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Comment by nilkn | Hacker News Reader

Please tell me you're taking into account cost of living here.

$100k does not go very far in San Francisco and Manhattan. Nobody making $100k in those places could reasonably afford a Tesla without severe over-spending (which they're welcome to do if they want to--whatever floats your boat). If you view the middle class as owning detached single family homes with yards, you would be lower middle class at best in those cities at $100k. If your spouse also made $100k, you could afford the crappiest single family home that was still livable.

But it's a really good salary in Denver or Houston; you could definitely find a nice house to buy and afford comfortably, though it might have a bit of a commute. If your spouse also made $100k, you could afford a nice home in any neighborhood with no commute.

And it might nearly qualify you as wealthy in a small rural town of 15k people total, where you would never need to spend more than $150k on any house.

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Here in SF, housing costs are significantly higher. Other costs are somewhat higher. But you know what isn't? Mass produced consumer goods for one. An xbox (or tesla) costs the same whether you make $100k in SF or $50k in middle America.

You know what else? Travel. Domestic and international travel is a LOT more affordable when you're making $100k in SF.

And a big one: Retirement. You sock away your SF salary for 40 years and then retire in a cheaper COL area with no state income tax.

The truth is, even here, $100k is a lot of money. It really is. It's not rich by any stretch, but it's certainly not average middle class living. It is frustrating that a couple making over $200k can hardly buy 1000sq ft house while staying inside 30% (of gross income) housing budget, a metric widely seen as "affordable housing." But still, on balance, that couple making $200k is doing very, very well.

And the truth is, there are a lot of engineers here that, with liquidity events (which might just mean vesting your RSU's in an already public company), are earning $200k a year. That literally puts you in the top 1% of wage earners. (But not in THE "1%" of course which is usually a term referring to net worth and not gross income. But still.)

Edit: The math is different of course if/when you add children to the mix. But I deliberately left them out, because in reality, it's just not a common lifestyle choice in San Francisco.

"You sock away your SF salary for 40 years and then retire in a cheaper COL area with no state income tax."

Small correction -- state income tax in CA is a big deal even if you're saving for retirement. And once you retire, you presumably won't care what the state income tax is.

That's not how it works.

Retirement savings goes into tax advantaged accounts like 401ks and iras. This is pre tax income. You pay the taxes at the end, when you're drawing from your accounts during retirement.

Not necessarily; you might have chosen a Roth for individual retirement savings. The contribution limit on that type of account is effectively higher than a traditional IRA, since it's expressed in post-tax dollars - very useful for someone trying to stash away as much as possible. Once the money is in the account, it grows tax-free.

But for those people, taxes are immediate rather than deferred.

Honestly, from the sound of it, you just googled retirement plans. :)

Actually, Roth IRAs are limited to $5000 a year per person, and once your income reaches ~$110k you can't deposit into a Roth at all. The vast majority of private retirement dollars are saved in 401k accounts that have have a cap much higher than in a Roth. Three times higher.

And actually, if you do the math (or just go read the math) you'll see that there is very little difference in your total retirement funds whether you use a pre-tax or post-tax account. This is because in a pre tax account you have the advantage of earning capital gains on the IRS's dime. The wisest choice is of course to use both if you can. Though many many people living in this area, due to income restrictions, cannot.

Anyway, I intended my reply to you as just honestly informative. I'm happy that you now are informed, but there was no reason to say "uhh, i mean a roth. yeah. a roth."

You couldn't be further off the mark. I've contributed to a Roth IRA for years, so I know you're incorrect about the individual contribution limit (it's $5,500 now). I live in the Bay Area. I replied to your comment because I've spent a fair bit of time thinking about this exact situation, and you responded in a rude and patronizing manner. That's not why I come to HN.

My reply was in the context of the $100k earner mentioned earlier, who would not be restricted from contributing to a Roth. Our hypothetical young tech worker is going to expect his or her real salary (and tax rate) to go nowhere but up as the years roll on. It's not bizarre to imagine this person might choose Roth rather than traditional for individual savings, independent of any 401k they might be contributing to.

Oh come on man.

There is only one way to read your comment: "Small correction -- state income tax in CA is a big deal even if you're saving for retirement. And once you retire, you presumably won't care what the state income tax is."

You didn't qualify that! You added a "small correction" that was anything but. And yes, you got me, I didn't realize that for 2013 (possibly 2012?) the Roth limit was increased to $5500. Still not much stacked against the $24,000 I saved in my tax deferred accounts last year.

Listen man, i'm not one for silly debates on the internet, so go ahead and have the last word. But If you're going to add a "small correction" that is not really a correction, you should expect some disagreement.

Perhaps what you really meant was "That's true, unless you chose a Roth IRA as your only form of retirement savings. In that case, current tax rates matter and future tax rates don't."

That still glosses over the fact that I'm talking generally and you're talking about a specific, somewhat rare scenario. But at least it's accurate. As it was, had I not replied to you, a casual reader would've read my post, then yours, and walked away assuming that retirement savings is taxed at your current tax rate, in your current state of residence, when in reality it's just not so.

I wasn't talking about people making $200k, though. I was talking about people making $100k, because that's the number cherry picked by the person I was replying to.

And, yes, of course I'm aware that a Model S is the same price no matter where you buy it, to a first approximation. The point is that housing is so expensive in the Bay Area that you can actually end up having less disposable income left over for your car than someone making $20k less than you on paper in a much cheaper city and in a state with lower (or no) income taxes (Washington, Texas, maybe a few others?). If you don't believe me, you need to just sit down with a calculator that will do taxes and everything, look up comparable rents, and do the math. You sound like you might be surprised.

Exactly. Also, California is the highest-taxed state in the republic, so adjust that pre-tax salary of $100K downward a bit more in real terms.

Consumer goods like cars and laptops and TVs will cost the same, to a first approximation, anywhere in the continental U.S. But in some coastal areas, you have real estate costs that are 20x that of cheaper areas with salaries/compensation packages that are generally not 20x higher. In central Pennsylvania towns the median household income, for instance, tends to be around $26K and the median house cost is $64K, meaning houses are 2.5X median income.

In Palo Alto, on the other hand, the median house cost is around $2.25M, and the median family income is around $160K, meaning houses are 13.75X median income. Part of this are older PA families who bought when land was cheap many decades ago and are grandfathered in with lower tax rates, but part of this is also people who are stretching their finances dangerously to be able to afford there. (Even though those $2.25M median homes are often smaller than the national average, measured by square footage.)

It's possible to make $100K in the SF bay area and be, in real terms, poorer than someone making half that in central Pennsylvania.

Of course it's not a universal statement. Estimates are never aimed at outliers.

People in San Francisco, Manhattan, and London are a major constituency here... not outliers.

Population of earth: 7.1 billion.

Population of San Francisco: 0.8 Million.

Population of Manhattan: 1.6 Million.

Population of London: 8.1 million.

Percentage of the world's population living in either San Francisco, Manhattan or London: ~0.0015%

Exactly what do you think an outlier is? If you live in one of those three urban areas, you're already a member of an elite class.

He was referring to the Hacker News demographic, where these places are not such an outlier, and whether or not living in a place like San Francisco puts you in an elite class you still could not reasonably afford both a nice place to live and a Tesla there on $100k, which was my original point.

But I don't really understand why living in an expensive urban area automatically puts one in an elite class. The standard of living is not much better than other places for one thing--what you gain in diversity is lost in housing conditions. Also, it's not like $100k wages there are super rare. You don't need to be a 4.0 Ivy League graduate to score a livable wage in San Francisco. That's the starting salary for a lot of professions in cities like that, not just software developers. Police officers in the SFPD can make as much as a Twitter engineer fresh out of Stanford: http://www.sf-police.org/index.aspx?page=1655

Very good point. I would, however, write that as 0.15%.

Derp. Thanks.

Edit: I can't edit my prior comment. Time window?

Apparently.

I'm not crazy about percent notation. I find it confusing. I might have written it thusly:

> 0.0015 of Earth's population are living in San Francisco, Manhattan or London

Cost of living is always a factor. I live in the bay area. The salary of a programmer is usually 6 figures here. Granted it's almost impossible to buy a home but if you are frugal with your rent ( for instance getting roommates or living further from your job or in a less hip neighborhood) you have a pretty large amount of disposable income. Teslas don't cost less in South Dakota than northern California. I think cost if living is sometimes overstated because besides housing I don't find other critical staples like food, insurance, utilities to differ appreciably by state. If you want to own THEN the situation changes dramatically.

I'm not really sure what you're getting at. Having to move far out and getting several roommates just to swing the payments on your Model S is not exactly my idea of comfortably affording the car.

I wouldn't buy a Tesla on $100k in North Dakota either. Maybe, if I felt like blowing through money, I'd get a BMW 3 series or Audi A4, both of which are still considerably cheaper than a Model S.

I'm not disagreeing with you re: the Tesla S is way out of reach of someone "only" making $100k.

I was just pointing out that besides housing (especially owning) the cost of almost everything in CA is the same if you move somewhere where the cost of living is lower yet the salaries elsewhere are significantly less. So there is an opportunity to save a lot of money if you are willing to compromise somewhat on your living conditions.

I suppose it depends on whether you think it's important to own your home and/or you mind having roommates. When I first moved to CA I had severe sticker shock re: the rents so I rented a room in nice houses with other young professionals for the first 5 or so years I lived here.

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