[tylerhobbs]

3% of $1.5m is only $45k. If you and your spouse can live off of $45k while you're still earning, you can save ~$100k per year and accumulate $1.5m by the time you're 40, easily. See Mr. Money Moustache for details on how this isn't as unreasonable to do as you would think: http://www.mrmoneymustache.com/

[n00b101]

If you and your spouse can live off of $45k while you're still earning, you can save ~$100k per year and accumulate $1.5m by the time you're 40, easily.

To spend and save $145k net income per year, you need a gross comp of $240k per year where I live. To save $1.5M at a rate of $100k per year would take 15 years. To do so by age 40 would mean that you need to be at a $240k/year salary by the tender of age of 25, and also have the restraint to live off of a mere $45k per year (presumably in a city with a high cost of living, since you are earning $240k at 25). And after you retire at age 40, you get to spend 2% of your $1.5M per year ($30K) which is below the poverty line where I live (at least as a household income).

[gnopgnip]

You are not factoring in the tax savings of a 401k or other retirement account. For instance a married couple that earns up to $183k a year can save $36k a year in the 401k, plus the employer match, and another $11k in IRA's that reduces your does not count as income. Your contributions grow tax free with compound interest. If you contributed $3916 a month from when you were 18 until 40 with 5% annual interest you would have a nest egg of 1.8Mil. If you each had a salary of 75k a year you would only be paying taxes on 100k of income, about 71k take home.

[falcolas]

If you tap your 401k before you're 60, you will face major tax penalties. So, that's at least 20 years you have to manage without your 401k funds if you attempt to retire at 40.

[jaredsohn]

You will still be making money each year from your 401k, though.

Thus, for the math to work you need to verify that you have (or earn via interest/other investing) twenty years of expenses via funds outside of your 401k.

[dgacmu]

No - Google for 401k SEPPs.

The earlier comment also omitted the backdoor Roth, which can get a married couple another 11k post-tax into a Roth, which can then grow and be used tax free.

[falcolas]

An interesting exemption (basically, you set up a structured, regular payout of your 401k over the remaining life expectancy and don't touch it). I still don't see this being realistic in almost any case, but it's a good option to keep in mind.

That said, "$3916 a month from when you were 18 until 40" is simply not realistic for most people. How about college? You're not going to get a $100k+ a year job without either college or years of experience. Where do you find that perfect mate capable of immediately working their own $100k salary and contributing almost $2k a month to retirement at 18?

Personally, I make a really good salary (it's worth noting that it took until I was nearly 40 to even get to this point), have a working spouse, live in a relatively inexpensive part of the country, and I still could not put $4k into an 401k or roth IRA every month. Owning a house and reliable cars, having dependents... it's not realistic; it leaves nothing for wiggle room.

I'm also going to come out and say it: working yourself to the bone, skimping and saving is no way to live some of the most active years of your life.

That's my 2¢.

[nogbit]

"I'm also going to come out and say it: working yourself to the bone, skimping and saving is no way to live some of the most active years of your life."

Exactly the response to all of these "retire young" articles. They neglect to say that you are doing it at the expense of not taking advantage of a healthy young body to adventure and enjoy life while you can...you may get hit by a bus tomorrow and then what a freaking waste of time all the penny pinching was!

[tylerhobbs]

I'm assuming both you and your spouse are earning money, in my numbers. Additionally, you would presumably make investments with the money that you're saving, so you don't quite have to save the whole $1.5m straight up. I'm also not sure why you used a 2% withdrawal rate -- typically 4 to 5% is regarded as a conservative rate, which would be $60k to $75k per year.

I'm not suggesting that doing this is a walk in the park, you definitely have to prioritize around it (which may include living in a city that isn't insanely expensive), but it's doable.

[beambot]

You should also: Drive a reasonable used car (if at all); send your kids to public school; live with roommates (or spouse); commute so you can live in a cheaper area; avoid expensive vacations; cook at home more frequently; etc.

I tried explaining all this to coworkers when I worked at Google, and many people dismiss the idea. These are the same people who:

- Drive a new Tesla

- Pay $120k/yr to send their four kids to private schools despite good public schools in the area

- Insist on living in SF and commuting 2 hrs by bus each way

- Jetset around the world for vacations

- Eat out at every non-Google meal

You can lead a horse to water... but sometimes you just can't make them drink. And guess which of my coworkers complained the loudest about unlivable wages in SFBA...?

[econner]

Why do you need gross of $240K?

Are you saying you pay $95K in tax?

If you have a 401K you can save a significant amount pretax. You're also not factoring in portfolio growth over the 15 years you're saving.

[to3m]

$145K take home pay is surely like $200+K/year? (In the UK, if you earn ~£110K+/year after tax, you're in the top 1% of taxpayers.)

If your spouse is going to work too, I admit that is a lot more doable.

If not, well... looks like the secret is, "be rich/well-paid, and don't piss it all away". Excellent advice, but I could have told you that already ;)

[n00b101]

$145K take home pay is surely like $200+K/year?

It's $240k/year in Canada.

If your spouse is going to work too, I admit that is a lot more doable.

Is it? Saving $1.5M by age 40 gives you a $30k/year life annuity (2%) for retirement. During the accumulation phase you need to save $100k/year for 15 years, so you only get to spend $45k per year during your pre-retirement life. Living off $30-45k/year maybe makes sense for 1 person, but 2 people or a whole family?? I think not, that's called poverty. You need to be earning $240k gross per household member starting from age 25, in order to make this retirement "plan" work.

[nommm-nommm]

>Living off $30-45k/year maybe makes sense for 1 person, but 2 people or a whole family?? I think not, that's called poverty.

Ah yes, the hacker news bubble where $40k a year is poverty.

Sometimes I am just speechless... This is one of those times.

[mcguire]

"Living off $30-45k/year maybe makes sense for 1 person, but 2 people or a whole family?"

You'd be in good company.

The median household income in the US is ~$51k. The median personal income is ~$30k. The poverty line in the continental US for a family of 4 is ~$25k.

[sheepmullet]

$30k/year is ~$550/week.

If you already own a home that is more than enough to live well as a family in most parts of the US.

> Living off $30-45k/year maybe makes sense for 1 person, but 2 people or a whole family??

Of course you have to make sacrifices. It all depends on what you want in life.

I lived with my parents until my early thirties and that allowed me to buy a house outright.

[trprog]

Although it is advice that an alarming number of people don't seem to follow. I have spent the last decade and a half working with plenty of reasonably high earning individuals. Although I have only occasionally got any insight into their personal financial situation the number of them still living pay to pay is mind blowing.

[kowdermeister]

How is that possible? Are they not saving up or the cash just goes down the drain here and there?

[trprog]

Spending tends to rise inline with income if you are some combination of foolish, bored or unhappy. Most people are some or all of those things at least some of the time. In particular people safely ensconced in comfortable long-term, well paying office jobs tend to be bored and unhappy a lot of the time.

That can lead you to make poor decisions which provide short burst of happiness. No matter how large an income you have you will be able to get a mortgage, a car loan and credit card payments sufficient to entirely consume your paycheck. And if you do still wind up with extra cash why not put in a swimming pool/buy a boat/take an expensive vacation. That will cheer you up (for a while).

Stuff like a more expensive home, vehicles and boats are especially disastrous financially because they have ongoing costs in addition to the upfront expense. You pay a bunch of money now and then have to pay money for maintenance, insurance etc for as long as you own the thing.

[nommm-nommm]

If you have $20 on your pocket you tend to spend $20. If you have $40 you tend to spend $40.

(Not you specifically, people in general. Or society encourages this)

[DrScump]

Living on $45K / year is certainly doable (I have), but the model of having $1.5M in assets to freely generate that income does not represent a very broad population.

[linkregister]

If you consider the typical MMM budget caveat of owning one's own house, $45k is an extraordinarily high rate of expenditure. Given a $45k expenditure in the SF Bay Area, with rent of $3k per month, and with a typical tax rate of 39%, this equates to someone spending every penny they make of $113k.

The MMM achievement of annual expense spending of $24k is not far off from what I assume most HNers have after rent and savings.

[RussianCow]

It's easy if you're earning $150k a year, but not if you're making a median salary and living mostly paycheck-to-paycheck. Remember that most people outside of the Silicon Valley area don't have the luxury of being able to save $100k every year.

[betaby]

Not that much people in SV can do that either.

[Swizec]

> If you and your spouse can live off of $45k while you're still earning

That's easy! I can just move back to Europe. Sweet.

> you can save ~$100k

Oh ... no ... no I can't get that in Europe. Well maybe I could, but my SO is not an engineer and can't get decent remote jobs.

[thesmallestcat]

Do engineer jobs in Europe even pay that well? The salaries I see posted look pitiful. Converted to USD, the high-paying jobs I see are maybe 80-90k, and you're paying much more in taxes. Senior positions appear to pay that much or less, and many of the senior positions require a PhD, some highly specialized skills, etc.

[kowdermeister]

That cap is about right, maybe big tech companies pay more. PhD is not really a general requirement, most ads mention equivalent experience.

[kogepathic]

> Well maybe I could, but my SO is not an engineer and can't get decent remote jobs.

Any suggestions for these remote jobs that pay 100k+?

Also how do taxes work in that case?

For example the tax rate in Germany on that amount ($100,000/91.000€) would mean your net pay would be around 51.000€/year. I'm including healthcare and retirement contributions in this figure.

I live in a major city in Germany and my annual expenses are around 16.000€ for a modest lifestyle. So that's only saving 35.000€/year. Hardly close to 100k.

I'm not aware of many European countries where the tax rate is significantly lower for individuals. Unless you lived somewhere like Bulgaria where the cost of living is much lower.

[branchless]

How many rental properties does the man who says a bucket of grain is actually a big deal? Guess.

> This was achieved not through luck or amazing skill, but simply by living a lifestyle about 50% less expensive than most of our peers and investing the surplus in very boring conservative Vanguard index funds and a rental house or two.

http://www.mrmoneymustache.com/about/

Just a couple of extra people (maybe two families) working and giving a big slice of their income. Everyone can do this, right? Wait. If we all do it how can we all live off part of the wages of at least two wage earners?

[pyrrhotech]

I've never spent more than $30k per year in my life. I'm 28 and live in the Bay Area

[throwthisawayt]

Yeah, but are you under rent control ?

[pyrrhotech]

I own a home in Hayward. I did get lucky and buy in 2012 tho when prices were about 35% lower

[actionbrandon]

you didnt spend more than 30k in 2012?

[pyrrhotech]

I transferred money from my bank account to the equity in my home; from an assets and liabilities standpoint, that's no different than transferring money from your checking account to your stock account. Spending money is depleting assets. Now, the closing costs were real expenditures and totaled around $4k, but I'm pretty sure I was still under $30k for the year. Definitely my most expensive year though.

[driverdan]

So you're saying the key to spending $30k/y in the Bay Area is to have a high six figure bank account that you use to buy a house?

[pyrrhotech]

I put $34k down on an 80-10-10 mortgage. You can easily save that amount in a year or two if you are willing to live on $30-40k a year, which is still possible while renting if you are willing to live with roommates. My salary at the time was $85k.

[foobarian]

What are the property taxes like in California? I'm just outside Boston and pay about $6k per year on a $400k house.

[pyrrhotech]

Mine are ~$4.1k per year, lower than they would be if I bought this year because of https://en.wikipedia.org/wiki/California_Proposition_13_(197...

[gnopgnip]

It is about 1.17% in most of california. Closer to 1.5% in SF, Berkeley, Oakland. But the tax increases by at most 2% per year. So $4800 a year on a $400k house in Castro Valley, Burlingame Hills, Broadmoor, or other cities without extra taxes.

[cpfohl]

Wow, this is nuts. I spend 5k a year in taxes for a $128k home... New York State for you...

[coliveira]

It is possible to spend $45k a year, but not if you need to live in a expensive area where you can make $145k a year.