Twitter Worker Making $160K Struggling to Survive?

[russ_watters]

@TeethWhitener and @Ryan_m_b , let me try to split the difference:

Hand-me down clothes and a beater car while puttig $50k into retirement savings and paying a 15 year morgage say to me a person is NOT "living lavishly", but is making frugal choices to live within their means and plan for the future. You COULD live more lavishly by swapping the 15 year mortgage for a 30 year mortgage and a shiny new Audi, and the fact that you haven't is a positive thing - and a need for sympathy is not implied to me in your description.

As an engineer, few people I work with are below the median and most are in the top 20%, but i think you can tell a lot about lifestyle choices by things like what car a person drives...

However:

What is sad is that what you're describing is the standard middle class cultural narrative (I am from the UK but I suspect the US and UK are in line on this one). Forty years ago home ownership, savings, pension funds etc were all pretty standard even if just one partner was working in a standard job. Now, especially in cities, this is a pipe dream for anyone who isn't earning significantly over the average.

That isn't true in the US and it would surprise me if it were true in the UK. It is a common/persistent/disappointing myth that living standards are going down. They are not.

[Edit] Caveat: a lot of ground was lost during the great recession, that has just started to be made up, for home ownership. Googling, I do see that the home ownership rate is still a touch (about 1%) below 1976, after dropping from 69% to 62% as fall-out from the housing crisis.

 

[TeethWhitener]

That isn't true in the US and it would surprise me if it were true in the UK. It is a common/persistent/disappointing myth that living standards are going down. They are not.

At the risk of veering off topic...This all depends on what metric you use. Poverty rates have held steady for about 40 years in the US, but real household income has been falling since the mid 90's. Taking @Ryan_m_b 's examples: home ownership has stayed steady as well, but savings rates have fallen precipitously (from ~15% to ~5%) since the 1970s. The number of workers increased from 36% of the total US population in 1960 to 46% in 2000, mainly from women entering the work force. So it can be argued in either direction.

 

[jobyts]

I live in bay area, comparable age, salary and job. My financials are not that bad, since we have a double income. But many of my single income coworkers are in the same boat. Here are the expenses I can think of:

Base Salary = 160,000
401K deduction = 18,000
Net Income = 160,000 - 18,000 = 142,000
Tax 40% (30% federal + 10% state) + other deductions = 142,000 *40% = 56,800
Net Income = 142,000 - 56,800 = 85,200
Rent = 3,000 * 12 = 36,000
Net Income = 85,200 - 36,000 = 49,200
2 Kids private school (3K/month rent in SFO means he is not from a good school district; bad schools in SFO could be really bad, so private school is not a luxury here) = 3,000 * 10 = 30,000
Net income = 49,200 - 30,000 = 19,200

So you have a net income of about 19K per year for the food+travel+utilities.

 

[Ryan_m_b]

That isn't true in the US and it would surprise me if it were true in the UK. It is a common/persistent/disappointing myth that living standards are going down. They are not.

The ratio of median house price to median income by district has consistently risen in the UK since the early 90s, in some places more than doubling:
https://data.gov.uk/dataset/ratio-o...resource/3a73de15-73df-487c-9144-111f09f5912f

This office for national statistics page has more data detailing how house prices and home ownership rates over time in england have been getting worse:
http://visual.ons.gov.uk/uk-perspectives-2016-housing-and-home-ownership-in-the-uk/

This isn't just a trend from the recession, it predates that and is due to a host of other factors. In any case it does mean that current generations in the UK (more so down south than in the poorer north) will go through life constantly renting, thus leaving them with less wealth than that of previous generations.

 

[russ_watters]

At the risk of veering off topic...This all depends on what metric you use. Poverty rates have held steady for about 40 years in the US, but real household income has been falling since the mid 90's. Taking @Ryan_m_b 's examples: home ownership has stayed steady as well, but savings rates have fallen precipitously (from ~15% to ~5%) since the 1970s. The number of workers increased from 36% of the total US population in 1960 to 46% in 2000, mainly from women entering the work force. So it can be argued in either direction.

Well, there are ways to spin it either way, but that is mostly a matter of picking time frames. As I said, an awful lot of ground was lost during the great recession, but when you pick a short timeframe that shows a "drop", the unstated assumption is that the Great Recession (or, perhaps, the internet bubbl burst in 2000) was the start of a new trend. That isn't necessarily "wrong", but it is a big assumption/prediction to make.

Fortunately though, Ryan picked the long view (40 years), which I agree is reasonable. Also, please be careful with two point trends: "but real household income has been falling since the mid 90's." is only true if you assume a smooth path between the first and last point and "mid 90s" is 1999. Roughly: the US median income went up through most of the '90s, fell from 1999-2004, went up from 2004-7, down from 2007-2012, and up since then. As of 2015, it was still below the 1999 and 2007 peaks, but since the economy is still growing, will likely exceed them this year if it hasn't already.

Income is my stat of choice for standard of living because it has the most direct impact. If anything, the lower savings rate means the standard of living is being inflated even more due to borrowing from your future self - but I agree that's a bad thing.

 

[PeroK]

I live in bay area, comparable age, salary and job. My financials are not that bad, since we have a double income. But many of my single income coworkers are in the same boat. Here are the expenses I can think of:

Base Salary = 160,000
401K deduction = 18,000
Net Income = 160,000 - 18,000 = 142,000
Tax 40% (30% federal + 10% state) + other deductions = 142,000 *40% = 56,800
Net Income = 142,000 - 56,800 = 85,200
Rent = 3,000 * 12 = 36,000
Net Income = 85,200 - 36,000 = 49,200
2 Kids private school (3K/month rent in SFO means he is not from a good school district; bad schools in SFO could be really bad, so private school is not a luxury here) = 3,000 * 10 = 30,000
Net income = 49,200 - 30,000 = 19,200

So you have a net income of about 19K per year for the food+travel+utilities.

This is surely wrong. You don't pay 40% tax on all your income, only on the portion that is in the 40% bracket. You also have to ask why someone on that sort of income is renting, rather than paying a mortgage.

It's also nonsense, given that half the people in the US earn less than about $60,000.

If this guy (or any guy) can't live on $160,000 a year, then how can anyone get by on an average salary?

 

[infinitebubble]

I live in bay area, comparable age, salary and job. My financials are not that bad, since we have a double income. But many of my single income coworkers are in the same boat. Here are the expenses I can think of:

Net income = 49,200 - 30,000 = 19,200

So you have a net income of about 19K per year for the food+travel+utilities.

That's not bad at all... since you have a double income... you could do one of two things... live on $19K for the year and 'save' all your wife's income or save $19K/yr and live on your spouse/partner's income.

I have a six figure salary, my wife as a teacher has a 5 figure salary... we live entirely on 'her' income and we pocket mine entirely in savings/investments for our retirement... We live extremely frugal, have a 3000 sq. ft home, brand new cars paid for (no payments), both children graduated college with no tuition paid for them out of pocket (HOPE Scholarships - Georgia), son in medical school free and clear (we pay his dorm fees), and that's it... no reason why many cannot do the same. Costly areas of living as the person in San Francisco, New York, San Diego, Seattle, etc... is what you want to control... We know... we lived in Palm Beach, FL (extremely costly), Seattle, WA and now in Savannah, GA... but our salaries have not changed only how frugally we now live (not cheaply just modestly).

 

[TeethWhitener]

Also, please be careful with two point trends: "but real household income has been falling since the mid 90's." is only true if you assume a smooth path between the first and last point and "mid 90s" is 1999. Roughly: the US median income went up through most of the '90s, fell from 1999-2004, went up from 2004-7, down from 2007-2012, and up since then. As of 2015, it was still below the 1999 and 2007 peaks, but since the economy is still growing, will likely exceed them this year if it hasn't already.

Fair enough. Real household income has remained at or below 1999 levels. I'd be more concerned about the divergence of income and savings.

Income is my stat of choice for standard of living because it has the most direct impact. If anything, the lower savings rate means the standard of living is being inflated even more due to borrowing from your future self - but I agree that's a bad thing.

I think I was ninja'd by an edit.

 

[PeroK]

Actually, this guy reminds me of someone that used to work for me. He got a pay rise that pushed him into the high-rate tax bracket (which was 40%) and then came to me to complain. His wife had convinced him that he was now working for less than the minimum wage per hour! He took quite a bit of persuading that he was better off and wasn't paying 40% on all his income!

 

[Ryan_m_b]

Income is my stat of choice for standard of living because it has the most direct impact. If anything, the lower savings rate means the standard of living is being inflated even more due to borrowing from your future self - but I agree that's a bad thing.

I think this is a very key point in the discussion. At least in this country a lot of the worrying debate and reports are mostly concerned with wealth rather than income. The former is more important over a longer timescale.

 

[Vanadium 50]

This is surely wrong. You don't pay 40% tax on all your income

The federal tax for someone making $160K is $20K or so, depending on deductions and the like - say 13%. CA has a sliding state tax, and it will be about 8%. Sales tax in SF is 8.5%, so while 40% is clearly too much, 30% looks a lot closer.

 

[Borg]

Actually, this guy reminds me of someone that used to work for me. He got a pay rise that pushed him into the high-rate tax bracket (which was 40%) and then came to me to complain. His wife had convinced him that he was now working for less than the minimum wage per hour! He took quite a bit of persuading that he was better off and wasn't paying 40% on all his income!

Reminds me of the many people who think that you shouldn't pay off a mortgage because you will 'lose' the tax deduction. It's funny to watch the logic dawn on them when I explain that they have to pay at least three times that in interest for every dollar that they get back.

 

[Vanadium 50]

He got a pay rise that pushed him into the high-rate tax bracket (which was 40%)

I was once employed by a university who had a sliding scale on how much the employee paid for medical benefits. I got a small raise that pushed me over the threshold and actually lost money.

At least in this country a lot of the worrying debate and reports are mostly concerned with wealth rather than income.

I started a thread on this a few years ago. You'd think that everyone on PF would understand that x and dx/dt are two different things. You'd be wrong.

 

[jobyts]

This is surely wrong. You don't pay 40% tax on all your income, only on the portion that is in the 40% bracket. You also have to ask why someone on that sort of income is renting, rather than paying a mortgage.

It's also nonsense, given that half the people in the US earn less than about $60,000.

If this guy (or any guy) can't live on $160,000 a year, then how can anyone get by on an average salary?

I used https://www.taxact.com/tools/tax-bracket-calculator.asp and https://smartasset.com/taxes/california-tax-calculator#GraGGTOArq

The federal tax comes to 33,000 and state tax comes to 7200 (both the numbers using a taxable income of 142K and after rounding). So tax is 33,000 + 7,200 = 40,000
The Medical tax: $110
The Social security tax = $465

The Medical and SS taxes are per bimonthly pay period; (I actually took it from my wife's pay check.)
So total medical+SS tax per year = (110 + 465) *24 = 13800, say 13,000 (just to reflect the fact that my wife's salary is slightly higher than his)
So Tax + medical tax + SS tax = 40,000 + 13,000 = 53000 / year

which is only slightly less than my original number.

 

[PeroK]

I used https://www.taxact.com/tools/tax-bracket-calculator.asp and https://smartasset.com/taxes/california-tax-calculator#GraGGTOArq

The federal tax comes to 33,000 and state tax comes to 7200 (both the numbers using a taxable income of 142K and after rounding). So tax is 33,000 + 7,200 = 40,000
The Medical tax: $110
The Social security tax = $465

The Medical and SS taxes are per bimonthly pay period; (I actually took it from my wife's pay check.)
So total medical+SS tax per year = (110 + 465) *24 = 13800, say 13,000 (just to reflect the fact that my wife's salary is slightly higher than his)
So Tax + medical tax + SS tax = 40,000 + 13,000 = 53000 / year

which is only slightly less than my original number.

You're double taxing now. You don't pay income tax on money you pay in other taxes. In any case, your original calculation was 40% of $142,000, which is not the way the tax system works.

 

[jobyts]

You're double taxing now. You don't pay income tax on money you pay in other taxes.

Thanks for pointing out this.

 

[Vanadium 50]

You don't pay income tax on money you pay in other taxes.

It's more complicated than that. You can deduct state income tax, or state sales tax, but not both. This is assuming the AMT hasn't kicked in. It probably hasn't for the fellow this article is about because he's renting, but it might well if he buys a house.

 

[MarneMath]

This is a bit absurd but it's a rather common refrain I hear from my peers. I recently moved to NYC since my wife missed her hometown. One main thing that boggles my mind is how quickly your view of what's "lavish" can change when you are constantly around wealthier people. My wife and I are fortunate enough to be able to afford a three bedroom apartment in NYC and we pay a lot in rent, but we are both six figure earners.

I was talking to a coworker explaining that my wife and I do not go out much because we are paying for private school for my daughter. So instead of going to broadway shows we watch west side story on this VCR we've had for 20 years now. He looked at me and literally said, "it's ok, you'll eventually get financial stability if you keep working here". I raised my eyebrow and became rather confused. I'm able to afford a three bedroom apartment in the City, send my child to private school, max out my 401k and IRA and I haven't reached financial stability?

I imagine this twitter engineer is tempted to present the imagine of wealth and success and this occurs a lot of cost for the privilege to say "I live in neighborhood xyz". It just sickens me to hear people like that complain.

 

[Vanadium 50]

a shiny new Audi

Hey! I like my shiny new Audi! (A 2016 A3 e-tron)

Another way to look at this is, with the complaint that $3000 for housing is too much, remove it. Then the complaint is that $127,000 a year isn't enough to live on in San Francisco, even if your housing is free. Does anyone take that seriously?

 

[kyphysics]

Another story: http://www.cnbc.com/2017/03/03/face...-with-rents-ask-mark-zuckerberg-for-help.html

Facebook engineers struggling with sky-high rents ask Mark Zuckerberg for help

Ester Bloom
22 Hours Ago

You might think that, once you get through all the interviews and score a coveted position as a white-collar employee of a billion-dollar company, you'll be set. But if your job means living in the Bay Area, you may find that, even with a generous salary, you're having a hard time getting by.

According to a write up in The Guardian, well-paid tech workers are struggling to pay for housing since the rents in and around San Francisco "by one measure are now the highest in the world." In 2015, according to SmartAsset.com, the cost of living there was "62.6% higher than the U.S. average." In 2016, the same site found that you'd need to make at least $216,129 a year to afford the rent on an average two-bedroom apartment.

Recently, some employees went so far as to ask their boss for help: "Facebook engineers last year even raised the issue with founder Mark Zuckerberg, asking whether the company could subsidize their rents to make their living situation more affordable, according to an executive at the company who has since departed."

With that salary, I'd be living like a king elsewhere!

This might actually be a thing people!

 

[Bandersnatch]

the same site found that you'd need to make at least $216,129 a year to afford the rent on an average two-bedroom apartment.

They calculate how much you need on the assumption that your rent takes 28% of income, and so you need to earn ~3-4 times the rent to not be financially strained. That's just silly. All spending does not scale with rent. According to their metric, if I earn 1 billion quid a year and decide to spend half of it to rent a lavish, outrageous, pants-on-head crazy overpriced mansion, then I'd be in the struggling bracket, since the 500 million left is merely half my income.

 

[Andy SV]

These people have no idea how much they have.
I make less in a year then they have leftover after the are bills are paid
Yet my mortgage is almost done I own all of my vehicles and I have no CC dept
It's not that hard to get by

 

[Evo]

These people have no idea how much they have.
I make less in a year then they have leftover after the are bills are paid
Yet my mortgage is almost done I own all of my vehicles and I have no CC dept
It's not that hard to get by

They could live a bit farther out in the suburbs and pay substantially less, that's what I did when I lived in expensive areas. Sure if I lived next to the office, I'd be broke, but because I had a brain, I moved to where it was affordable and realized I'd have to get up a couple of hours earlier each morning for the commute. It sucked, but it was affordable.

 

[nuuskur]

They could live a bit farther out in the suburbs and pay substantially less, that's what I did when I lived in expensive areas. Sure if I lived next to the office, I'd be broke, but because I had a brain, I moved to where it was affordable and realized I'd have to get up a couple of hours earlier each morning for the commute. It sucked, but it was affordable.

HAD ? Has something changed by now? :D

I manage to save 300 euro on average of my semestrly stipend and this "twitter employee" is struggling to scrape for rent? I don't buy it. Has to be a joke or it is someone who can't do simple arithmetic :(

 

[Greg Bernhardt]

The federal tax for someone making $160K is $20K

All the online calcs I've used report between $33k-40k

 

[russ_watters]

Hey! I like my shiny new Audi! (A 2016 A3 e-tron)

You can drive whatever you want, as long as you don't simultaneously drive something expensive and complain about not having enough money! That's partly where the people who are the subject of the thread go wrong:
1. Know where you actually stand.
2. Own your choices.

 

[Vanadium 50]

All the online calcs I've used report between $33k-40k

At $160K with zero deductions and zero exemptions (i.e. an unrealistic upper limit), federal tax is $38K. Don't know where they get $40K. Trimming down to $20K is not impossible.

 

[Greg Bernhardt]

At $160K with zero deductions and zero exemptions (i.e. an unrealistic upper limit), federal tax is $38K. Don't know where they get $40K. Trimming down to $20K is not impossible.

True, but most will take the standard deduction with a little help from loan interests and IRA contributions. FICA and state tax will take further cuts.

 

[Andy SV]

It's actually pretty easy to live well and cheap
just do it backwards buy a car with cash and then make payments to yourself until it's used up and buy the next one
Don't drive to the gym and pay money to sweat. walk to the ice cream stand and buy a sunday. You're morning coffee should cost ten minutes not ten dollars and it will prolly taste better if you spend the time any way. Do you really need to know to the minute when the baby giraffe is going to be born leave the internet at home . Why spend twelve dollars on a book that's free at the library and cheaper
In a tablet

 

[Fervent Freyja]

This particular person is probably claiming the HOH deduction and 2 dependents, with his wife being a stay-at-home mom with 2 kids. Still, with that income, those deductions won't make much of a dent in the taxes he owes at federal or state levels. It's very possible he's paying around $10k a year for family health insurance coverage, or more. The average child costs $10K a year, it's likely in this situation that they are spending double on each child. Even if his wife's personal expenses are only $10K a year, that's $40K a year just on personal expenses and health insurance for 3 other people. Maybe $40K towards taxes, other cuts, and retirement. With having $80K left before paying rent, I can see how it would get difficult when money isn't being managed properly, that applies in any income bracket, but still should be plenty for 4 to not have to struggle to survive on. A bad part of recommending that he move further out is that if he commutes 3 hours a day, that's 3 less hours with the family each day, which makes a huge difference with young children. If he arrives home at 6pm and they go to bed at 8pm, that's 2 hours a day. I think the person is making excuses, really. They have technical skills that can translate into a decent income worldwide, even working from home. It shouldn't be that hard for this person to find a job making 3X less in an area with a lower cost of living while still being able to give the same support and living standards. It's kind of repulsive that a person would go so far to complain about something like this.

 

[russ_watters]

True, but most will take the standard deduction with a little help from loan interests and IRA contributions. FICA and state tax will take further cuts.

Well, the home ownership rate is still 62%, so there are a lot also taking the mortgage interest deduction. It's a biggie.

Erm, we don't really have to speculate. Much of the data is published:
https://taxfoundation.org/how-much-do-people-pay-taxes/

So the average federal income tax rate for a filer who makes between $100k and $200k is 8.8%. So for $160k, that's $14,000. FICA, state and local might add another $10k (remember the FICA upper limit).

 

[Fervent Freyja]

8.8% cannot be right. Seriously Russ, you have to be paying more than that yourself! This calculator shows the federal tax alone would be $34,869.75, which is around 21%!

 

[russ_watters]

8.8% cannot be right. Seriously Russ, you have to be paying more than that yourself! This calculator shows the federal tax alone would be $34,869.75, which is around 21%!

That appears to only show the average standard deduction. I sure hope anyone making $160k is maxing out their 401k ($18k) and a good fraction of those people have houses and mortgage payments (various), deductible health insurance, property taxes, etc.

[edit] I just checked my tax return and my tax as a percentage of gross income was about 15% -- might want to make sure you aren't looking at adjusted gross or taxible income, both of which are much lower than gross.

 

[Greg Bernhardt]

Just to note if someone has a house, real estate taxes can be rough. I live in a city with extremely high taxes. I would imagine San Fran is very high too.

 

[WWGD]

Car $800 a month? Even including insurance for a car for San Francisco (it's hilly) should not come close to that unless he's had so many wrecks/tickets he's almost uninsurable. Something's out of whack.

Parking, repairs, tickets... Estimated(Avg.) yearly cost of maintaining a car in the US is around $10,000. Monthly parking can easily go over $1,000.