Hacker News Reader

Comment by gitgudnubs | Hacker News Reader

A single person in San Fransisco with an income of $500,000 and the standard deduction has a takes home $288,646.

A single person in San Fransisco has a cost of living of $1125.83 without rent, according to numbeo (whatever that is). Median rent in San Fransisco is $3700 for a one bedroom.

That leaves a measly $230,736 of post-tax, post-living expenses money. Assuming this person does nothing more than hide a monotonically increasing pile of cash under a mattress, it takes just over 43 years to amass $10,000,000.

Presumably this financial cretan started working right after college, at the age of 22. This means they've acquired the full sum at the age of 65, which is not an uncommon retirement age. Cuts close, but checks out.

View on HN

More realistically, if you get a 5% return on your investments (or ~2% after inflation), in 43 years you'd have $14,663,123.

I'm lucky enough to be making ~$400k at 30. At 21, I was lucky enough to be making $65k. Virtually no one starts off making $500k. Even if you start at the top 1% of income earners and stay there your entire life, live relatively frugally, never have kids, never take a break from work, and invest well -- even then, you're still unlikely to accrue $10M in wealth.

Geometric average returns for stocks are over 7%, and that accounts for inflation. The scenario presented to me included no investments, and a flat career.

I think the high cost of living in San Fransisco was a reasonable assumption for someone in the top 1% of income. I think the complete absence of investment in my analysis more than makes up for a flat career. It's not even clear that modeling a flat career growth increases the number, since income tends to peak around 48.

Yes, because someone earning 500k totally started earning that sum right out of college and will never get married or have kids...

But if they were dual-income, no-kids (DINKs) they'd get there even faster.

I didn't set the parameters of the question. I didn't consider investing the money either, proving that I was literally just responding to the scenario as presented. I chose San Fransisco, because it's close to home for posters here.

I don't think many people should expect to get into the top 1% of assets by just sticking money under a mattress. Presumably most would invest it and expect an average rate of return of 7% or so from decades of investing. Eventually the investment grows more from compounding than new income.

The compound interest of saving 19k/month @ %7/yr rate results in 10 million after 21 years, which is under half of 43 years.

And you can get 7% per annum on a savings account... where, exactly? Back in 1985 via a time machine, maybe?

S&P 500 index fund will probably average you around 7%.

I happened to look this up earlier today for a completely different reason - S&P results to date since 1/1/2000 is 5.6% assuming dividends were reinvested.

Ah, I was off a bit then. Thanks for the update.

No you weren't. That period includes one of the worst recessions in recorded economic history. The other guy either intentionally picked and chose his years, or is simply bad at research.

An inflation adjusted long-term trend is over 7%.

That's a fair point, but I don't think it's ridiculous to choose the last 20 years as a discussion point.

I think the more interesting question is, how many San Franciscans earn $500,000/year?

Discounting the homeless? Lots.

Reply on news.ycombinator.com