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View Diary: Making it work on $250k/yr (90 comments)

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  •  Ask some of DK folks who live in SF or Berkeley (10+ / 0-)

    or Boston or NYC or LA.  

    A family with an income of $250 k per year may be "rich" but many of them sure aren't living anything like what most people would consider a rich or wealthy lifestyle.

    It all depends on your individual family's circumstances.

    Take a  55-year-old married couple living in the SF Bay Area with 2 college-age children.  Total family income = $250,000.  Two well-educated professionals can be making incomes that add up to that without being plastic surgeons or TV tort attorneys.  Both police and firefighters in SF have base salaries over $100 k, with many earning much more due overtime.  Many public high school teachers in SF make over 90k.  Experienced nurses in the Bay Area make $90-100k,  So say a pharmacologist and a nurse, or a public health clinic doc and a cop,  

    They will pay around $50,000 in Fed income taxes, $15,000 in state taxes, $15,000 in Soc Sec/Medi-Care taxes.  So they have $180,000 of real money to play with each year,

     The median home price in SF is $705,000.  Even in Daly City, a very modest bedroom community south of SF, the median is $490,000.  In South Berkeley, the poorest part of the city, it is over $500,000.  In the Berkeley Hills or Claremont areas, where the most affluent generally live, you will find some very nice houses, and some very ordinary ones.  One does not get the impression you are in a particularly wealthy neighborhood, though the avg home price is above $1 million.

    So let's say they own a house worth $650,000 in a less attractive part of SF or in the Berkeley flats.  The house will be in the range of 1500 to 1800 sq ft.   Their monthly interest payments will be around $2,900/mo, or $35,000/yr.  Their property tax will be around $11,000 per year, insurance $2,000, utilities $4,000.  They are now over $50,000/yr for housing alone.

    These costs will remain fixed for years, perhaps long after their peak earnings years are past.

    Then they have those two kind, smart children in college, one at a UC, the second at a good small liberal arts college.  There's $75k for college expenses.  

    They are now down to $55,000 year.  They each drive a Toyota Camry, 3 years old,  Car payments, registration, and insurance add up to $10,000.  Public transport or gas/tolls = $1,000/yr.

    $5,000 for food expenses

    They are now under $40,000.

    Then there are expenses for appliances, computers, household repairs and maintenance, internet-cable, cell phones, and medical.  These can vary a lot, but are likely going to in the $4-$8k range.

    Maybe since they are getting close to retirement age they would like to fund their 401k (unless they are cops or teachers they probably have a crappy or non-existent pension).  Say $10k each.

    As do many households in their 50s, there may be an aging parent who needs some assistance to avoid putting them into a nursing home.  Full time care by unlicensed care givers is around $50,000 per year, but these folks are fortunate to have three siblings who can also each chip in $12,500/yr.

    There balance sheet is essentially zero now.

    What would a realistic amount be for recreation, gifts, books, and travel?

    None of these expenses are extraordinary, or even very unlikely.  

    Sure, these people live a good life, but they would not appear to be living the rich life many seem to imagine.

    •  there you go--exactly! When you really chip away (4+ / 0-)

      at what it costs to live with all these fairly normal expenses with two kids in college in a major city or suburbs surrounding---you're left with just about ZERO.

      It is both shocking and frightening to really face the numbers.

      If the plutocrats begin the program, we will end it. -- Eugene Debs.

      by livjack on Mon Dec 10, 2012 at 09:02:07 PM PST

      [ Parent ]

      •  And if you lose your job..... (0+ / 0-)

        you risk losing your house...

        Suddenly one can find themselves earning median household income of 48k.

        I wont begrudge someone earning 250k, 10 million? 50 Million, ok, no problem. They earn money from capital they aren't wage earners.

        FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Tue Dec 11, 2012 at 12:27:27 PM PST

        [ Parent ]

    •  How poor do you want to be? (1+ / 0-)
      Recommended by:
      The median home price in SF is $705,000.  Even in Daly City, a very modest bedroom community south of SF, the median is $490,000.  In South Berkeley, the poorest part of the city, it is over $500,000. Metro Area Home Prices Show Stronger Increases in Third Quarter, Sales Up
      The national median existing single-family home price was $186,100 in the third quarter, up 7.6 percent from $173,000 in the third quarter of 2011, which is the strongest year-over-year price increase since the first quarter of 2006 when the median price rose 9.4 percent. In the second quarter the price increased 7.2 percent from a year earlier.
      500k - 180k means that someone just offered you 320k to get you to move.  For that kind of money, you can buy a house free and clear in Indianapolis and have dramatically lower living expenses and a six-figure savings account.

      -7.75 -4.67

      "Freedom's just another word for nothing left to lose."

      There are no Christians in foxholes.

      by Odysseus on Mon Dec 10, 2012 at 09:25:37 PM PST

      [ Parent ]

    •  Families earning 30k or 40k (3+ / 0-)

      have likely already lost a job or 3, lost a house. In fact they may be in the bottom quintile, which means they arent even in the middle class, they are working poor.

      For the so called family making 250k..At 250k you havent likely lost a job or a house. Thats all. That same family is one layoff from sliding down that same slope, losing a job, then a house, and the husband is driving a limo for his old workmates, for 45k a year.

      Working and middle class families need to understand they have been ripped off, by folks making 10's of million of dollars a year, and some are not keeping their eyes on the target, instead they hint that the problem is folks making 250k. SO tax them, cause 250k a year is way cool.

      I dont think we should raise taxes on anyone until they make a good 2 million, heres 6 more brackets


      Unless we repeal the Reagan tax cuts and the 1986 tax reform Act. Which is a more complicated issue.

      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Mon Dec 10, 2012 at 09:27:00 PM PST

      [ Parent ]

    •  Think your math may be off... (2+ / 0-)
      Recommended by:
      ferg, Be Skeptical

      If you're single making $250k/year, you're paying about $60k/year in federal income tax, $4.5k social security, and $3.5k medicare.

      I'd think being married would reduce income tax to more like $30-40k, with the Bush tax cuts still in effect.  Medicare would be the same and social security would double, so that's about $13k, which is pretty close to your estimate.

      That gives them about $15-20k more per year to work with.  

      With an income that high, odds are they've been saving for college for a while, so they will have been paying that $75k over the past 18 years.  Speaking of savings, they'll probably also have investment income, since they could actually have been saving that $75k/year, maxing out 401k contributions (Their income is high enough that they can't put money in a Roth IRA, and a normal IRA wouldn't be tax deferred).

      Or instead (Or in addition), they may have opted to get a 15- or 20-year mortgage, in which case, they may have the house paid off by now, or almost paid off, assuming they started paying with the first child, and have had relatively constant incomes (Admittedly, they may be making a lot more now than they were 20 years ago).

      Aging parents are certainly an issue - and retirement homes can be quite expensive, even for seniors who don't need nursing care.

      The fact is if you're making that kind of money, and you pace when you pay for major expenses, you have a lot of options, though you certainly still need to be careful.

      •  tried to use realistic estimates (2+ / 0-)
        Recommended by:
        Flying Goat, Roger Fox

        You definitely make some good points.  Depending on past income and circumstances they may have accounted for these expenses years ago and planned for them accordingly.  Of course, many did not...

        Interest rates 10-15 years ago were way, way higher, so a shorter term mortgage would have sucked even more of their income than I show here, as I have used the much lower current rates.

        After their education and training, plenty of professional couples didn't start earning good salaries until they were close to 35 or 40 even.  When they had children, childcare could be very expensive.  

        As far as taxes go, there is obviously a wide range based on circumstances.  I looked at several sources, including this one.

         From PolitiFact: How much taxes do you really pay if you make $250,000/yr?

        I think we can agree that people earning that amount of money, though they may not be living the lush life,  have far more options than most Americans and should probably keep any complaints very quiet,

        •  That's for an individual, not couples (Which makes (0+ / 0-)

          a huge difference), and pretty much matches my number, though I didn't include payroll taxes, since when you say "I make $250k / year", you generally are excluding payroll taxes.

          You're definitely right about interest rates, though with that extra 75k over the years, they still could have pretty easily managed a 15 year mortgage.  Of course, there's also the deduction on mortgage interest, which would have helped.

          Clinton era taxes were a bit higher, too, especially for couples, so would have to tack that on to their income tax from 11+ years back, too.

        •  I know some top 2-3 percenters (1+ / 0-)
          Recommended by:
          Be Skeptical

          They phonebank for candidates, etc.

          When I wasnt working and Occupy Wallstreet was new, I organized a food drive for Occupy Wallstreet in NJ. My 2-3%ers came thru every week.

          3 of them work in banking, in the Wall Street area, and would risk their jobs becoming involved, so I was like a cutout for them. I delivered 600 meals in 6 weeks, thanks to those 3%ers.

          Now of course I only hang out with liberals, anyway. So I have very little exposure to GOP 3%ers. LOL.

          FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

          by Roger Fox on Tue Dec 11, 2012 at 12:18:18 PM PST

          [ Parent ]

      •  & if you lose your job (2+ / 0-)
        Recommended by:
        Flying Goat, Be Skeptical

        and find yourself driving a limo or working at  Starbucks....and maybe losing your house ......

        A 250k earner has options yes, but they also have more in common with the median household earning 48k, than the 250k earner has in common with the 10-35 million earner.

        FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Tue Dec 11, 2012 at 12:22:51 PM PST

        [ Parent ]

    •  Steele specifically said 250k adjusted gross (1+ / 0-)
      Recommended by:
      Roger Fox

      which is what set me off. That's after deducting mortgage interest and state taxes. No payroll taxes after $110k. Tuition and retirement savings would also lower the tax bill

      Car repairs and insurance, home repairs, utilities, aging parents, child care, college expenses?? We almost all (98%) struggle with those.

      To me, it's not about being "hateful" (Roger Fox) towards the fortunate, affluent, rich or idle rich, however you want to describe them. It's about being invisible to them.

      •  AGI (1+ / 0-)
        Recommended by:
        Be Skeptical

        If you think about it, "gross" can't be after deductions.  Because after deductions would be net, which is the opposite of gross.

        By inspection of Form 1040, AGI is the last number on page 1, carried over as the first number on page 2, and all of the deductions come after that on page 2.

        Ultimately, tax is calculated on (go figure) taxable income.

        "They let 'em vote, smoke, and drive -- even put 'em in pants! So what do you get? A -- a Democrat for President!" ~ Faster, Pussycat! Kill! Kill!

        by craiger on Mon Dec 10, 2012 at 10:28:23 PM PST

        [ Parent ]

      •  Invisible yes.... good point. (0+ / 0-)

        FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Tue Dec 11, 2012 at 12:10:25 PM PST

        [ Parent ]

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