op which entitles you to occupy a particular apartment. As a shareholder in the co-op you are required to pay maintenance to cover your share of the operating costs of the building: energy and utilities, maintenance, doorman etc. Some co-ops also generate revenue from flip taxes.

Maintenance doesn't have to equal the mortgage payment - our Brooklyn co-op costs around $650pcm in mortgage, and $800 in maintenance.

Even that is insane!!

I have a share in the freehold of my flat in the UK, my maintenance comes in at £480 per annum, this includes buildings insurance, cleaning, heating and general building maintenance.

Thats pretty damn steep over there!

A good whack of it goes towards fuel oil to run the steam heat system, then you've got a surgeon sized insurance premium in case some litigious oaf slips on the sidewalk, and finally a couple of full time staff.

Looking at those numbers, Obama has done NYC out of an awful lot of taxes. I wonder how much schadenfreude will be left once that trickles down to services that ordinary people take for granted - or who will make up the shortfall.

The 500k limit is only on executives of banks that receive future extraordinary assistance from the government--the execs are free to find jobs elsewhere if they don't want the restrictions. The banks are free to not take the assistance if they can maintain a healthy capital level without it. With fractional-reserve banking that is the condition they implicitly agreed to in exchange for the ability to conjure money from the (almost) ether.

It also only applies to the top N executives at those firms, where last I checked N was 5.

Seems like there's a glaring loophole there. Let's say they want to pay their top five people ten million dollars each. And let's say they can think of five VP-level people who should be earning around $500K each. Why not say "Oh, these VPs are crucial to our survival. They're worth $20 million a year. Sadly, we can only pay them $500K of that." At that point, the VPs get about what they would normally get, and the traders can safely be paid $10 million a year.

Or am I misunderstanding the cap?

I guess it depends on the final drafting. Drafting the cap as "top 5 highest paid people can't make more than $500k" should solve the loophole you just wrote about.

Drafting the cap as "the top 5 highest paid people can't make more than $500k" isn't the same as a $500k cap on the top 100,000 employees?

If you sort employees by pay it is the same. But if you sort employees by power it might not be.

For example, some sales people at tech companies make much more money than mid-level managers taking home a couple hundred thousand dollars per year. Some of those sales people will make more than the senior level executives. Which one is more important and is higher rank is up for debate.

In my comment above I tried to explain a way to fix the loophole that byrneseyeview listed. Saying nobody makes more than $500k is a way to fix that.

You say that as if the right to operate a fractional reserve bank is granted by the government. Without a government, fractional reserve banking would still happen, and people would put their money in banks that had good reputations.

I find the aversion to fractional reserve banking that is frequently displayed on the internet quite odd.

Without a government, fractional reserve banking would still happen, and people would put their money in banks that had good reputations.

This is true, but fractional reserve banking is inherently unstable: bank runs happen, and will happen (eventually) to any bank without government guarantees.

If that were a real concern it would be far more efficient for the Feds to make up the lost taxes than to continue having these clowns take home tens of millions of dollars in tax payer money.

None of these people are leaving NYC. Of course they're going to complain because they want people to think that it's inhumane to limit their salary. But if things get tough, they have millions of dollars in savings accounts, assets, vacation homes that they can sell off to keep up their lavish lifestyle long enough for the economy to recover.

Besides, considering that most of these people should have been going to jail, I don't mind if we end up making them to move to New Jersey :)

New Jersey?

I mean, we do have laws against cruel and unusual punishment...

...to protect the people of New Jersey from this fate.

> co-op maintenance fee of $8,000 a month

seriously, how on earth can co-op maintenance for apartment amount to 8k a month unless you are building it from scratch?

For one thing, taxes are high in New York City, which makes everything expensive. The "maintenance fees" can include more than what might normally be considered "maintenance": salaries for doormen and superintendants, utilities, building mortgage, and real-estate taxes. http://www.wallfly.com/review/manhattan_ny/faqs/faqs_co-ops....

ah yes, I forgot about property taxes. We don't have them here where I live, taxation is mostly through income and consumption taxes. Property taxation always seemed stupid and somewhat evil to me. What if you happen to lost your income source for awhile or something along that line? You would loose your property you own because you cannot pay legal racketeering on something that is yours.

Property taxation always seemed stupid and somewhat evil to me.

Given a choice of income-, consumption-, or property- taxation, it seems to me that property-taxation would provide the least perverse incentive. http://en.wikipedia.org/wiki/Perverse_incentive Consumption taxation perversely punishes consumption, and income taxation perversely punishes productivity. The economic effect of either of those, therefore, is harmful. Property taxation, on the other hand, is simply rent on property that is also latently owned by various layers of government. If one wishes to pay less rent to the government, one is free to move to a less-desirable (e.g. smaller; less-conveniently located) property.

What if you happen to lost your income [...] You would loose your property

One could sell, and move to a less-expensive property. Then, the original property would be available to one who is more-productive. The economy, therefore, gains when low-productivity individuals sell expensive properties.

legal racketeering on something that is yours.

Actually, nothing within a governmental jurisdiction can be outright privately owned. Therefore, said property cannot be said to be outright "yours". A government always retains ultimate ownership of properties "privately owned" within its jurisdiction. If one wants to truly own his own property outright, he either needs to found it from scratch (and provide for all of the maintenance and defense needs), or buy it from some existing government. Buying a condo in Manhattan is usually not the same thing as buying it from its true latent owners: the borough of Manhattan, the city of New York, the state of New York, the nation of the United States of America, the North American Free Trade Agreement, and the United Nations.

> One could sell, and move to a less-expensive property. Then, the original property would be available to one who is more-productive. The economy, therefore, gains when low-productivity individuals sell expensive properties.

that is the evil part I was refering to.

How about a $500K salary cap for presidents of universities that accept federal grants and loan subsidies? Heh heh.

Very few make much more than that. Here's an article about university president pay from 2006: http://www.thecrimson.com/article.aspx?ref=515933

Apparently the Harvard president has made ~$500-600k for the last many years.

Cripe, more than the US president less all the attendant duties. A functionary making that much...obligatory greenspun (nsfw) http://philip.greenspun.com/school/tuition-free-mit.html

If you factor in the cost of transportation and protection (not to mention the rent on a swanky, DC-area mansion), the President is pretty high:

http://dealbreaker.com/2009/01/no-more-than-the-president-of...

The edit button is gone, so I feel bad about this. The President is pretty highly paid. According to his book, he hasn't be getting high since his 20's.

I wish people would lay off him. Look, for the last time, Bush is not President anymore. Next we'll be going over his alchoholism and business failings in his 30s.

Leave him be, please.

I meant this book, actually:

http://www.washingtonpost.com/wp-dyn/content/article/2007/01...

Uh, guess you didn't get it (no, not the book).

Its actually football coaches at big universities that make all the money. Median salary is over a million dollars last I saw. The academic salaries are much more reasonable. Mostly in the 100-200K range for upper level profs and administrators.

If you want to win at football, you most definitely need a good football coach, and the markets for pro football coaches and college football coaches are hardly separate. So you have to pay college football coaches somewhere in the ballpark of pro football coaches.

What has never been properly explained to me is the utility of winning football teams to universities. I really would like to hear about that.

Top football programs basically fund entire athletic departments. So in order to maintain a top brand, paying an excellent coach 10% of your budget doesn't seem to be a bad investment.

See http://online.wsj.com/article/SB122853304793584959.html?mod=...

The football teams at most major universities are profitable, and the coaches' salary come out of the teams earnings. At my university, the football team ended up funding most of the athletic teams in unprofitable sports.

If you want to be successful in business, you most definitely need a good CEO...etc.

We aren't bailing out failing universities that have destroyed trillions of dollars in wealth by virtue of martingale mismanagement. We provide state support to universities because they aren't supposed to try to internalize their positive externalities.

They should just do what Steve Jobs does. Get a wardrobe of nothing but jeans and black turtle necks, and subsist on cancer-fighting carrots and peas.

Reply on news.ycombinator.com