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Comment by seiji | Hacker News Reader

Nobody has mentioned taxes yet.

I assume your "making 100K" is the salary. The pre-tax salary. Taxes will chop that pretty much in half. So if you save $40K/year, you get to live off of $10k in the second most expensive MSA in the US. Good luck.

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This is way overly pessimistic. At 100k total taxes (Federal+CA+SS+Medicare) are in the 30% range. That leaves 30k to spend (not too hard for a single 25 year old assuming you don't have lots of student loans, even in SF) and 40k to save.

And this ignores tax-advantaged savings

At 100k, take-home pay is $65,278. Closer to 35% "total taxes"

And that's excluding the possibility of 401k, or IRA, or SEP-IRA, out of which you've got to be eligible for at least one.

well, your lease is $25k, so $40 saved == is naked, barefoot, hungre and not yet even at the office =D

Where are you getting those numbers? Not saying you're wrong, just curious. A quick look online shows ~18k federal, ~6k CA, and ~6K SS + medicare, which is 30%ish

Apologies. I used the paycheckcity.com calculator, which gave take-home pay after all withholdings. It did not take into account over-paying (and thus the refund at the end of the year).

Wikipedia says federal tax for those making between $83,600 and $174,400 is a fixed $17,025 + 28% of the amount over $83,600.

ftb.ca.gov says that California state tax for those making between $48,942 and $250k is a fixed $2,154.83 + 9.3% of the amount over $48,942.

This gives

California: $6,903. Federal: $21,617.

Then there's about $6600 in SS+Medicare+SDI and approximately $5500 standard federal deduction for a grand total of about $30k in taxes.

Are there any tax-advantaged savings options besides IRA and similar retirement savings that you essentially can't access until you are 60+?

There's also HSA (although still taxed in California you'll still avoid federal taxes) which is tax deferred and if used for qualified medical expenses you'll never pay federal tax. After age 60 it can be drawn down on similar to an IRA. (Has the caveat that it to maintain an HSA you need to be on a HDHP, which for a healthy 20 something is probably a reasonable choice).

HSAs are a great choice for someone without ongoing medical costs. I'm currently earning 2% in mine. Best part about it is that contributions stay in the account & continue earning interest, unlike an FSA where it's use-it or lose-it each year.

and since FSA maximum got cut and HSA maximum increased, it makes a lot more sense

If you do any freelance work or own your own business you could do an Independent 401k which lets you stuff more money away than a normal 401k. Good idea for some of the freelancers on HN.

http://www.investopedia.com/terms/i/independent_401k.asp

There are different rules for "IRA". If you are a sole proprietor instead of a corporation, you can do a SEP IRA. That, depending on your earnings, will allow you to sock away up to $49k/yr. If you are incorporated, you must offer the same 401k plan to all employees (you and your team). Also, company 401k plans cost money to manage... more than you might think. When you are small it is more than you'd expect. I incorporated last year and this is my experience in So. CA.

You and I are looking at different marginal tax rate tables if you're talking about US income tax.

  Annual Gross Pay	$100,000.00
  Federal Withholding	$19,794.50
  Social Security	$4,200.00
  Medicare	$1,450.00
  California	$7,257.14
  SDI	$955.85

  Net Pay $66,342.51

http://www.paycheckcity.com/calculator/netpay/us/california/...

And if the only tax break one takes advantage of is the 401k (ie no mortgage, no business deductions, etc):

Annual Gross Pay $100,000.00 Federal Withholding $ 15,292.50 Social Security $ 4,200.00 Medicare $ 1,450.00 California $ 5,518.04 SDI $ 955.85

401k $ 17,000.00

Net Pay $ 55,583.6

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