$60-100k salary is not enough to support a family and retire; it's probably not ... (2024)

In today's environment, home prices really seem to be getting nuts.

As I said, anyone in software is likely making over $100K. A $500K house with 20% down would have a P&I payment of $2,715 / month (at 7.2%, plus taxes/insurance.) That's less than $33K / year. (I bought my first house for $155K making $55K / year, and my second house for $390K making $100K.) If you're making over $100K, and spending under a third of it on housing, you should be able to afford to live, unless you're careless with your money.

I don't think I'm making any sacrifices in my life, because I don't think of the things you can overspend on as sacrifices. As I said, I eat well (at home and at restaurants), I travel, I have great technology / toys. And at 44 I have a 7 figure net worth. Because I'm still spending under $65K USD / year, I could likely live off investments in a few more years, though being in software, it's easy to continue contracting on my own terms and having extra money.

In places where houses are $500K, rent is probably $2000 / month. (More like $1200 - 5000 / month, but depending on the size, location, amenities, luxuriousness of fixtures, etc.) If you make barely $100K, and are spending $24K on rent, let's say you spend half of the rest on living. That leaves you with $38K savings per year. So it takes you 32 months to save up $100K for a down payment.

The secret is don't spend all of the money you make. Well it's not a secret, but it's also not "normal." It's culturally normal to spend all of your money, and then wonder why you can't build up savings. But if you're a software engineer with an income of 6 figures, you really should be able to figure out how to live a good life without spending every last dollar.

Do you know a lot of software engineers that barely make $100k?

That's why I'm not getting caught up in the particulars of this example.

There are many people in software that are making under $100k

Anyone working in in a government position, or for a state university, or for a nonprofit is probably not earning $100k except maybe in high COL areas or those with quite senior positions.

Don't you think it's interesting that taxes dramatically skew the example?

Think about people earning $50k - $100k. 37 million households in the US. Another 34 million households earn less. 128 million households in America total.[1]

12, give or take 2, years into professional life, you sign a 30-year note and cash out all of your savings. Wages and cost of living won't be constant, but that's basically the optimistic case. Working 42 years to retire by owning one basic shelter.

[1] https://www.statista.com/statistics/203183/percentage-distri...

To be sure if we want an example with someone making $80k after tax, we should really not be looking at houses above $400k. Yes, home prices are nuts, as I observed, but no one should be spending 5x gross income and 6.25x net income on housing.

In my own life, I spent about 2.5x gross income for both of my home purchases. And they were arguably more home than I needed. When I bought my first house, I was single, and I rented out the two other bedrooms. My spouse and I bought a house together, but ultimately could not have children, so the house is too big. (We also live on an acre and have a lot to maintain.) Now I know these Philly suburbs are nothing compared to California real estate, but it's still a medium to high cost of living area compared to the rest of the country, where we're minutes away from any kind of shopping or entertainment we'd want, and 45 minutes from the large international airport.

For sure the rising housing costs make it even harder for households making less than the median. I never argued otherwise. My point was about that which started this thread, that there is "no option" but to work for a big, awful tech company. I disagree, and elevated housing costs don't change that.

It took me about five years to save my down payment. I lived very frugally, don't have a wife, don't have a kid, I paid less than $20k on note for each of my cars, and do not have college debt. I'd say it's fairly difficult if you start moving any of the knobs I minimized or set to zero above. Even then, after my down payment money was tight for the first year because it was everything I had.

I got a mortgage similar to what OP mentioned but I have a veterans home loan. Most people I know don't have one of those, so their mortgage that was gotten at the same time as mine is closer to $4k/m.

>I eat well (at home and at restaurants), I travel, I have great technology / toys. And at 44 I have a 7 figure net worth.

You clearly don't have kids. and/or a spouse that depends on your income. The former drains your money very quickly, especially if you need services like daycare (if your spouse isn't a full time parent... so we're back to one income to support a family of 3+) or perhaps invest in private school. I wouldn't call either of those "overspending" depending on the area. And nowadays you may need to invest in a 529 for that kid's college...

It's already hard raising a kid badly. Raising one well is expensive.

>A $500K house with 20% down

how are you saving 100k on a 100k salary, on top of other savings for rainy days? do you just save for 5-10 years by throwing 20% into a savings account, on top of rent/utilities and other stuff?

Even then, the hard part is getting approved for the sale. The market right now is just absurd. Even if you can comfortably pay mortgage you may be outbid by some family or other person who simply buys the house in cash. You really can't keep up.

Home rates are closer to 8%. The redfin calculator puts a $490k home near me at just under $3200/mo with 20% down.

So over $36k a year. I'm in Washington, so no income tax. Let's say $100k income, single person. No pre tax deductions and you'll be bringing home $6200/mo. So over 50% of your take home goes to mortgage alone.

In your example, your home prices were roughly 3x-4x your annual income. Compared to your example of prices being 5x.

Why on earth would a single person buy a 490k house? Everyone I know either had roommates, an inheritance, or make enough it’s a trivial expense.

Also don’t forget about the home mortgage tax deduction, that plus inflation really impacts the cost of home ownership.

>Why on earth would a single person buy a 490k house?

I'm in California, so that's pretty much the bare minimum. Maybe if I go way out to the high desert area (we're talking 70+ miles from downtown LA), I see more 300-400k houses for 2 bed/bath. In my area (which is still pretty far from Downtown) it's 600k minimum.

70 miles from the downtown of a major city is still generally considered part of that city’s metropolitan area and prices reflect that. Still though getting a 1br condo in LA for 150-300k is more reflective of what it actually costs to get an affordable place as a single person in that area. Yes you have condo fees, but maintain a house comes with serious costs as well.

That’s the thing, if it’s a trivial expense then who cares, but when there’s more affordable options it’s hard to imagine why stretching yourself buying a house at that price would be a good idea.

255k for a 1,952 square foot place in Harrisonburg, VA 22802 is far more representative of most of the US’s housing prices. It’s a modest 50k population university town 130 miles from DC so not in the middle of nowhere but still cheap. https://www.redfin.com/VA/Harrisonburg/1036-Meadowlark-Dr-22... Plenty of places listed for less than that or far more, but in general there’s still a lot of options under 300k.

>getting a 1br condo in LA for 150-300k is more reflective of what it actually costs to get an affordable place as a single person in that area.

A house is a multi decade investment. Why would I buy a single shack if I want to perhaps have a family one day? Especially in this market? I don't want to own a house for the sake of ownership.

And yes, like anything else in life, you have super cheap deals and super expensive. I was using a very rough median pricing. Especially since the lowest cost houses likely mean you need to do the most work on it. I'm not a carpenter nor a house flipper, so that's not of interest to me (and I imagine many other people in tech).

Median pricing downtown is 1m for 2 Bed/bath. I feel the cost going down to 40-50% for going beyond what is considered LA county (which is huge, but not a 70 mile radius) seems to make sense. I suppose you can keep looking northeast towards Death Valley and find something at 200-300k, but you're legitimately getting towards food desert[1] area at that point. The high desert area is already pretty rural as is, unless you are a true hermit (or a stargazer) I can't imagine going further out and making it a 20+ mile drive to any and everything.

[1] https://en.m.wikipedia.org/wiki/Food_desert

That phrase only refers to the distance from you to a grocery store. So, no you don’t need to enter food desert territory when you buy a house in one of the many smaller CA cities/towns.

Anyway, buying a house can be an investment but living in a larger one than you need is wasting a productive asset. If you have a 4 bedroom house you can rent out for 4k/month then living in it is costing you 4k/month the same way renting a place for 4k would be. There’s nothing inherently wrong with buying an investment house, but you shouldn’t be out anywhere close to the full monthly cost.

>you don’t need to enter food desert territory when you buy a house in one of the many smaller CA cities/towns.

You don't, but I'm talking about a very specific area of a very specific state (one larger than some countries) in a very specific location. One where I was in fact raised. You are free to instead go directly North to Bakersfield where prices rise slightly, or west to Thousand Oaks where prices go back to LA prices. I simply don't recommend East/NE of the high desert unless you are a huge fan of tumbleweeds and dust storms.

>buying a house can be an investment but living in a larger one than you need is wasting a productive asset

I don't really consider an extra room a waste. Even if I end up alone I can use that room as a gym or an office or just as storage (storage costs are also way out of whack these days. Owning an extra room is legitimately cheaper).

There's also the fact that half the rooms isn't equal to half the cost. It's more cost effective to add an extra room if you anticipate a family.

> I don’t really consider an extra room a waste.

By waste I simply mean it’s consumptive. It’s obvious when you’re spending well above the norm on rent, but it doesn’t slap you in the face in the same way when buying a larger house.

If you bought in the past, you made it. That doesn't help the current generation.

Hundred year-old teardowns are two million in our neighborhood. 60+ y-o condos are $800k. Redfin est payment/mo: $5,974. Just the property tax and HOA fee is over $1,000 a month.

I've been very confused about how people are getting by.

If they're not in tech, and and they're not a member of the professional class (doctor, lawyer, etc), how are they doing it?

Is everyone working two jobs and doing uber on top of that, or what? How much of a bubble am I in? I'm in tech and I feel like I'm barely making it.

It's possible much later in career when you establish yourself in a certain domain. You become valuable enough that you working half the time (or even just consulting) is more valuable than 2 other employees.

But people who can do that are also probably in positions to retire early already. Either with PhD's and 10+ years working on some now-extremely-valuable tech (think AI if you worked on it in the 2010's, or data science in the 00's) or some otherwise reputable name in their industry.