Nailed it! $223,199/yr: magic# for making it in SF Bay Area

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davidsorensen32
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Nailed it! $223,199/yr: magic# for making it in SF Bay Area

Post by davidsorensen32 »

Here are my calculations (disclaimer: I didn't include any time value of money nor return from investment calculations to keep it simple - probably they'll just cancel each other)

To make it in the Bay Area : (disclaimer: none of this is necessary but I DO believe that I have lots of colleagues and Bay Area residents who are in the same boat or thinking planning along similar lines so this is not completely irrelevant)

Average House = $1.5M
1 Kid in private school for 12 years = 12 x $20,000 = $250,000
1 Kid in private college for 4 years = $250,000
Cost of living = $44,000/yr (excluding housing + education) - thats my living expense
Total time in bay area = 56 years (start at 24, live till 80)
Must earn = $1.5M + $0.25M + $0.25M + $44K x 56 = $4.464M

Average career in IT (start at 24, laid off at 50) = 26 years

Need to earn = $4.46M / 26 = $171,692/yr after tax

i.e. before tax = $223,199/yr (assume 30% tax)

Which means that for every year you earn less than this, you better make more than this amount in subsequent years. For every year you earn $100,000, you better make $223,199 + ($223,199 - $100,000) = $346,398 one year to compensate.

Seems like nearly insurmountable odds. Unless you hit a google, facebook jackpot or at least some substantial $ value stake in a startup, you won’t get there with just a big company job.

I know there is no way I’m going to get there. It just took me a lot of time to get beyond a $100,000/yr salary. Depressed ? Nope. Reality ? Yup. Any thoughts from the wise folks ?

Update: clarifications added from comments

a) Pvt school not necessary if living in $1.5M house. Hedging for 2nd kid. college expense of 2nd kid = $250,000 so total on education would still be $500,000 even without pvt school
b) No SS assumed. Don't know the impact of missing 17yrs of SS deductions
c) income increase - salary or investment income expected to offset cost of living increase so cancel each other
d) many other expenses not calculate e.g. housing maintenance etc. which will mean a much bigger hole

Update2: helpful comments

a) Spouse should work in IT. This is the most practical idea. 2 IT incomes easily earn more than the magic # in total.
b) Work for BART
Last edited by davidsorensen32 on Tue Apr 07, 2015 5:26 pm, edited 3 times in total.
Runner01
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by Runner01 »

So basically, Bay Area residents live beyond their means like most Americans, just on a much larger scale?
joebh
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by joebh »

Define "SF Bay Area"
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FrogPrince
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by FrogPrince »

joebh wrote:Define "SF Bay Area"
All areas in or near San Francisco where a run-down shack with mold problems can sell at $1.5M in 7 days or less, with multiple overbids, for cash.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by FrogPrince »

davidsorensen32 wrote:Here are my calculations (disclaimer: I didn't include any time value of money nor return from investment calculations to keep it simple - probably they'll just cancel each other)

To make it in the Bay Area : (disclaimer: none of this is necessary but I DO believe that I have lots of colleagues and Bay Area residents who are in the same boat or thinking planning along similar lines so this is not completely irrelevant)

Average House = $1.5M
1 Kid in private school for 12 years = 12 x $20,000 = $250,000
1 Kid in private college for 4 years = $250,000
Cost of living = $44,000/yr (excluding housing + education) - thats my living expense
Total time in bay area = 56 years (start at 24, live till 80)
Must earn = $1.5M + $0.25M + $0.25M + $44K x 56 = $4.464M

Average career in IT (start at 24, laid off at 50) = 26 years

Need to earn = $4.46M / 26 = $171,692/yr after tax

i.e. before tax = $223,199/yr (assume 30% tax)

Which means that for every year you earn less than this, you better make more than this amount in subsequent years. For every year you earn $100,000, you better make $223,199 + ($223,199 - $100,000) = $346,398 one year to compensate.

Seems like nearly insurmountable odds. Unless you hit a google, facebook jackpot or at least some substantial $ value stake in a startup, you won’t get there with just a big company job.

I know there is no way I’m going to get there. It just took me a lot of time to get beyond a $100,000/yr salary. Depressed ? Nope. Reality ? Yup. Any thoughts from the wise folks ?
I know you asked for thoughts from the wise folks, but I will chime in anyway. :)

Keep in mind that many people have double incomes in the Bay Area, and thus the magic number is more common that you would believe. Which in turn leads to real estate price inflation...
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ray.james
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by ray.james »

If this is true
Average House = $1.5M
then private schools for kid is probably not needed. Assuming that price would buy one a home in Cupertino /Piedmont/ best schools districts areas which have best schools, then private school is not needed.
Cost of living seems reasonable with 2 kids with vacations etc included.

Also, a home in decent school district like San Ramon/Dublin/some Fremont areas cost an average of 800k-1M
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by surfstar »

1. Buy RV, sleep/live at work when allowed.
2. Save.
3. Retire at age 30 and GTFO


that would be my equation for making it
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by livesoft »

Many SF folks have told me that the house is their 401(k) plan.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by HomerJ »

davidsorensen32 wrote:Any thoughts from the wise folks ?
Move.
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davidsorensen32
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

Yes, I agree. Thats one way its possible - but you'll need both employed in the IT sector to make it.
FrogPrince wrote:
davidsorensen32 wrote: Keep in mind that many people have double incomes in the Bay Area, and thus the magic number is more common that you would believe. Which in turn leads to real estate price inflation...
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davidsorensen32
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

True, lots of people move away after retirement but that's the same as not being able to make it.
livesoft wrote:Many SF folks have told me that the house is their 401(k) plan.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by fetch5482 »

ray.james wrote:If this is true
Average House = $1.5M
then private schools for kid is probably not needed. Assuming that price would buy one a home in Cupertino /Piedmont/ best schools districts areas which have best schools, then private school is not needed.
Cost of living seems reasonable with 2 kids with vacations etc included.
In Sunnyvale, a 3-bed SFH in Cupertino School District are selling north of 1.8 million lately. In Cupertino, SFH sell well above that price lately. If you are OK with a town house, you could get away with lower income. A 2-bed TH in Cupertino School District sell for around 750k.
Also, a home in decent school district like San Ramon/Dublin/some Fremont areas cost an average of 800k-1M
True - and especially attractive for folks who work in SF city or east bay. If you work in South Bay, the commute will kill ya!
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by LFKB »

$1.5 million house on $223k seems like quite the stretch. A 30 year at 4% would be ~$87k per year + ~$18k property taxes = $105k on housing alone (excluding insurance). Our joint income is around $800k and people on here tell me I shouldn't be spending $100k on housing!

You left out property taxes, interest and many other variables from your equation, all of which would drive the number higher.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

You are correct. I was hedging a bit for a 2nd kid. Private school tuition saved from 1st kid = college costs for 2nd kid.
ray.james wrote:If this is true
Average House = $1.5M
then private schools for kid is probably not needed. Assuming that price would buy one a home in Cupertino /Piedmont/ best schools districts areas which have best schools, then private school is not needed.
Cost of living seems reasonable with 2 kids with vacations etc included.

Also, a home in decent school district like San Ramon/Dublin/some Fremont areas cost an average of 800k-1M
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

I know ! You're correct. I left out a lot of numbers to sugar coat a bit.
LFKB wrote:$1.5 million house on $223k seems like quite the stretch. A 30 year at 4% would be ~$87k per year + ~$18k property taxes = $105k on housing alone (excluding insurance). Our joint income is around $800k and people on here tell me I shouldn't be spending $100k on housing!

You left out property taxes, interest and many other variables from your equation, all of which would drive the number higher.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by chocolatemuffin »

A few suggestions:

1) Live in San Jose, it's quite a lot cheaper (although a SFH will still likely cost your over $1m). If you make $100k or so, it's probably better to buy a townhouse rather than a SFH.

2) There's no need to go to private school. There are quite a lot of decent school districts in the Bay Area.

3) Invest your money, so part of the earnings can come from investment income.

4) Hopefully, your spouse can provide another income.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by puma »

LFKB wrote:$1.5 million house on $223k seems like quite the stretch. A 30 year at 4% would be ~$87k per year + ~$18k property taxes = $105k on housing alone (excluding insurance). Our joint income is around $800k and people on here tell me I shouldn't be spending $100k on housing!

You left out property taxes, interest and many other variables from your equation, all of which would drive the number higher.
This.

You can either be a bogleheads.org approved Boglehead or live in the bay area. Both cannot be done at any level of income and/or any amount of windfall. Unless you rent. Then may be. :happy
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davidsorensen32
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

Renting won't help - it will actually make things worse. You'll end up spending $3,000/month x 12 x 56 years = $1,680,000 on rent. This is higher than the $1.5M for house I budgeted. Again, sugarcoating and simplifying.

Its a no-win race for the common company man. You need a trust fund, or hit the IPO jackpot to make it here.
puma wrote:
LFKB wrote:$1.5 million house on $223k seems like quite the stretch. A 30 year at 4% would be ~$87k per year + ~$18k property taxes = $105k on housing alone (excluding insurance). Our joint income is around $800k and people on here tell me I shouldn't be spending $100k on housing!

You left out property taxes, interest and many other variables from your equation, all of which would drive the number higher.
This.

You can either be a bogleheads.org approved Boglehead or live in the bay area. Both cannot be done at any level of income and/or any amount of windfall. Unless you rent. Then may be. :happy
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by mmmodem »

Rejiggered the numbers for me, living in Martinez (30 minutes from SF) in a nice area with good schools.
$525,000 Home
$0 No private school because I am buying in a good school area
$100,000 Partial state college for 2 kids, if they want private, it is their perogative to take loans.
$24,000 Yearly cost of living
=$1,969,000
Over 26 years and 25% taxes means yearly household income ignoring inflation is $94,663. And that is living comfortably. My bills outside of housing only total $500. (Auto insurance, life insurance, utilities, phone, Internet) $1500 a month is plenty for a family of 4 for everything else.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by MnD »

$44K cost of living for everything excluding only direct housing, education and taxes on $223K gross?
My wife would not be happy with that number! :mrgreen:
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by swaption »

davidsorensen32 wrote: Its a no-win race for the common company man.
What ever gave you the impression that a common company man would expect to live in a place like San Francisco, in a $1.5 million home, support 12 years of private school, and 4 years at a high end private university? There is a reason why people attempt to be uncommon.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by johnubc »

Do you expect to live paycheck to paycheck for the entire time - no investment appreciation - did I miss it?

You need to increase the income or reduce the costs.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by Meg77 »

Presumably this imaginary upper middle class/spendy individual would have a spouse, at least at some point, given the large expenses related to children in this example. In that case a combined average $111K/year income doesn't seem like quite as much of a stretch, even if one spouse stayed at home for a few years.

A year or so ago when I visited SanFran the transportation workers were on strike, and my husband and I were flabbergasted to read that the average BART employee earned over $80K plus had amazing benefits (full pensions, less than 40 hr workweek, etc) - and they were demanding more. My husband joked that he should refer some of his MBA buddies from the Midwest to this area, as some of them weren't doing so well.

If the metro operators are earning that much, surely you don't have to hit it big with a start up to get to the numbers you're talking about. There must be plenty of general professionals cracking 6 figures (accountants, middle managers, etc). But what do I know...Looks like the average wage in SF is $67K per year - and that includes service workers and lower income earners as well: http://www.bls.gov/regions/west/news-re ... ncisco.htm

Seriously though maybe you should just go work for BART...eliminate the need to save for retirement due to the pension, then start a business with the rest of your time since you'd only be working 37 hours a week or whatever their union maximum is. You'd probably come out ahead of the tech guy in your story! :D
Last edited by Meg77 on Tue Apr 07, 2015 4:37 pm, edited 1 time in total.
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davidsorensen32
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

I'm making perhaps a simplistic assumption that over time costs inflation and investment or income appreciation will just cancel each other. so they will be perfectly offset. this may not be the case. There are a couple of other assumptions too - I assumed little to no income from SS. I've no idea how bad of an impact $0 income from age 50 --> age 67 has on SS payments. And company match on 401(k) is just rounding error as its a very small amount typically $2000 - $3000 at most tech companies I've worked at. Of course there is zero pension in all tech companies.
johnubc wrote:Do you expect to live paycheck to paycheck for the entire time - no investment appreciation - did I miss it?

You need to increase the income or reduce the costs.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by sk.dolcevita »

I have never met anyone wishing they lived in Kansas, Oklahoma, Nebraska, or other two dozen states? I guess that explains why the real estate is cheap there.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by SmileyFace »

Meg77 wrote:Presumably this imaginary upper middle class/spendy individual would have a spouse....
perhaps the spouse is a non-working stay-at-home arm-candy type.
You need to add $100K/Year to your expenses :)
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

swaption, yes you're right. This means that unless you are uncommon, don't try to make it in the bay area. Thats the bottomline. A common man = common bay area techie will be subject to the expenses and choices I mentioned if he/she wishes to make it in the Bay Area.

ps. on pvt school - I'm hedging. if one wishes to have a 2nd kid, college expenses for 2 will equal $500,000. It goes it a different bucket but doesn't move the needle.
swaption wrote:
davidsorensen32 wrote: Its a no-win race for the common company man.
What ever gave you the impression that a common company man would expect to live in a place like San Francisco, in a $1.5 million home, support 12 years of private school, and 4 years at a high end private university? There is a reason why people attempt to be uncommon.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

Wow ! Good job. But Martinez is not really Silicon Valley though I agree its geographically part of the Bay Area. Commute each way to and from Silicon Valley burbs would be 2/hrs each way or 4 hrs/day.
mmmodem wrote:Rejiggered the numbers for me, living in Martinez (30 minutes from SF) in a nice area with good schools.
$525,000 Home
$0 No private school because I am buying in a good school area
$100,000 Partial state college for 2 kids, if they want private, it is their perogative to take loans.
$24,000 Yearly cost of living
=$1,969,000
Over 26 years and 25% taxes means yearly household income ignoring inflation is $94,663. And that is living comfortably. My bills outside of housing only total $500. (Auto insurance, life insurance, utilities, phone, Internet) $1500 a month is plenty for a family of 4 for everything else.
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davidsorensen32
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

I have 4 letters for you, repeated thrice : Jobs Jobs Jobs.
sk.dolcevita wrote:I have never met anyone wishing they lived in Kansas, Oklahoma, Nebraska, or other two dozen states? I guess that explains why the real estate is cheap there.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

The spouse is the key - I agree. You better marry right. Your spouse needs to be in IT from the get go. It takes a number of years to reach six figures in non IT fields and you fall behind the curve all those years. And both spouses better be working continuously without any break for young kids etc.

ps. Astute observation on BART - they have an amazing deal. Funny, how the tech workers think they are the masters of the universe, but most of them are actually on their way out of the bay area whether the know it or not while the low flying unglamorous BART worker has the final laugh. Tortoise v/s Hare ?
Meg77 wrote:Presumably this imaginary upper middle class/spendy individual would have a spouse, at least at some point, given the large expenses related to children in this example. In that case a combined average $111K/year income doesn't seem like quite as much of a stretch, even if one spouse stayed at home for a few years.

A year or so ago when I visited SanFran the transportation workers were on strike, and my husband and I were flabbergasted to read that the average BART employee earned over $80K plus had amazing benefits (full pensions, less than 40 hr workweek, etc) - and they were demanding more. My husband joked that he should refer some of his MBA buddies from the Midwest to this area, as some of them weren't doing so well.

If the metro operators are earning that much, surely you don't have to hit it big with a start up to get to the numbers you're talking about. There must be plenty of general professionals cracking 6 figures (accountants, middle managers, etc). But what do I know...Looks like the average wage in SF is $67K per year - and that includes service workers and lower income earners as well: http://www.bls.gov/regions/west/news-re ... ncisco.htm

Seriously though maybe you should just go work for BART...eliminate the need to save for retirement due to the pension, then start a business with the rest of your time since you'd only be working 37 hours a week or whatever their union maximum is. You'd probably come out ahead of the tech guy in your story! :D
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by HomerJ »

davidsorensen32 wrote:I have 4 letters for you, repeated thrice : Jobs Jobs Jobs.
sk.dolcevita wrote:I have never met anyone wishing they lived in Kansas, Oklahoma, Nebraska, or other two dozen states? I guess that explains why the real estate is cheap there.
I'm confused... are you saying there are no jobs in Kansas, Oklahoma, etc.?
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

Actually, believe it or not, $44K/yr is a lot of money. It doesn't take much to live well. Its the housing and education that kill it.
MnD wrote:$44K cost of living for everything excluding only direct housing, education and taxes on $223K gross?
My wife would not be happy with that number! :mrgreen:
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

What would a 50yr old techie guy do in Kansas, Oklahoma or Nebraska ? I confess I don't have the foggiest clue. Never been to those places.
HomerJ wrote:
davidsorensen32 wrote:I have 4 letters for you, repeated thrice : Jobs Jobs Jobs.
sk.dolcevita wrote:I have never met anyone wishing they lived in Kansas, Oklahoma, Nebraska, or other two dozen states? I guess that explains why the real estate is cheap there.
I'm confused... are you saying there are no jobs in Kansas, Oklahoma, etc.?
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by sk.dolcevita »

davidsorensen32 wrote:What would a 50yr old techie guy do in Kansas, Oklahoma or Nebraska ? I confess I don't have the foggiest clue. Never been to those places.
HomerJ wrote:
davidsorensen32 wrote:I have 4 letters for you, repeated thrice : Jobs Jobs Jobs.
sk.dolcevita wrote:I have never met anyone wishing they lived in Kansas, Oklahoma, Nebraska, or other two dozen states? I guess that explains why the real estate is cheap there.
I'm confused... are you saying there are no jobs in Kansas, Oklahoma, etc.?
While jobs rank high in determining where one would want to live (probably the determinative factor for most), there are other quality of life factors that are important as well. Bay Area and surroundings do have have high quality jobs. They also:

(1) have a very pleasant weather
(2) are close to the sea, desert and mountains
(3) have world class educational institutions
(4) have highly diverse, educated and cosmopolitan population that is generally optimistic, progressive and forward-looking
(5) have high walkability score for the most part
(6) decent public transport

For someone preferring an urban living, there is not very much not to like there once you have a job to be able to afford housing expense.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by mnaspbh »

davidsorensen32 wrote:Here are my calculations (disclaimer: I didn't include any time value of money nor return from investment calculations to keep it simple - probably they'll just cancel each other)

To make it in the Bay Area : (disclaimer: none of this is necessary but I DO believe that I have lots of colleagues and Bay Area residents who are in the same boat or thinking planning along similar lines so this is not completely irrelevant)
(snip)
I know there is no way I’m going to get there. It just took me a lot of time to get beyond a $100,000/yr salary. Depressed ? Nope. Reality ? Yup. Any thoughts from the wise folks ?
The last "big company" IT job I had in Silicon Valley had a starting benefits package for highly skilled workers (sr software developer) that was pretty close to your "magic number" and that was over a decade ago. Even raw CS grads still got over 100K base salary as of a couple of years ago, and the numbers go up fast with skill and experience.

If one "big company" isn't paying very well, go to another--skilled workers can pretty much write their own ticket.
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by Carefreeap »

davidsorensen32 wrote:Here are my calculations (disclaimer: I didn't include any time value of money nor return from investment calculations to keep it simple - probably they'll just cancel each other)

To make it in the Bay Area : (disclaimer: none of this is necessary but I DO believe that I have lots of colleagues and Bay Area residents who are in the same boat or thinking planning along similar lines so this is not completely irrelevant)

Average House = $1.5M
1 Kid in private school for 12 years = 12 x $20,000 = $250,000
1 Kid in private college for 4 years = $250,000
Cost of living = $44,000/yr (excluding housing + education) - thats my living expense
Total time in bay area = 56 years (start at 24, live till 80)
Must earn = $1.5M + $0.25M + $0.25M + $44K x 56 = $4.464M

Average career in IT (start at 24, laid off at 50) = 26 years

Need to earn = $4.46M / 26 = $171,692/yr after tax

i.e. before tax = $223,199/yr (assume 30% tax)

Which means that for every year you earn less than this, you better make more than this amount in subsequent years. For every year you earn $100,000, you better make $223,199 + ($223,199 - $100,000) = $346,398 one year to compensate.

Seems like nearly insurmountable odds. Unless you hit a google, facebook jackpot or at least some substantial $ value stake in a startup, you won’t get there with just a big company job.

I know there is no way I’m going to get there. It just took me a lot of time to get beyond a $100,000/yr salary. Depressed ? Nope. Reality ? Yup. Any thoughts from the wise folks ?
LOL, there's a lot of truth to that scenario.

How we differed;
1. Moved to SF Bay Area in 1990 from the Washington DC area. Scared silly could affordn't house back then. Bought dump in "average" area on Peninsula at 5x husband's $50k salary. Yes he was in IT. I got a job and house was only 3x salary.
2. Fixed up dump and 3 years later looking for move-up house. I got laid off. Worked part time consulting gigs for 18 months. After looking for 2 years found nice house 4 doors up the street. Found ourselves competing with across the street neighbors for same house :!: Let them "win" (both offers were contingent on sale of our houses). Thirty days later I got full time job offer, and came back and bumped their offer going non-contingent. Moved MIL in old house for 7 months then sold house following summer. MIL was on a temp assignment in SF Bay Area.
3. After death of founder, company DH worked for relocated out of area in 2001 and DH's job was in AZ. After a year+ of negotiations we agreed to move but rented out house.
4. After economy crashed in 2008, company pulled up stakes and stopped doing business in US. We agreed to move to Europe for 3 years in 2009.
5. In 2012 company stopped paying meager ex-Pat package. DH said "Auf Weidersehen" and we moved back to SF Bay Area. Which was just in time since our tenants had filed BK and we had to evict.
6. Essentially paid off house by renting it out for 9 years.
7. No kids.
Every day I can hike is a good day.
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stevewolfe
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by stevewolfe »

davidsorensen32 wrote:What would a 50yr old techie guy do in Kansas, Oklahoma or Nebraska ? I confess I don't have the foggiest clue. Never been to those places.
7 years short of your hypothetical techie, and in Pennsylvania instead of Kansas, Oklahoma or Nebraska, but I'll swing the bat nonetheless... I have 21 years experience as a software developer. I live in a school district of about 5,000 people. We're approximately 2 hours from the major metropolitan areas of Philadelphia, Baltimore and a little farther, maybe 2.5 hours, to New York City and Washington D.C. We take lots of trips into the city and enjoy the things on offer there.

However, we also enjoy the country and the dramatically lower cost of living. I commute to a small city each day (40 minutes each way) and am well compensated. We purchased our home in a nice development 15 years ago for $90k. No, I didn't miss a digit in the amount.

So I guess I can answer your question this way - I make about 75% of what a friend in the Bay area makes and live in an area that costs about 1/8th as much as the Bay area (at least for housing, likely the largest expense). What does a techie do that lives in an area like that? Pretty much anything they want to. :beer
jayjayc
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by jayjayc »

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jayjayc
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by jayjayc »

One huge draw to the SF Bay Area is the belief that you can get rich quickly here. Many techies flock to start ups in the hopes that Google acquires them or goes IPO. The 50 person startup that got acquired by Facebook for $19 billion? They're heroes here. Nowhere else can some kid in their 20s or 30s become a multimillionaire overnight like here.

Obviously the odds are still extremely low to hit it rich, but long odds never stopped a kid from dreaming about making it to the NBA. It's just that now, an unathletic enginerd can now dream that he'll land millions.
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LiveSimple
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by LiveSimple »

Uhmmmm...

Both husband and wife working in IT and making 200+ K can live and raise the family comfortably anywhere in the Midwest.
Also will have more happy moments of experiences with the family for 25+ years.

Can throw in vacations as well, to CA, SFB, Europe, etc.

Except saying I lived in bay area, what am I missing.
Yes some make it great at the bay area
Invest when you have the money, sell when you need the money, for real life expenses...
joebh
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by joebh »

FrogPrince wrote:
joebh wrote:Define "SF Bay Area"
All areas in or near San Francisco where a run-down shack with mold problems can sell at $1.5M in 7 days or less, with multiple overbids, for cash.
So basically excluding all the more affordable areas close to San Francisco.
Got it.
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ClevrChico
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by ClevrChico »

Both DW and I are IT workers in the midwest, near the rust belt.

The online calculators report we make 25% less income here, but cost of living is half of SF. Winters are not fun at all, but life is pretty easy.

I'd say your numbers are in the ballpark.
jayjayc
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by jayjayc »

davidsorensen32 wrote:
Update2: helpful comments

a) Spouse should work in IT. This is the most practical idea. 2 IT incomes easily earn more than the magic # in total.
b) Work for BART
This is hilarious but true! I would also add in Muni workers. Muni is SF's bus system. I read that a Muni mechanic made $300k due to overtime.
Harold
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by Harold »

jayjayc wrote:One huge draw to the SF Bay Area is the belief that you can get rich quickly here. Many techies flock to start ups in the hopes that Google acquires them or goes IPO. The 50 person startup that got acquired by Facebook for $19 billion? They're heroes here. Nowhere else can some kid in their 20s or 30s become a multimillionaire overnight like here.

Obviously the odds are still extremely low to hit it rich, but long odds never stopped a kid from dreaming about making it to the NBA. It's just that now, an unathletic enginerd can now dream that he'll land millions.
A young guy I play basketball with here in SF (a software developer) who looks up to me for financial stuff casually mentioned one day between games that all he wants is $2M and he'd be happy. As he sees it, other guys are getting it and he's not asking that much. An interesting perspective, and I suppose a commonly held one in any boom time.

From an investing side, I'll help him get it. But the big software idea to get the $2M or more quickly is on him.
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HomerJ
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by HomerJ »

davidsorensen32 wrote:It just took me a lot of time to get beyond a $100,000/yr salary.
davidsorensen32 wrote:What would a 50yr old techie guy do in Kansas, Oklahoma or Nebraska ? I confess I don't have the foggiest clue. Never been to those places.
If you have 10-20 years of experience, you could make over $100k in an IT job here in the Midwest as well... At least, I do...

But OUR houses cost 1/6 as much... My house is 5-bedroom 4300 square foot monstrosity with a huge deck, and a big backyard that backs up to a wooded area with a creek running through it.

Cost us $500k... That same house would cost $3 million (or is that low?) in SF.

So what would you do? You'd save a bunch of money, retire early, AND have a nice life in the process.

Sure, there's no ocean.... but I just got back from my lake condo... Wasn't much fun this time... did a lot of spring cleaning, but the boat started right up, so no worries there... In a few weeks, when it gets a bit warmer, I'll start taking a bunch of 3-day weekends every other week... :) We also have a trip planned to go to Greece and Istanbul this summer... Easy to have a vacation budget when you live in a LCOL area.

I could probably make 30% more in SF... Maybe even 50%-75% more... but my housing costs would quadruple at least, and I'd have a smaller house with less of a view.
Last edited by HomerJ on Tue Apr 07, 2015 7:53 pm, edited 1 time in total.
Leesbro63
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by Leesbro63 »

stevewolfe wrote:
davidsorensen32 wrote:What would a 50yr old techie guy do in Kansas, Oklahoma or Nebraska ? I confess I don't have the foggiest clue. Never been to those places.
7 years short of your hypothetical techie, and in Pennsylvania instead of Kansas, Oklahoma or Nebraska, but I'll swing the bat nonetheless... I have 21 years experience as a software developer. I live in a school district of about 5,000 people. We're approximately 2 hours from the major metropolitan areas of Philadelphia, Baltimore and a little farther, maybe 2.5 hours, to New York City and Washington D.C. We take lots of trips into the city and enjoy the things on offer there.

However, we also enjoy the country and the dramatically lower cost of living. I commute to a small city each day (40 minutes each way) and am well compensated. We purchased our home in a nice development 15 years ago for $90k. No, I didn't miss a digit in the amount.

So I guess I can answer your question this way - I make about 75% of what a friend in the Bay area makes and live in an area that costs about 1/8th as much as the Bay area (at least for housing, likely the largest expense). What does a techie do that lives in an area like that? Pretty much anything they want to. :beer
Plus income tax in PA is 3.07%. In California it's graduated with top rates at 13%. That's huge.
Ron Ronnerson
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by Ron Ronnerson »

I live in the Bay Area and agree that real estate has recently risen quite a lot, making the area tough for newcomers. However, I just thought I'd share how we manage to live in the Bay Area on far less than the $223k figure. We live in a 4 bedroom/3.5 bath townhome in a nice part of the East Bay (San Ramon). The schools around here are excellent. That was particularly important to us when we bought our home in 2010.

I'm a teacher and my wife works 30 hours a week at a small company. We earn $130k gross. I contribute $12,500 to a 457b plan and $7,500 toward my pension so our taxable income comes down to $110k - the threshold to fully qualify for the child tax credit. After itemizing, we're in the 15% tax bracket. At age 61, my pension is supposed to be roughly $80k/year in 2015 dollars (though I may continue to work after age 61 if I love going to work in the future as much as I do currently). My wife's employer contributes 15% of her salary toward retirement and wife puts in nothing. We also max our Roth IRA (in fact, we put in $11k for the two of us just today). So we're contributing $30k per year to retirement accounts per year not including my pension or wife's social security. My pension alone should cover all our expenses in retirement. Then a few years later, the mortgage will disappear and Social Security will begin.

Our home is valued at $700k but we bought at $500k in 2010. We currently owe $397k on it. Here are our monthly expenses:
Mortgage: $1810 (3.25%, 30 year fixed)
Property Taxes: $800 (annual increases to this amount are small due to Prop 13 law in CA)
HOA: $264
House Cleaning: $225 - totally worth it!
Home Improvements/Repairs: $50 - one of my best friends is very handy and helps out whenever I need it
TV/Internet: $150 - all channels on U-Verse with fastest Internet speed they offer
Electricity: $100 average
Cell Phones: $60 for 2 iPhone 4s's with unlimited talk, text, and data through Virgin Mobile. Will replace when the phones becomes beyond obsolete.
Water: $30 (most of water bill is included in HOA dues)
Garbage: $20
Health Insurance: $200 for Gold Coverage with Kaiser for family of 3 (2 adults aged 40 and a baby) - wife's employer pays the rest of the health insurance bill
Auto/Home/Umbrella Insurance: $190 (2014 Corolla for wife, 2015 Corolla for me, Umbrella coverage is for $1 million)
Life Insurance: $143 (30 year term that covers us each up to age 68 - super preferred rate for both wife and me - $1M coverage each)
Gas: $300
Car Maintenance/Repairs/Registration/Tires/AAA Dues: $75
Groceries/Household Items: $1000 (includes diapers/formula, etc.)
Restaurants/Coffee Shops: $400 (wife gets a daily latte and I think that's just fine)
Vacations: $250 (we fly using miles, stay with friends and family whenever possible, and often vacation in California by driving in our Corolla).
Miscellaneous (Furniture, Gifts, Donations): $150
Office Supplies/Technology (computers, phones, etc.): $100
Clothing/Shoes/Hair/Nails: $80
Pets: $80 (one of our two cats need special food due to having a super-sensitive stomach)
Medical/Vision/Dental: $50 (cost reduced due to Flexible Spending Account offered by my work)
Entertainment: $25 (it's hard to go out to the movies a lot with a baby at home)
Childcare: $220/month (grandma watches the kid twice a week, I'm off for the summer, there is a tax credit available, and wife doesn't work Fridays)
TOTAL: About $6800/Month

I've checked the budget against actual numbers over numerous months and we fall very close to $6800.

We do finagle a bit and earn a little money by opening bank accounts and transferring brokerage balances on a regular basis. I do focus groups and surveys for extra cash. We max out cash back using 4 different credit cards. I also get gift cards from parents at the school where I teach around Christmas time and earn a little extra by attending paid workshops . All this stuff adds about $300 per month to our income.

When it's all said and done, we are able to live very comfortably in the Bay Area on a teacher's salary (90k/year) and a wife who works 30 hours per week ($40k/year). We could work more (wife could go 5 days and I could teach summer school/tutor) but it doesn't seem necessary since $130k is obviously more than enough to live just fine in the Bay Area.
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davidsorensen32
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

That was me 25yrs back - fresh faced, wide eyes, full of optimism when I walked out of the Arrival lounge of SFO. The world was my oyster and millions would be mine. Fast forward 25 years - face got a few wrinkles, eyes need glasses, I'm still full of optimism + a pinch of reality. I did ok but obviously not enough. Wish I'd found this forum, done the math earlier. Next phase of life begins today - cut my loses and bow out gracefully. Oh I'll miss the lovely weather.
jayjayc wrote:One huge draw to the SF Bay Area is the belief that you can get rich quickly here. Many techies flock to start ups in the hopes that Google acquires them or goes IPO. The 50 person startup that got acquired by Facebook for $19 billion? They're heroes here. Nowhere else can some kid in their 20s or 30s become a multimillionaire overnight like here.

Obviously the odds are still extremely low to hit it rich, but long odds never stopped a kid from dreaming about making it to the NBA. It's just that now, an unathletic enginerd can now dream that he'll land millions.
Topic Author
davidsorensen32
Posts: 472
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by davidsorensen32 »

Thanks for sharing. Your living expenses are very close to mine (ex-housing/schooling) Great job ! CALSTRS has gold plated pensions. I've been exploring teaching for a while but procrastinating as the IT salary is higher for the time being. But sooner or later it'll run out - like it always does. Maybe teaching will be a second career. Any takes for 50yr old technies in education ?
Ron Ronnerson wrote:I live in the Bay Area and agree that real estate has recently risen quite a lot, making the area tough for newcomers. However, I just thought I'd share how we manage to live in the Bay Area on far less than the $223k figure. We live in a 4 bedroom/3.5 bath townhome in a nice part of the East Bay (San Ramon). The schools around here are excellent. That was particularly important to us when we bought our home in 2010.

I'm a teacher and my wife works 30 hours a week at a small company. We earn $130k gross. I contribute $12,500 to a 457b plan and $7,500 toward my pension so our taxable income comes down to $110k - the threshold to fully qualify for the child tax credit. After itemizing, we're in the 15% tax bracket. At age 61, my pension is supposed to be roughly $80k/year in 2015 dollars (though I may continue to work after age 61 if I love going to work in the future as much as I do currently). My wife's employer contributes 15% of her salary toward retirement and wife puts in nothing. We also max our Roth IRA (in fact, we put in $11k for the two of us just today). So we're contributing $30k per year to retirement accounts per year not including my pension or wife's social security. My pension alone should cover all our expenses in retirement. Then a few years later, the mortgage will disappear and Social Security will begin.

Our home is valued at $700k but we bought at $500k in 2010. We currently owe $397k on it. Here are our monthly expenses:
Mortgage: $1810 (3.25%, 30 year fixed)
Property Taxes: $800 (annual increases to this amount are small due to Prop 13 law in CA)
HOA: $264
House Cleaning: $225 - totally worth it!
Home Improvements/Repairs: $50 - one of my best friends is very handy and helps out whenever I need it
TV/Internet: $150 - all channels on U-Verse with fastest Internet speed they offer
Electricity: $100 average
Cell Phones: $60 for 2 iPhone 4s's with unlimited talk, text, and data through Virgin Mobile. Will replace when the phones becomes beyond obsolete.
Water: $30 (most of water bill is included in HOA dues)
Garbage: $20
Health Insurance: $200 for Gold Coverage with Kaiser for family of 3 (2 adults aged 40 and a baby) - wife's employer pays the rest of the health insurance bill
Auto/Home/Umbrella Insurance: $190 (2014 Corolla for wife, 2015 Corolla for me, Umbrella coverage is for $1 million)
Life Insurance: $143 (30 year term that covers us each up to age 68 - super preferred rate for both wife and me - $1M coverage each)
Gas: $300
Car Maintenance/Repairs/Registration/Tires/AAA Dues: $75
Groceries/Household Items: $1000 (includes diapers/formula, etc.)
Restaurants/Coffee Shops: $400 (wife gets a daily latte and I think that's just fine)
Vacations: $250 (we fly using miles, stay with friends and family whenever possible, and often vacation in California by driving in our Corolla).
Miscellaneous (Furniture, Gifts, Donations): $150
Office Supplies/Technology (computers, phones, etc.): $100
Clothing/Shoes/Hair/Nails: $80
Pets: $80 (one of our two cats need special food due to having a super-sensitive stomach)
Medical/Vision/Dental: $50 (cost reduced due to Flexible Spending Account offered by my work)
Entertainment: $25 (it's hard to go out to the movies a lot with a baby at home)
Childcare: $220/month (grandma watches the kid twice a week, I'm off for the summer, there is a tax credit available, and wife doesn't work Fridays)
TOTAL: About $6800/Month

I've checked the budget against actual numbers over numerous months and we fall very close to $6800.

We do finagle a bit and earn a little money by opening bank accounts and transferring brokerage balances on a regular basis. I do focus groups and surveys for extra cash. We max out cash back using 4 different credit cards. I also get gift cards from parents at the school where I teach around Christmas time and earn a little extra by attending paid workshops . All this stuff adds about $300 per month to our income.

When it's all said and done, we are able to live very comfortably in the Bay Area on a teacher's salary (90k/year) and a wife who works 30 hours per week ($40k/year). We could work more (wife could go 5 days and I could teach summer school/tutor) but it doesn't seem necessary since $130k is obviously more than enough to live just fine in the Bay Area.
BogleBoogie
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Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Post by BogleBoogie »

davidsorensen32 wrote:I know ! You're correct. I left out a lot of numbers to sugar coat a bit.
LFKB wrote:$1.5 million house on $223k seems like quite the stretch. A 30 year at 4% would be ~$87k per year + ~$18k property taxes = $105k on housing alone (excluding insurance). Our joint income is around $800k and people on here tell me I shouldn't be spending $100k on housing!

You left out property taxes, interest and many other variables from your equation, all of which would drive the number higher.
Then the answer is don't "sugar coat" it and be realistic.
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