> If you tell people that if they work 12+ hours a day in their 20s that they would be millionaires or billionaires
Billionaire isn’t a realistic goal, but millionaire is a common outcome for software developers who work hard through their 20s and 30s now. It doesn’t even require a FAANG job or living in a super expensive city any more, just wise job selection, a reasonable amount of financial savvy and budget adherence, and a deliberate effort to work on your career path.
You don’t need to own substantial equity in a company in your 20s to have a reason to work hard, as long as you’re doing work that builds your skill set, reputation, and network. Everything you do (or don’t do) has some impact on your persona capital over time.
Working hard in the mailroom or stocking shelves at a grocery store isn’t going to translate into a successful software career, but making an impact and helping people get things done at several companies through your 20s is the easiest way to build a strong network that opens doors in your 30s and beyond
> millionaire is a common outcome for software developers who work hard through their 20s and 30s now.
No, it's not. It's common for some FAANG engineers. It's not common at all for the industry as a whole.
Look at all these comments doubling-down on the "7%/$10k-per-year" arithmetic, as if the only thing that affects savings rates is knowledge of this basic math. For a data driven community there sure are a lot of people ignoring the data.
The Millionaire Next Door concepts are still as relevant as ever, albeit the specifics are a bit dated. Millionaire status is reasonably achievable for someone whose income and cost of basics allow for modest discretionary income. This is certainly the case for the majority of software developers
It’s so hard to get $1MM that only about 19% of people age 65 or over ever reach it. Is software overrepresented in that group? Probably. But not to the extent that it’s reasonable to make the claim that it’s common for software developers to reach it in their 20s and 30s.
I think you misread the comment. Or at least read it differently than I did. I read that most software engineers who work hard in their 20s and 30s can become millionaires at some point. You seem to have read it that they will become millionaires in their 20s or 30s, which I don't think is what it says. My reading is more that putting hard work in early in the career sets you on a path to pay off debts and start saving and also have the experience to get good jobs later, which allow you to save more. This meshes with my experience of the industry.
Not that they _do_ reach it, but that they can. I think the general argument is that most people are not sufficiently financially literate to appreciate that the path to a million dollars is paved with consistent savings and reasonable budgets.
It's a bad argument, though. Financial literacy isn't even necessary, though it may help. Life happens, things occur that make sustained savings impractical or impossible, and so on.
> How do we factor in retirement needs and inflation?
Use inflation-adjusted calculators. Any good savings and retirement calculator will have an option for this.
Inflation is commonly misunderstood in long-term financial planning. It’s important to consider inflation for expenses and future savings amount, but many people don’t realize that inflation will also life their investments to some degree.
For example, if a common house costs $5,000,000 on your future retirement date and you’ve been saving your money in cash this whole time, you’re in a bad spot. However, if you buy a house in your 30s that meets your needs, the value of your house will also rise with inflation. Inflation is also loosely coupled to rising stock prices (except for hyper-inflation or other economic catastrophes) and asset prices. Just don’t keep your money all in cash, because that’s the only guaranteed way to lose out to inflation.
Yes, because despite being _insanely_ intelligent he was _also_ insanely hard working. Its questionable whether aiming to be an outlier is reasonable, but it was a revelation to me that most of the wildly successful outliers I knew of growing up were also harder working than anyone I'd ever met. Yet no one ever talked about that, only how lucky it would be to be "born with" X. From there I realized that most people have this fallacy where they discount what they can achieve because they don't see how hard others work to get to whatever level they are at. Aiming for Bill Gates would be foolish, but understanding the recipe is not.
So why not showcase the data that supports the point rather than pick an outlier and have people question if the recipe really works?
The successful people I know mostly got there by luck. Sure hard work and intelligence played a role, but I know people who were smarter and worked harder and didn't get half as far.
I'm arguing that working hard is not the main goal. PG completely misses how you need to be in a position to benefit from that hard work. Without that positioning it will be pointless/useless.
Gates was also extremely lucky and in the right place at the right time born to the right parents. Gladwell covers this in one of his books. As a 13 year old he got access to a time share computer. His school even bought hours on one and the school was only able to do that via the PTO which was wealthy and run by his mother etc...
Yes he was interested and worked hard but there's a lot more to it.
Is "financially independent by 30, or even 40" the definition of "being a millionaire"? Or does it count if you save up a million dollars by some point in time? I'm honestly asking what we're discussing here, because they seem like very different things.
The whole point of this comment thread is that it wasn't appropriate to use a statistical outlier like Gates to represent that hard work for normal people leads to his level of success (financially independent, multimillionaire in his 30s).
The Millionaire Next Door is about as misleading as it gets, at least for today. Let's not forget that $1M in the mid 1990's is about the same as $2M today, at least in terms of terms of CPI. Even then, that is after 20+ years of housing prices outpacing inflation by 2x or more.
In the mid 1990's, the top 20% could get to $1M with some good financial discipline and hard work. Today? Maybe the top 1% could save $1M, and unless you inherited the family home, you're still living a lifestyle that is somewhat median in 1995 terms.
The fact that $1M is still some kind of mental benchmark that we hold up for being "rich" tells us everything we need to know about today's economic conditions.
So the principles of the book may still apply, but the outcomes are worlds away from reality.
I can't speak to the book, but I would say that you should examine your thinking regarding the top 1% saving $1mm. While it might be that only the top 1% can save an actual million dollars in cash, saving about $10,000/year with somewhat conservative estimates will get somebody to around $900,000 over 30 years. Granted, that's still not most people, but it's a much larger group than the top 1%. I made a separate comment here with the same OP if you'd like to run some numbers yourself. Compound interest is crazy.
> The fact that $1M is still some kind of mental benchmark that we hold up for being "rich" tells us everything we need to know about today's economic conditions.
This is a very interesting comment. I wonder why the mentality of this benchmark amount hasn't changed. Economic conditions certainly have, $1mm isn't the same now as it would have been in 1970. Maybe it's a financial independence thing? At $1mm you really are independently wealthy in most cases.
Using the standard definition of "independently wealthy" as "no longer needs to work to cover living expenses", I would say that $1MM is nowhere enough to do that in almost any place in the US, especially if you have kids. I'd say at least $3MM in cash and as much as $5-6MM in higher cost-of-living areas would be required to maintain an upper middle class standard of living.
On $1MM, one can almost certainly safely take out $35k/year (after taxes on any gains) and still grow the portfolio (so as to offset inflation). That's definitely sufficient to support the barest minimum of "lower middle class" living expenses. Without kids. Add a kid and it blows right up.
But, yes, to support an upper middle class style of living one would certainly need more.
If you had $1mm today you for sure no longer need to work to cover living expenses in most places in America. I guess healthcare is a question, but even then your annual income rate will probably qualify you for Obamacare subsidies.
Even with kids. Though that makes the budgeting a little more tight.
> At $1mm you really are independently wealthy in most cases.
This doesn't strike me as true. A big facet to consider also is liquidity. Are you talking about $1M in net worth? If so, I disagree with you: a big chunk of that $1M is likely very illiquid for a younger person, tied up in a house and retirement accounts with penalties for withdrawal. But sure, if you have managed to save $1M above and beyond equity in your home and tax advantaged retirement accounts, then you are probably independently wealthy (but your actual net worth is probably significantly higher than $1M).
Well, I'd say if you look at what I wrote it was a savings rate of $10,000/year so my underlying assumption is that goes into the market, which will be liquid. You could choose to do a Traditional 401k or Roth 401k. Both are liquid enough.
My point wasn't to really give a breakdown of all savings forms, but just to show that saving $10,000/year with historical returns will net you close to $900,000. You don't even have to put it in a tax-advantaged account. Though you should.
And that amount is plenty to retire on and be independently wealthy at least today and for the next 5 or so years. Though I guess maybe that's not the best choice of words since what I mean to say is that you can just live pretty comfortably without working - more financially independent than "wealthy".
Certainly economic conditions can change, so the more the better.
And just to be clear, you could take $1mm right now with 0 assets and buy a decent enough house for <$200,000 and pay pretty low taxes. You'd still have $800,000 left over to appreciate with low cost of living in the vast majority of America.
Retirement accounts aren't liquid at all if what we're talking about is reaching financial independence and retiring really early (in your 30s or 40s say), which is what I thought we were talking about. But if you're strictly talking about being financially independent enough to retire at the normal time (when you can access retirement accounts), then I agree with you.
On the house point, people always seem to forget that people already live someplace and also often have families. No, it is not possible to find a house for a family of four where I live for less than $200k.
Sure they are. For example your Roth IRA contributions can be taken out at any time. You’ve already paid taxes on them. The interest though has to wait until I believe 55 years old. You should do your own research (you as in anyone reading this) to see what investment options are right for your personal goals.
> No, it is not possible to find a house for a family of four where I live for less than $200k
Well we weren’t talking about you specifically, but Americans in general. If you need $10mm retire in the Bay Area or something g ya know that’s just what you’ll personally have to work on. I don’t have an answer for you. You can buy affordable houses and live comfortably in almost anywhere in America. In fact there are people who retire and move to other countries, or live very frugally on much less, like $400,000.
You're right about the principal in Roth accounts, but most people (especially high earners at time of contribution) put their savings in traditional retirement accounts, for good reason. The age to withdraw without penalty (for both types of accounts) is 59.5.
200k is unrealistic in most population centers in the country, not just the Bay Area (I don't live there).
Why are you shifting goalposts? You don’t need to live near a population center. Even so, it depends on what you mean by population centers. If you’ve got a million dollars you don’t need to work, so you don’t have to incur the higher expenses. You can live 30 minutes or so outside of MCOL cities like Columbus and get houses for $200,000 or $300,000. That might be unrealistic for you but that doesn’t generalize to the vast majority of people in America.
> but most people (especially high earners at time of contribution) put their savings in traditional retirement accounts, for good reason.
Not so clear cut. So first if you’re a high enough earner you’re adjusted family income is >$200,000 or so before the Roth IRA starts being phased out for you. So we’re already talking about the top 10% or so of all income earners in the U.S.
Second, you tend to put the money in a traditional IRA, but you might withdraw (probably actually) less than you were making with your income. So if you’ve been phased out and can only contribute to a Traditional IRA, depending on when you want to retire you might withdraw $100,000/year (or less) and potentially pay a lower tax rate on that income then your marginal contribution rate on a Roth.
Lastly, you can still contribute $19,000 to a Roth 401k which doesn’t have contribution challenges related to income (at least for the income the vast majority of people would ever make - idk what happens if you make $1mm or something).
I don't think I am shifting goal posts? Most people don't have enough of their savings in liquid assets to retire early was, I think, the original goal posts. You haven't convinced me that this isn't true...
Your point about housing (and mine) would benefit from actual data. My contention is that for greater than 50% of people in the US, that they cannot, without moving (say the concrete metric here is a move that doesn't require children to switch schools), purchase a home for $200k or less. This is my intuition based on experience with housing markets and a general sense for how the population is distributed in the country, but it may well be wrong.
On the retirement account front, what I'm saying is that most professionals in their 40s will have a large amount in traditional 401k/IRA accounts, and much less in Roth or non-tax advantaged accounts. I believe this is accurate.
I think the confusion in our conversation is that you seem to be talking about what people can do, if they're focused from an early age on accumulating liquid savings, whereas I'm making a descriptive point that most people, even with large net worth, do not have most of it in liquid assets.
> Most people don't have enough of their savings in liquid assets to retire early was, I think, the original goal posts.
This must be a misunderstanding. I never made this claim so now this wasn't the original goal posts. Apologies if I somehow gave off that interpretation. I actually was pretty explicit I think when saying you could save $10,000 (this is cash) via a 401k or other investment vehicle and the math works out to be around $900,000 saved.
> Your point about housing (and mine) would benefit from actual data. My contention is that for greater than 50% of people in the US, that they cannot, without moving (say the concrete metric here is a move that doesn't require children to switch schools), purchase a home for $200k or less. This is my intuition based on experience with housing markets and a general sense for how the population is distributed in the country, but it may well be wrong.
Again, not a claim I've made. I've simply stated that you can buy a house for less than $200,000 and live just fine (this was based on accumulating a million dollars and that there was an assertion that you couldn't live off of that). It's trivially easy to see for yourself on Zillow or via another product that you can buy an affordable enough house and live just fine in most of the U.S..
> I think the confusion in our conversation is that you seem to be talking about what people can do, if they're focused from an early age on accumulating liquid savings, whereas I'm making a descriptive point that most people, even with large net worth, do not have most of it in liquid assets.
Yea that about sums it up. So I'm not sure where you're really going with any of this. I guess it's cool as a general assertion (and I think it would be interesting to discuss) but I'm bewildered as to why it would used as a rebuttal to something I've said. That's why I asked why you were shifting goalposts.
I understood your claim to be that most people on a typical salary in our industry can be financially independent prior to retirement age. My point was merely that this may seem true on paper if just looking at net worth, but that liquidity is important if you actually want to live off savings (ie. be financially independent).
So in my original post I said you could save $10,000/year. That savings can be liquid if you do choose, and even 401ks can be liquid. If you are a typical software engineer in America you can contribute to a Roth 401k and withdraw contributions penalty free. You’re liquid if you want to be.
Then on top of that $10,000 maybe you buy a house or something. You have the rest of your money to do stuff with too.
The financially independent thing really depends on individual circumstances and desires. For some, $1mm isn’t enough. For others it’s more money than they can spend for the rest of their lives.
I went back to my very first comment in the thread. I quoted this:
> > At $1mm you really are independently wealthy in most cases.
Firstly, my working definition of "independently wealthy" is when you can stop working and keep living. I think this is the common definition, but it's possible you're using a different one.
So from that quote and that definition, what I have been saying is that I don't think it is true that "in most cases" people with $1m are independently wealthy. I think that in most cases, those people have most of that $1m net worth tied up in their house and in illiquid traditional retirement accounts, and could not actually live off of just the remaining liquid wealth once those are subtracted. That's really all I've been saying. It's based on just that one quote that hinges on "independently wealthy" and "in most cases".
> Firstly, my working definition of "independently wealthy" is when you can stop working and keep living. I think this is the common definition, but it's possible you're using a different one.
You are independently wealthy in America at $1mm and do not need to work. It takes very little time to see that hit is the general case. You can buy a cheap house, and buy groceries and probably actually grow the principle amount.
Now from here you can say like it’s not enough money for you, or you don’t want to leave California (or wherever) but you can easily live off of that amount of money in the vast majority of America. You can also say that people accumulated that money in some distribution and all of that too. But even if you had that amount in a house + retirement you can sell the house and move to a different location or downsize or something. If you have a million in assets you’re making a choice to work. Period. There might be some thing you don’t want to give up, or some place you want to live. That’s fine, but you’re making a choice after you’ve become independently wealthy.
At this point you are willfully failing to understand my point. It's extremely simple, many mid career people with $1M dollars in net worth are not able to retire, because their net worth is not liquid, and liquidity is necessary to pay for things. If you do not understand the concept of liquidity, then I really can't help you out. Cheers.
> many mid career people with $1M dollars in net worth are not able to retire, because their net worth is not liquid
It really depends on the assets and the choices you want to make. Generally speaking, if you have $1mm worth of assets, you do not need to work. That's it. Period.
If you find that you need to work, you're making some other choice to work because of some factor that's overriding your desire to not work.
The liquidity of the assets is only relevant if you want to talk about specific cases, and even then it's likely not an issue. You can sell your house. You can withdraw from an IRA or 401k. Etc.
The key factor in being able to do so is to have money to save early in your career. The median household may have 10k/year to spend, but the median household is already 10-15 years into their career, and thus 10-15 years behind on that compound interest.
And nobody really has that kind of money early in their career, except maybe the top 1%. You either make a lot of money and spend most of it on housing, or you make a little bit of money and spend most of it on housing.
All I’m doing is providing information. Saving $10,000 is very achievable. Some people get higher paying jobs by the time they are 30 and save $15,000/year instead. Some buy a house and save some. There are lots of paths. I completely disagree that saving $10,000/year is only something the 1% can do. I started my first job at a salary of $60,000 and was able to save $10,000/year via my 401K + 6% matching. I lived in a MCOL city, drove a Honda Civic, and traveled a little bit but not much. That’s not a 1% lifestyle. It’s better than average no doubt, but it’s accessible to many Americans.
We should talk more about how people can do it and how we can help those who don’t make enough money instead. Maybe instead of paying into Social Security we could develop a different savings plan?
Okay, but you have to understand that you're exceptional...at least top 1% in terms of capability. Only 88% of teenagers graduate high school. Some 60% of those will go to college, and only 46% of those will eventually graduate. Of those that eventually graduate, on average they will earn an average $50k starting salary, which takes your savings rate down to zero. 17% might get a salary of $85k. [Too lazy to cite the Google results, I'm on mobile].
So at least from my napkin math plus estimates, you've probably got less than a 10% chance of making enough to save any money at all for your first job out of college.
And I don't know about you, but I spent the first 5 years out of college paying off student loans...and I had a pretty low student loan burden compared to most. And many others might start families sooner than you've chosen to, which is expensive as well...and half of them will get divorced which is even more expensive.
I don't have anything against teaching people to do the best they can with the shit hand they've been dealt in life. But selling that by claiming that average people can be millionaires (even in today's terms, let alone 1990's terms) is selling an expectation that will never pan out for the vast majority of them. Any belief in the truth of that claim inherently relies on a very privileged view of the world, either because they were born with a silver spoon, or because they don't truly understand the scope of expenses that other people face, or because they think that average people are even capable of the kinds of jobs that they hold. It is flat out irresponsible to peddle this fantasy.
Please tone down the hyperbole. I'm not "peddling a fantasy" but looking at numbers and giving my best guess to speak of generalities with these numbers. Initially we were talking about software engineers. Now we're talking about the general population. Even in the initial estimate for software engineers you wouldn't reach $1mm with a 6.7 average return (it could be more, it could be less).
The person making $50,000 may have other benefits. Items like social security and a lower cost lifestyle in the first place. So maybe for them saving $5,000 is doable, and so they wind up with $500,000 and social security. Maybe that person marries someone and combined they make $90,000 and can save $8,000. I don't know. Y
> And I don't know about you, but I spent the first 5 years out of college paying off student loans...and I had a pretty low student loan burden compared to most.
Yes. I joined the Army to pay for college. Nobody in my family has ever attended. I didn't know what the SAT was. That took up 4 years, and I had no savings (obviously never learned what stocks were or anything like that, though there was some government program called the TSP but I was taught to be weary of the government of course so I didn't invest), and then I spent 3 years getting my undergraduate degree so I was around 25 when I started working. So about the same age, at least investing-wise.
> And many others might start families sooner than you've chosen to, which is expensive as well...and half of them will get divorced which is even more expensive.
Sure. Plenty of things that could happen. They could also choose to start a business, or marry a spouse that makes significantly more than they do. Idk. All kinds of things happen.
> Okay, but you have to understand that you're exceptional...at least top 1% in terms of capability.
Ha. I appreciate the accolades but promise that this is certainly not the case. I'm opinionated, and I'm no dummy, but I wouldn't consider myself exceptional in any meaningful sense to me personally. Maybe statistically.
The data indicate that it is quite rare to have $1MM at (roughly) the retirement age (fewer than 20% of those aged 65 have that amount[1]). It may seem like 20% is "common" or even "infrequent," but it's not: it's rare.
Moreover, the median SE salary is just below $100k/year[2]. It's uncommon (certainly not rare but uncommon) for a SE to be able to have a sustained savings rate necessary to achieve $1MM by retirement.
So maybe "peddling a fantasy" is a bit strong, but it's not exactly wrong. For most software engineers (over 50%) it simply is not a realistic scenario.
Yes, absolutely people don’t save like this. That $10,000/year can buy a boat, or maybe a bigger house. But most don’t do that, especially the Boomer generation.
And it’s even worse because if they actually retire at 65 they had like a good 40 years of compound interest too, 10 years is a big difference versus the 30 we were talking about.
The median US household has ~$12k/year available to save/invest after all ordinary living expenses, per the US government (BLS), and that number goes up very rapidly for people above the median.
Americans are notoriously poor savers, also per the US government, but a large percentage of all households -- at least 40% -- could fairly easily accumulate $1M if they were diligent about saving and investing a decent fraction of that surplus income. The surplus income is available but Americans choose to use that income for things other than saving and investing.
That surplus income is only surplus until you have medical event, catastrophic loss, or need a major repair (roof). Ot to mention the need to save for retirement. It's those extraordinary living expenses that kneecap you.
Whiler I agree with the thrust of your comment, your committing an error: the distribution of incomes isn't uniform across time/age. That is, the set of under 30 and under 40 household with 12k/ year is lower than 40%. If you look at not the median household at this moment, but the lifecycle of the median household from when it started to when, it probably couldn't save 10k/yr until recently.
I think it's common when compared to other industries, though maybe not generally common. Admittedly I have no data to back up this hunch.
If I'm wrong, please correct me, but my interpretation of what the person you're replying to was trying to get at was that modest savings from a 23+ year old software engineer, to the tune of $800/month or $10,000/year (this could be 401k match and contributions) will get you pretty close to a million.
Using this calculator[1] with an assumed rate of 6.7%, $0 initial investment, $800/month, compounded semi-annually and a variance of 1 netted $891,000 within 30 years.
I think $800/month for nearly all software engineers is doable.
Exactly. The math is easy, but convincing people that becoming a millionaire is a matter of consistent moderate savings is still hard.
$800/month is $9.6K per year. Approximately half of the maximum 401K contribution limit, so it can be tax-advantaged as well. If you can swing the full 401K maximum, you’ll hit the millionaire status even faster. Add some taxable savings and it can be done in a decade without getting too extreme. A married couple doing this together makes it even more achievable.
Unless someone has maxed out their career options (unlikely) almost everyone in software could get a $10-20K bump in the coming year through negotiation or changing jobs. Allocate that raise entirely to tax-advantaged savings and stay consistent for a few decades and it will add up to a million dollars.
It doesn’t require FAANG compensation or extreme frugality. It just requires consistency over 20-30 years.
> The math is easy, but convincing people that becoming a millionaire is a matter of consistent moderate savings is still hard.
Consistent moderate savings on top tier income, sure.
> $800/month is $9.6K per year. Approximately half of the maximum 401K contribution limit,
Also, approximately 1/3 of national median household disposable income after taxes and transfers (NB: not essential expenses, just taxes and transfers) in the United States.
> A married couple doing this together makes it even more achievable.
Yes, you can become a half-millionaire much faster than a millionaire—brilliant observation.
> Unless someone has maxed out their career options (unlikely) almost everyone in software could get a $10-20K bump in the coming year through negotiation or changing jobs.
“Software” includes a lot of different occupations, but most of the nob-management ones have median compensation around or substantially below $100K; so you are suggesting most people are leaving upward of 10-20% on the table. That's...unlikely.
> It just requires consistency over 20-30 years.
Asserting that that is easy in software would be more convincing if we were more than 20-30 years from a major industry crash, or had some structural guarantee of it not happening again.
Not completely convincing even then, but more convincing...
> Consistent moderate savings on top tier income, sure.
Do keep in mind that the context for this thread was software engineers. The median pay makes saving $10,000/year very, very achievable.
> “Software” includes a lot of different occupations, but most of the non-management ones have median compensation around or substantially below $100K; so you are suggesting most people are leaving upward of 10-20% on the table. That's...unlikely.
Below $100k sure, but closer to $60,000 or so which again makes this amount of savings very achievable. My first job out of college was exactly this amount and I was saving about $1,000/month in a MCOL city. And if you're making that amount and living in a HCOL of city you may need to consider changing your location. You might not like it, but that's reality.
> Asserting that that is easy in software would be more convincing if we were more than 20-30 years from a major industry crash, or had some structural guarantee of it not happening again.
This is only a problem if you happen to retire right when a market collapse happens. Even then you adjust your withdrawal rate or try to put retirement off a bit. For those saving 20-30 years, those market dips are buying opportunities as the ROI of the market compounds over time. Given what we know, there's no reason to assume things won't just keep chugging along, at least for the purposes of general discussion. You can say that it won't and give great reasons for that, but I think it's fair to state those up-front.
If you want to discuss specifics I think that would make sense, but given that the person your responding to and myself were speaking generally about the software engineering profession (sure maybe there's some confusion there but for my part I was speaking about software engineers) so obviously there's some generalizations and built-in assumptions that are pretty common in the finance space.
Aren’t 401k taxed? Can you write down the math how a police officer can do this easily (get to 1m purchasing power of today’s value in 10 years) please? I cannot figure it out how to even get a quarter of that
401ks are taxed (either a Roth or Traditional 401k) but are tax advantaged.
Please feel free to contact me directly. Happy to help. It'll be difficult to get to $1mm in purchasing power of today's value in 10 years without saving around $50,000/year or getting extremely lucky.
No doubt. People usually assume 2% inflation/year since that is what the Federal Reserve targets (and the 6.7% is a little conservative) but that amount of money also continues to grow over time, so depending on your expenses you may never touch the principal at that point with a 4% withdrawal rate.
There are a lot of variables too. $800,000 with a paid off house is different than $800,000 and still renting, for example. Depends on your country of residence too, etc.
But you can get to that point by saving, using common assumptions.
In that time period the cost of your house went from 100k to 700k. You aren’t a millionaire anymore. You are poor. Getting to a million dollars with the same purchasing power (make sure your inflation basked is properly chosen) as of today outside of metro area (as a million in sf isn’t much)
No, it is. If you don't retire (at 65~) with 2+ million in the bank you did something wrong (or had a rare cataclysmic event that drains your financial resource). I have a modest salary in the Midwest and should retire with $3m+ making reasonable contributions to a 401k, and that's if I don't change anything.
> Or you could be served divorce papers from your partner and lose a substantial fraction of your net-worth and future income.
This definitely implies a questionable decision.
> Or you ( or a member of your family) could have a debilitating/rare disease and your insurance does not cover all the treatments for it
Sure, there could be rare cataclysmic events that drain you of your financial resources. That's not really on-topic to what the discussion is about though.
> Or you could have been fired and opened your own business and your partners fleeced you out (ask me how I know)
This is 100% a bad decision. Do not take money out of your 401k to start a business.
> Or you live in a country where salaries are below 45 k /y.
Then you likely live in a country where the CoL is significantly lower than in the US and the dynamics of retirement are very different. I'm speaking 100% from an American-centric point of view.
> You have a very naive, simplistic and privileged worldview so I hope for your own sake you never have to leave that cocoon.
I'm sorry my short internet comment on a technology forum is not comprehensive enough to account for all potential scenarios and nuance. I grew up in poverty, and I'm going to do everything I can to prevent myself from ending back up in that situation.
I grew up in poverty, too. Not the caricature "TV in every room" "fake-poverty" nonsense some use to try to "prove" poor Americans aren't poor, but actual poverty. Like, almost homeless, single-mom skipping meals so me and my brother could eat, exposed to drugs and gun violence, pest-infested inadequate housing, style poverty. In America. I can do the poverty olympics all damn day with anyone here, even those from so-called under-developed nations.
I am...skeptical...of your statement. I'm rich now thanks to an IPO--and my hard work in being in a position to be employed at a successful company. But I recognize that a lot of what you've written there is just...wrong. It's "right" enough in some respects, but just so very wrong in so many ways.
There's definitely different levels of poverty. Rural American poverty is different from urban American poverty, there's different problems. We didn't have pest problems, but one of the houses we lived in had severe mold that caused health problems (so we had to move). We didn't have gun violence or drugs, but we chopped and burned wood from the area to heat our house through the cold winters because we couldn't afford fuel. We didn't go hungry, but only because we got heavily subsidized or free lunches from the school. We had our electricity shut off on several occasions. I was lucky in the sense that we lived within the territory of a decent school district, so I was able to dig a computer out of the school dumpster that only had a failed hard drive, which I fixed and used to teach myself programming (by this point, we could at least afford internet service). It wasn't consistently like that, and not as bad as what you described, but it was absolutely still poverty.
According to him if your partner divorces you it is always a bad decision of yours. If people betrays you it is a bad decision if you get sick it is a bad decision, if you live in Haiti earning 300 USD/month it is fine because COL is lower. Living in hindsight-land, but it is OK since he grew up in "poverty". Totally absent of any sense of perspective of what a normal human life consists of, typical of an upper-middle class able, white, male in IT.
All these replies with the typical 7% return for 20-30 years calculations are missing the point. I know what the arithmetic is. It is not common to be in a position to do that, even in the software industry.
If you start maxing out retirements in your first job and continue to do so throughout your career, raises will be raises and you'll continue to save. If you tap into your max savings per year in start of your career, you'll have trouble pairing that income back and putting it away for savings. Max out your retirement funds early and never look back.
The fact that over 80% of individuals don’t even have $1MM in assets certainly is a basis to dismiss the point. “It’s possible” is technically correct (no, that’s not the best kind of correct), but leaves out just a ton of context. “It’s possible” for a Boltzmann brain to form. Doesn’t mean it’s likely, common, or that people who don’t achieve it have somehow done something wrong.
How does the percentage of those with 1MM in assets relate to whether or not you should prioritize savings?
Are you suggesting individuals should not be saving for retirement or long term financial well being? If so I'm not sure I have anything to offer to you.
I can only speak for myself. I do and I know lots of friends who do as well. I made 42k when I finished undergrad and have always maxed out my available tax beneficial savings (401k/403b/IRAs). Doing anything else would be negligent on my ability to prepare for my future where I would like to retire and not rely on social security, children or other programs.
Where were you living and when was that? My starting salary about $15k higher than that, but I still couldn't max out. Rent, insurances, car payment (eventually), food, taxes, etc really eat a big chunk. I always tried to save a lot, but it was probably only $14k per year (IRA + 401k). I'd say I'm still only around that because I now have a family to support and medical bills.
With a $100,000 salary, $50,000 expenses, 30% tax rate, and 5% real returns you could put away $20,000 a year and have a million (2021) dollars in 26 years.
Hardly easy but not out of the realm of possibility for a persistent and highly paid software developer.
I’m glad you phrased it like that, because I think it explains a lot of the talking past each other that’s going on here.
The article is not titled “How to be rich af”. It’s How to do Great Work.
So Gates is the example here because he built a huge company that made software used by almost every human on earth, and because every reader will know who he is.
I guess the author could have used RMS, or John Carmack, or Bill Joy, but that would have excluded people who aren’t into free software or gaming or Unix etc.
If you use his definition of working hard, by the time you are 30-year old software developer you'll have valuable skills and a valuable network in addition to a solid amount of money. You may be unable to _retire_ at 30 but you will, generally speaking, be setup for success for the rest of your life.
How did you work hard? What kind of career did you choose? What was your budget like? Did you have any bad luck re health or family? There's many possible reasons, many under your control, some not. Should I assume based on your response and the original article, by hard work you mean not just effort on the job, but also effort in finding work you align with, explored other job types, spent real effort networking, studied for job skills a bunch, and didn't have any bad luck to explain it?
Good grades, got a job I thought was good at the time, great grades in a masters program (expanded network outside the company), became an expert at my company, filled a role on the team 1-2 levels above mine. Then got denied promotions based on political games and contrary to policy, more ignored policy to my detriment, even worked a second job for a while, outsourced my team, forced to switch to even less known tech, etc etc. Got AWS and financial certs, filled a role above my grade (again), more politics, more violation of policy to my detriment, etc etc. No other good job options in this area, wife won't relocate, multiple family health issues in the past year and family commitments (ie my wife walks all over me now that we have a kid) that prevent me from throwing in extra hours, not that I feel much reason to based on past treatment when I used to do that.
Budget has always been very frugal. I make my own cheap beer/wine, make soap, grow food in a garden, almost never take vacations (honeymoon was the only expensive one), cook 99% of the time at home, etc.
You can't trust companies to keep their word. Working hard gets you no where. The greedy people at the top are the ones who get everything and will screw you over constantly. And I'm not even talking about success in terms of $200k+ salary and fancy titles like CTO etc. I'm just talking about success as making it to the natural progression of senior dev and techlead with a salary over $100k.
But I must be a loser who didn't work hard since other people made it.
But even that isn't necessarily true. I know of several managers who didn't work hard to get there. Theh were just in the right place at the right time, or in some cases the right gender.
We can abstract this a little. You don't have to work hard. You just have to appear useful to the people in power.
I worked hard in the past. I'm not working hard now - I'm really slacking now that I know I'm screwed. I'm still getting paid the same.
Anyone making high 5 or low 6 figures will be a millionaire at the start retirement if they can save a modest amount from a reasonably early start, say 30 years old.
While technically correct, this doesn't square with most people's intuitive sense of what "being a millionaire" means. It's not having a solid retirement nest egg, it is being able to jet off to your yacht in St. Tropez on a private jet.
I think this is largely due to inflation. A million dollars in the 50s or 60s would be around 10 million today, while at the turn of the 20th century when the term really became popular it would be worth 30 million today. A "millionaire" of the time is really living a different lifestyle and can likely afford a very extravagant upper class lifestyle purely on interest of their wealth.
With housing costs having risen so much faster still beyond inflation, today you can easily be "a millionaire" simply by having a bit of equity in a modest home in a costal city.
yeah well that's true about people's intuition but it hasn't been the case for a long time. to "jet off on a private jet" anywhere regularly probably requires a salary on the order of a million per year.
10% of Americans are millionaires. I would say that 90% of full time software engineers will end up becoming millionaires. FAANG engineers become millionaires in their 20s. For others it will take longer.
It seems like $100k is conservatively a pretty typical salary these days even outside the big companies. That is $4M after a 40 year career, which makes you a millionaire when you retire if you can save 25%, even if the savings appreciate 0%. This seems pretty accomplishable.
But perhaps the idea of "being a millionaire" you're thinking of is not that you slowly manage it over a long career, but that it happens more quickly?
It's not about eventually becoming a millionaire. It's about using Gates and other successful outliers as a pattern for normal people. There are tons of smart and hardworking people out there who are not very successful. There's a lot more going on than just hard work.
> Working hard in the mailroom or stocking shelves at a grocery store isn’t going to translate into a successful software career
Equally, working hard as a software engineer isn't going to translate into the "uncapped salary" class of employment like CEO/CTO, VP, Founder, etc. There's a class ceiling where only a certain type of person gains entry. You can hard-work yourself to the bone writing code, but that "VP of Engineering" role is going to go to the external candidate who is already "VP of Engineering" somewhere else, and who has been some flavor of Director or VP his whole career. Jobs are a lot more class-stratified and career immobile than we like to think they are. This reminds me of a previous "hard work" discussion here: https://news.ycombinator.com/item?id=27517158
This has nothing to do with class, similar to how declining a junior engineer for an architect role is not classist. A VP Engineering role is a senior management position, and being a fantastic programmer is not a reasonable transition point. It's a lot more reasonable to either make a lateral hire or promote internally from a lower level (say, Director). Tiny startups take more chances with whom they place into these positions out of necessity. At the end of the day though, vast majority of coders don't have the right set of skills to be a successful VP right there and then, as their day-to-day responsibilities do not meaningfully overlap. Doesn't mean they can't get there, but there's a career progression aspect to it which is certainly within their grasp. Vast majority of Directors and VPs work their way up, just like everyone else.
But that is not argument against what he said. All software engineers cant be VPs. It is not possible - there are not enough positions and many people are not suitable for that role.
If everyone worked super hard, still only minority would got these positions.
That was not the main argument of the parent comment, this was:
> There's a class ceiling where only a certain type of person gains entry
It is true that working hard alone is not going to get you into a VP role, but working hard on the right things has a much higher likelihood of accomplishing that. Impact != hours put in, and vice versa, and frankly this is where a lot of the hard working people find themselves. Doing a difficult, but low leverage activity (relatively speaking) really well does not automatically entitle one to a role that is intended to be high leverage, all the time.
I think my use of the word "class" was problematic. The word doesn't really capture what I mean, and I struggled to find the right description. Those people who always seem to end up SVPs and CEOs and Founders all seem to be cut from a certain cloth. Not a "class" in the literal sense of English aristocracy, but it's always the same "Ivy Leaguer" type of person. Smooth talker, big smile, outgoing, and credentialed up the wazoo. Like a game show host but with a business degree. Look at all the CxO folks at your company and tell me they are not all basically cut from this same fabric.
It's almost never the smart, hard working kid whose parents were factory workers in Pittsburgh, who hard-worked their way up from the mail room.
EDIT: Maybe not a perfect comparison, but how many current active duty 4 star military officers started out their careers as enlisted grunts rather than as officers?
That's nonsense. Look at the "about us" pages for tech companies and startups. You'll see a huge diversity of backgrounds among SVPs of engineering, including many first generation immigrants.
There are also a lot of senior military officers at the O-5 to O-6 level who started out enlisted. The relative lack at the O-7 level and above is due more to retirement age limits than anything else. If a service member did a couple enlisted tours, then went to college and OCS, they usually just run out of time.
> Working hard in the mailroom or stocking shelves at a grocery store isn’t going to translate into a successful software career
Right, but it might lead to satisfaction regardless. Even the most menial positions are often rewarded. I have worked a few menial jobs, and effort is even more important. When I worked hard and went the extra mile when required, I got rewarded with better shifts, more flexibility and more respect. It also personally felt good.
I find that people who don't work hard and are apathetic about the work they do are often deeply unhappy, while people that take pride in their work and work hard are satisfied. The best feeling I get in the day is after a grueling workout. There are health benefits sure, but its not worth the amount of discomfort and suffering I have to endure. If there were a pill that gave me the same benefits, I would be less satisfied than putting in the work. But maybe that's just me.
People who work hard often have better personal circumstances as well. Who would want to be with a partner that just spends their life going through the motions with no real purpose or drive?
> Putting the extra effort into a menial job isn't "a grueling workout", it's mortgaging your body and health for a price you'll regret in 20 years.
Maybe if you're working grueling construction jobs or consuming fast food and soda for 3 meals a day because you're too busy for anything else.
However, having worked in an industry with a lot of people who are on their feet and doing physical work throughout the day, I've come to realize that sedentary jobs like programming are a huge risk to long-term health. Sitting at a desk all day every day takes a toll on the body. The people who were active and moving about every day for decades are still in good physical health years later. The people who sit at desks all day (without compensating with exercise) accumulate a lot of health problems and weight gain if they're not careful.
I don't know what to tell you if you think that. I guess don't put in effort in a menial job? Just quit, slack off and post on HN instead?
I don't think menial work leads to "mortgaging your body". Some jobs sure, but those very physically demanding jobs pay well because the alternative would be a job that pays equally as poorly and is not physically demanding. You can always default to working at a grocer or fast food job.
Those factory jobs at Amazon that are fairly grueling pay a lot better than similar jobs in those areas w/ that skill set. People don't really work them very long either due to the demands. So you can do that for a few years, make more money and hopefully invest it in building out a more valuable skill-set or give better opportunities to your children.
That's honestly the only thing you can optimize for: do the very best you can at what you are doing. Take care of what is right in front of you. You'll be fulfilled, and in many world-lines you will also be successful. But also, when you are resting, rest thoroughly. Don't just rest to work more later or try to scheme this or that in your day dreams. Just let go of the effort and relax.
Great point. I've actually done some of my hardest work for hobbies, volunteer positions, or just helping friends with huge projects. And I loved every minute of it. There's a lot to be said for being able to appreciate accomplishing things and working together with other people.
I've had good success hiring some bootcamp grads for this reason. Some of them may not have the years of experience that senior candidates or even college grads might have, but you can find a lot of hard working and highly motivated people among bootcamp grads.
This is especially true for those who came from careers that involved a lot of hard work or manual labor. It's refreshing to work with people who enjoy getting things done and can appreciate how lucky we all are to be able to sit in air conditioned offices and type on computers all day. Contrast this with some of the perpetually disgruntled college grads I've seen lately who think we're taking advantage of them unless we pay them Google L6 compensation that they saw on levels.fyi .
> just wise job selection, a reasonable amount of financial savvy and budget adherence, and a deliberate effort to work on your career path.
None of that requires working 12+ hours a day. I am one employee out of x,000 at my company. The difference between me giving 75% and me giving 150% (hours) seems very unlikely to affect the stock price in any meaningful way.
Do you think your colleagues can distinguish between someone who excel's and someone who does not? Do you think when they find some lucky opportunity, they would be more likely to reach out to the harder working colleagues they know or the lazier ones? It doesn't require 12 hour work days and we could exagerate ad nauseum, but generally speaking working hard and working smart earns you more than just a marginal impact on your current business -- it earns you a reputation that you can leverage towards greater opportunity.
Sure. There are definitely colleagues I would recommend over others if I had to only choose one, but I don't. Bouncing between large companies means "sure, I'll refer you and get $5k for doing so" as long as I think you can pass the interview.
I updated to multi-millionaire. The idea was that people would have enough money to quit their job and live very comfortably.
I think the network effect is highly overblown for the average person. Sure, networks can be good for the people in the top 10%, but I don't see it really helping most of us because what are the chances our average friends will be in a position to hire us to a high position.
I don't see an average developer being even a millionaire after a decade. Average salary is about $100k, but might be skewed due to the high cost areas. That's $1M before tax, living expenses, etc. Maybe you could hit $1M after 2 decades if lucky.
Is the average for a developer really that low (in the US)? In the Boston-area market (now remote, but same pay scale), we're paying more than that for fresh college hires.
Get hired, contribute to your 401(k), buy a house, and do that for 15 years and in most markets I think your change in net worth over the 15 years is more likely to be >$1MM than less.
According to U.S. Bureau of Labor Stats May 2018 for the job category "Software Developers, Applications" mean salary is $108K. They provide percentiles 10% at 66K and 90% at 161K.
Well, I have to support a family on it. I dont get time to do anything enjoyable. I don't have any upward mobility. All with no end in sight for when I'll be able to quit this job I hate.
Start working some l33tcode problems and applying to other jobs. If you hate your job, it pays poorly, you have no upward mobility, and you don't get to do anything enjoyable, get another job. The companies on levels.fyi are all hiring, go do what it takes to get hired by them.
There really aren't any job options in my area. I don't consider remote an option for a new job since it's much more difficult to onboard virtually. I dont have time to LeetCode due to family constraints.
> buy a house
In my neighborhood in Brooklyn, NY, a 1 bedroom is approximately a million dollars. COL in the area where your job is is critically important as well.
> I think the network effect is highly overblown for the average person. Sure, networks can be good for the people in the top 10%, but I don't see it really helping most of us because what are the chances our average friends will be in a position to hire us to a high position.
Your friends don't need to be in a position to hire you into a high position. They just need to be in a position to recommend you for a good job that might be a step up. Or put in a good word for you when you apply at their company.
They don't even need to be friends. In fact, most of the time I get my back-channel references from people who simply worked at a company at the same time as another person.
Network effects aren't always obvious. I can't tell you how many times I've changed my mind on a candidate (in either direction) due to a friend of a friend giving me some more info about their experience working with the candidate.
Allow yourself to be exploited by capital in exchange for experience and you'll probably be rewarded later when you get to exploit inexperienced people? Sounds like a big risk for labor and a big win for capital.
Strange framing. Working very hard in the US has made my compensation increase 7X in 9 years. I’m not capital (this isn’t a static group, btw), I don’t feel exploited, and I don’t exploit anyone - I invested in myself and successfully optimized for long-run outcomes.
I’m in the midst of people who essentially have had the same career trajectory, while starting in this country with debt and zero social capital. It’s not applicable to everyone, but it’s also pretty darn attainable - unless you’re convinced that it’s not/
Well said. That's why capital has to write essays like this to make it seem like a better deal than it is, lest the rest of us figure it out and organize.
I.e. choosing companies that have (or eventually get) publicly traded stock that goes up a bunch.
There are whole classes of people who sit around all day trying to figure out which companies will grow and succeed and which ones won't. They aren't really that good at it.
There's a certain point of working hard enough to clear the interview bar of the FAANG companies or similar, but beyond that your financial success is largely tied to a favorable roll of the dice.
Billionaire isn’t a realistic goal, but millionaire is a common outcome for software developers who work hard through their 20s and 30s now. It doesn’t even require a FAANG job or living in a super expensive city any more, just wise job selection, a reasonable amount of financial savvy and budget adherence, and a deliberate effort to work on your career path.
You don’t need to own substantial equity in a company in your 20s to have a reason to work hard, as long as you’re doing work that builds your skill set, reputation, and network. Everything you do (or don’t do) has some impact on your persona capital over time.
Working hard in the mailroom or stocking shelves at a grocery store isn’t going to translate into a successful software career, but making an impact and helping people get things done at several companies through your 20s is the easiest way to build a strong network that opens doors in your 30s and beyond