[nilkn]

I actually think more people should act as if their career is going to end in 20 years. Thinking in these terms really drives home what you need to do if you want actual financial independence. Even if the goal is not realistically attainable, it shows you exactly where you stand.

Let's say you think $1M is good enough for your notion of financial independence. Well, how can you accumulate that amount in 20 years? One way would be to invest $2750/month. If you can manage an average annual return of 4%, you'll hit the $1M mark right after 20 years. If you start at 25 (giving you a buffer period after college to grow some roots), you'll be good by the time you're 45.

Note that in this case, "financial independence" doesn't necessarily have to mean that you're wealthy enough to live your picture perfect life without ever working a day again. It could simply mean that you've reached a point where you don't need to save more and could take a 50% paycut without any serious long-term implications for your retirement. An example might be that you make low six figures up until age 45, surpass the $1M mark in investments, and then you get hit by ageism and your income drops by half for whatever reason. You're not going to be saving much anymore unless you make lifestyle changes, but you've still got the million bucks in the bank. The drop in income has impacted your ability to save and invest more, but it has had no effect on the savings you've already amassed, and it's still good enough to sustain your comfortable lifestyle with more modest savings.

[meowface]

Keep in mind software dev salaries often aren't as high in states outside of CA and NY, especially when working for smaller companies and companies that aren't tech-centered. Saving $2750 per month would be far too difficult for many software devs in other parts of the US.

I do agree that saving a lot early on is a good idea though.

[nilkn]

One big life hack is to learn to balance salary with cost of living. It isn't always about pursuing the highest possible salary, because that might mean you're paying most of it in rent.

Consider a $75k salary in Texas. That's $4766/month net (or thereabout), due to lack of state income tax. Let's say you pay $1k/month in rent (very realistic for most of Texas). That leaves you with $3766. That $2750/month figure won't be too far off if you don't have any dependents and live frugally, especially if you take advantage of tax-advantaged savings (like a 401(k)).

The thing is, you can make more than $75k in Texas, especially once you've got a few years of experience under your belt. So while I completely agree that it's not going to be attainable for everybody, I think it's not so far off as many might think.

[meowface]

Absolutely. Unfortunately, I live in a state where housing costs tend to be unusually high, with salary not that much higher than average to compensate (Maryland).

[Bahamut]

I just got out of DC myself - the salary in the region definitely does not match up to the housing costs. You can get a little smaller apartment in Silicon Valley for ~$2k and make significantly more money out west, which was a powerful incentive to move out of DC for me.

Saving is especially a challenge for me since I have an extraordinary amount of debt from a bad family situation financially - it's a miracle I landed in such a high powered career as software engineering. I have more debt than most in the profession I believe (~$200k, no house or car), which is just a bad luck of the draw. However, for me this underscores how much harder I have to work to succeed even more so that I have more of a fighting chance against my financial odds.

[dennisgorelik]

What stops you from moving to Texas (or someplace else)?

[meowface]

I may move in the next few years. Just not practical for me right now. Plus, I generally like Maryland's other aspects.

[pekk]

That take-home isn't realistic. Even in Texas, you are still paying substantial federal taxes.

[nilkn]

It's completely accurate. It already takes into account federal taxes, medicare, and social security witholdings. It does not take into account 401(k) deductions. It also assumes no copay on insurance, which is the case at many tech companies.

[hessenwolf]

I've done a lot of work in human longevity estimates. I strongly recommend you think of your life planning as lasting 60 years after college. If you think you can work twenty and live for forty off that, well for you.

There is a demographic shift and a lot of things are going to be different in 30 years. Plan for life-long learning and be able to be valuable in a changing environment. My 2c.

[nilkn]

I think you might have misunderstood me (or I've misunderstood you). The whole point I was trying to drive home is that life is long--60 years after college is a good number--and so acting as if you only have 20 years of good work to prepare for that shows how important saving really is. Like I wrote at the end of my post, the idea isn't to literally retire after 20 years of working, but rather to get yourself in a position where you could suffer a large loss of income--say 50%--without a major impact on your retirement prospects.

The idea is to use the most productive and highest-earning period of your life (per the hypothesis that the tech industry is ageist) to amass savings, so that you don't have to worry about socking away for retirement later on in your career if you ever do face problems with your age.

[minikomi]

Ouch. From Tokyo... That seems impossible for me in my current track. Thanks for the dose of reality. Time to think things over.