OK, that is true in a way, I do think it depends on when you are thinking about retirement age, your future plans post-retirement, your family situation and how the market is doing in general.
I have 4 kids, in Silicon Valley I would need $1.2M to buy a 4-bedroom house (2018 average). Where I live, I own two 5-bedroom houses for a total of $240K. So now I have secondary income and my taxes are much lower than the $1.2M house taxes. This thing kind of cascades let's say you put $200K down for your $1.2M house, so $1M loan also means your 4% interest will be a lot more money than my 4% interest rate. Your school taxes, and property taxes would be much more $ as well.
All that money has to come from somewhere. Does it mean your 401K % contribution is lower? Does it mean that if you do retire with twice as much money in retirement you will be spending all the profits paying your taxes? Maybe, maybe not.
I think that's kind of impossible to predict clearly what's more beneficial. For me I rather have my houses fully paid by the time I retire, I'm trending to have paid both of them off in about 8-10 years. I'm putting 13% to 401K, 6% in IRA and living a comfortable life. Would I have 4 kids if I living in NYC or the Valley? Definitely not.
I'm not trying to argue that my way is the best way. Just that it's just "a way", an alternative for someone that is tired of working in FAANG and wants something else.
Yeah, but a single person with no kids making $500k in NYC or SF can save $150k+ per year even after all expenses. Then, instead of spending 8-10 years paying off that $240k house in the midwest, they can just buy it for cash and have plenty left over.
No, but it does assume you already save a large portion of your paycheque. Suppose you make $400k as a senior SWE at FAANG, or maybe $250k after taxes. Now you move to a lower CoL area and make 30% less - so $280k (for argument's sake suppose taxes are the same, so you take home $175k).
Now supposing your CoL is halved, your CoL needs to have been $150k+ for this to be worth it. Since you lose $75k in pay, and need to make that up from the CoL difference. If you're single, chances are you weren't spending that much on food and housing, so you actually end up with less money. But if you're supporting a big family, you may well have been spending most of your money on necessities and the CoL reduction is worth it. (At least financially.)
However, one important factor is owning a home. Housing in the Bay Area is really expensive, and substandard. Therefore, you are paying out the nose for a substandard product, and will likely never own a place, even with FAANG comp. Contrast this with most other places, where you could own a (much nicer, larger, recently built) place for the same or slightly larger expense. The high house prices also cost pretty much the same or more in property taxes, even compared to low COL areas that typically have higher property tax rates.
This one is difficult to price, because you are raising your living standard by raising your housing standard for almost the same or substantially lower housing expense (it's even better if you rent and save up even more to buy a lower-priced home in the LCOL area).
I have 4 kids, in Silicon Valley I would need $1.2M to buy a 4-bedroom house (2018 average). Where I live, I own two 5-bedroom houses for a total of $240K. So now I have secondary income and my taxes are much lower than the $1.2M house taxes. This thing kind of cascades let's say you put $200K down for your $1.2M house, so $1M loan also means your 4% interest will be a lot more money than my 4% interest rate. Your school taxes, and property taxes would be much more $ as well.
All that money has to come from somewhere. Does it mean your 401K % contribution is lower? Does it mean that if you do retire with twice as much money in retirement you will be spending all the profits paying your taxes? Maybe, maybe not.
I think that's kind of impossible to predict clearly what's more beneficial. For me I rather have my houses fully paid by the time I retire, I'm trending to have paid both of them off in about 8-10 years. I'm putting 13% to 401K, 6% in IRA and living a comfortable life. Would I have 4 kids if I living in NYC or the Valley? Definitely not.
I'm not trying to argue that my way is the best way. Just that it's just "a way", an alternative for someone that is tired of working in FAANG and wants something else.