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Around the Internet => Antimustachian Wall of Shame and Comedy => Topic started by: NoraLenderbee on May 17, 2016, 02:13:13 PM

Title: I make $900K per year, but I'm only middle-class
Post by: NoraLenderbee on May 17, 2016, 02:13:13 PM
From Bogleheads forum:
https://www.bogleheads.org/forum/viewtopic.php?f=2&t=191337

The poster feels poor because his neighbors are richer, and he's worried about his expenses being too high. Gosh, why doesn't he get any sympathy?

Quote
Dual income: doctor + professional daytrader (small proprietary trading firm), both early 40s
- Children: 3 girls (triplets) who will be starting 1st grade at a private school in the fall
- Annual (pre-tax) income: average of last 5 years AGI has been $920k, ranging from $630k to $1.3mm (last year in 2015); doctor income very stable at around $350k/year - daytrader income highly dependent on performance (and the financial markets)
- Unvested deferred compensation: $750k - vests roughly 1/3 each year, and get more every year
- Annual household expenses: for 2016 expected to be $320k (excluding principal payments on primary residence)

Total private school tuition for all three girls runs $120k/year; at 37.5% of our annual budget we are clearly prioritizing this in our lives, and don't want to cut this out even if we have to sacrifice in other areas. The full-time nanny, which is necessary given our working hours and the girls' schedules, costs roughly $60k/year (including payroll taxes).


other than the private school tuition and a full-time nanny, we don't have expensive tastes or expenditures


It's Bogleheads, so there's no facepunching, but a number of posters clearly are this close to telling him to get his (her) head out of his ass.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: serpentstooth on May 17, 2016, 02:16:44 PM
Wait, they aren't paying for private kindergarten now? Those poor girls! They will never catch up!
Title: Re: I make $900K per year, but I'm only middle-class
Post by: 2Birds1Stone on May 17, 2016, 02:18:12 PM
$900k/yr really isn't all that much in some areas.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: I'm a red panda on May 17, 2016, 02:18:24 PM
hahahahahahaha!

Middle class? OMFG.

Even with annual household expenses of $320k (WTF? how?), private school of $120k (oh my god for FIRST GRADE!), and a Nanny at $60k, what the heck are they doing with the other $400k or so that makes life so tough for them?
Title: Re: I make $900K per year, but I'm only middle-class
Post by: Bracken_Joy on May 17, 2016, 02:18:41 PM
Wait, they aren't paying for private kindergarten now? Those poor girls! They will never catch up!

*sigh*. We only spent $60k/yr on their education in first grade. Really, what chance did they ever have at success?
Title: Re: I make $900K per year, but I'm only middle-class
Post by: I'm a red panda on May 17, 2016, 02:22:47 PM
$900k/yr really isn't all that much in some areas.

Like the moon. The second you need to go to a grocery store, you have to go into debt just for the transportation.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: beltim on May 17, 2016, 02:26:06 PM
I liked this response; it framed the situation in a compelling way:
Quote
"Middle class" is going to the grocery store and knowing you can choose two of: healthy, quick, cheap.
"Upper class" is looking at your finances and knowing you can choose two of : private school, "better than average" house in neighborhood with "culture", early retirement.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: backyardfeast on May 17, 2016, 02:27:11 PM
Hah!  What gets me is how they can employ a nanny, which they reasonably pay $60K and still have this perspective.  What class do they think the nanny is in?!  How do they think she is getting by on such a tiny salary?  Do they think that simply having 3 kids would automatically add $300K+ to their budgetary needs?!

Yowza.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: serpentstooth on May 17, 2016, 02:30:09 PM
Hah!  What gets me is how they can employ a nanny, which they reasonably pay $60K and still have this perspective.  What class do they think the nanny is in?!  How do they think she is getting by on such a tiny salary?  Do they think that simply having 3 kids would automatically add $300K+ to their budgetary needs?!

Yowza.

Serf? Dalit? Indentured laborer? Hoi polloi? Untermenschen? Peasant?

Also, building a lifestyle around day trading income seems like a bad idea.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: jinga nation on May 17, 2016, 02:52:49 PM
Hah!  What gets me is how they can employ a nanny, which they reasonably pay $60K and still have this perspective.  What class do they think the nanny is in?!  How do they think she is getting by on such a tiny salary?  Do they think that simply having 3 kids would automatically add $300K+ to their budgetary needs?!

Yowza.

Serf? Dalit? Indentured laborer? Hoi polloi? Untermenschen? Peasant?

Also, building a lifestyle around day trading income seems like a bad idea.

The irony that a day trader is on Bogleheads, a site for devotees of Jack Bogle and Vanguard and index funds.
Bogleheads don't like facepunching, they keep it clean, using the softly softly gently gently approach. I say they can't handle the truth (and the facts).
Disclosure: I'm a member of that site, but I lean MMM, so several of my posts there have been flagged.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: soupcxan on May 17, 2016, 03:05:47 PM
what the heck are they doing with the other $400k or so

On $950k of income, federal and state taxes are likely ~$400k.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: forummm on May 17, 2016, 03:15:45 PM
Quote
- House value: ~$3mm ($1.4mm mortgage balance remaining) - this is for a 'slightly above average' family home in our area.

They have a $5M NW plus almost a million/year income.

Quote
An outside date for being a single-income (doctor) household, or maybe even completely financially independent (early retirement?) would be 2028

They "need" at least another 12 years to subsist on a measly $350k doctor income!
Title: Re: I make $900K per year, but I'm only middle-class
Post by: I'm a red panda on May 17, 2016, 03:57:40 PM
what the heck are they doing with the other $400k or so

On $950k of income, federal and state taxes are likely ~$400k.

I always assumed people at that level have figured out pretty well how to manage to not pay much in taxes.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: serpentstooth on May 17, 2016, 04:06:07 PM
what the heck are they doing with the other $400k or so

On $950k of income, federal and state taxes are likely ~$400k.

I always assumed people at that level have figured out pretty well how to manage to not pay much in taxes.

One assumes the day trading income is all short term capital gains, right? Unless the doctor owns her practice (or a part of it), she's getting wage income, not dividends. If she owns it, she may be getting a low salary and taking as much as she can as dividends from the corporation.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: human on May 17, 2016, 04:11:50 PM
Man people on this site and bogleheads can't spot trolls worth shit. He has 6 posts, probably all on that thread, he is trolling. I bet it's cactus pants from the panhandling thread.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: tomsang on May 17, 2016, 04:27:38 PM
On $950k of income, federal and state taxes are likely ~$400k.
I always assumed people at that level have figured out pretty well how to manage to not pay much in taxes.

One assumes the day trading income is all short term capital gains, right? Unless the doctor owns her practice (or a part of it), she's getting wage income, not dividends. If she owns it, she may be getting a low salary and taking as much as she can as dividends from the corporation.

The dividends would be taxed as regular income.  You may be able to avoid Medicare taxes, but the dividends are not capital gains.  The bigger area of ownership is the ability to depreciate fixed assets and buildings.  So if she owned the building she was in, then maybe you can lower your tax.  AMT and other provisions will force some tax to be paid.  Most likely she is an employee and therefore not much to do, except max out 401k.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: mm1970 on May 17, 2016, 04:47:50 PM
Hah!  What gets me is how they can employ a nanny, which they reasonably pay $60K and still have this perspective.  What class do they think the nanny is in?!  How do they think she is getting by on such a tiny salary?  Do they think that simply having 3 kids would automatically add $300K+ to their budgetary needs?!

Yowza.
And the kids are in school.

So you need a full time nanny when the kids are in school?
Title: Re: I make $900K per year, but I'm only middle-class
Post by: forummm on May 17, 2016, 05:56:48 PM
On $950k of income, federal and state taxes are likely ~$400k.
I always assumed people at that level have figured out pretty well how to manage to not pay much in taxes.

One assumes the day trading income is all short term capital gains, right? Unless the doctor owns her practice (or a part of it), she's getting wage income, not dividends. If she owns it, she may be getting a low salary and taking as much as she can as dividends from the corporation.

The dividends would be taxed as regular income.  You may be able to avoid Medicare taxes, but the dividends are not capital gains.  The bigger area of ownership is the ability to depreciate fixed assets and buildings.  So if she owned the building she was in, then maybe you can lower your tax.  AMT and other provisions will force some tax to be paid.  Most likely she is an employee and therefore not much to do, except max out 401k.

Or using the bogus "carried interest" loophole to pay LTCG rates.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: rencelas on May 17, 2016, 07:45:26 PM
$900k/yr really isn't all that much in some areas.

Yep. On the moon, it barely covers an hour of mission control back on earth. :)
Title: Re: I make $900K per year, but I'm only middle-class
Post by: I'm a red panda on May 18, 2016, 07:58:17 AM

And the kids are in school.

So you need a full time nanny when the kids are in school?

They'd at least need one on call. What if the kids need to be picked up sick in the middle of the day?
Title: Re: I make $900K per year, but I'm only middle-class
Post by: deadlymonkey on May 18, 2016, 09:33:45 AM
I as going to post that with a 900k+ income (1.3 million last year) and middle class, the are essentially paying slave wages to their Nanny (only 60K), who assumes all responsibility for their children for 8+ hours a day,  and should be shamed.  Alas, the thread is locked.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: serpentstooth on May 18, 2016, 09:42:52 AM
I as going to post that with a 900k+ income (1.3 million last year) and middle class, the are essentially paying slave wages to their Nanny (only 60K), who assumes all responsibility for their children for 8+ hours a day,  and should be shamed.  Alas, the thread is locked.

Is $60,000/yr, which is more than the median American household income, really slavery wages?
Title: Re: I make $900K per year, but I'm only middle-class
Post by: With This Herring on May 18, 2016, 09:43:43 AM
what the heck are they doing with the other $400k or so

On $950k of income, federal and state taxes are likely ~$400k.

I always assumed people at that level have figured out pretty well how to manage to not pay much in taxes.

As an accountant who has seen this income and the related taxes:  Nope.  I think that actually starts at the next level up (which I have not seen).
Title: Re: I make $900K per year, but I'm only middle-class
Post by: I'm a red panda on May 18, 2016, 09:54:04 AM
I as going to post that with a 900k+ income (1.3 million last year) and middle class, the are essentially paying slave wages to their Nanny (only 60K), who assumes all responsibility for their children for 8+ hours a day,  and should be shamed.  Alas, the thread is locked.

Is $60,000/yr, which is more than the median American household income, really slavery wages?

In the area they live, it might be.  If she's a live in Nanny, then it probably isn't. 

But a lot of service professions in high cost of living areas have hours long commutes to get to the areas they can work in, because they can't afford to live anywhere near it, and there are no jobs where they live. Mobility is a privilege of the middle class. It's easy to say "move to a lower cost of living area and find a job", and much harder to enact it for some people.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: acroy on May 18, 2016, 10:03:21 AM
Lots of judging going on in this thread.... sour grapes?
Sounds like they are very successful and but not over-extended. The spending of the 1% largely supports the next 99% - as ever it has.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: deadlymonkey on May 18, 2016, 11:14:32 AM
Lots of judging going on in this thread.... sour grapes?
Sounds like they are very successful and but not over-extended. The spending of the 1% largely supports the next 99% - as ever it has.

Not sour grapes, it is more the audacity of the poster who is essentially saying, they make 900K+ a year, live in a 5 million + house, employ all the "help" but are only "middle class" because they are trying to keep up with the joneses who live near them who are all trust fund babies.

No one attacked them for being successful, they were attacked for their woe is me financial complaints.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: acroy on May 18, 2016, 11:20:28 AM
......... they were attacked for their woe is me financial complaints.
I read no complaints;
Closest I saw was the statement "we are by almost any measure income-rich, but feel middle class in our community" which I took as explanation of their situation, not a complaint.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: mm1970 on May 18, 2016, 11:24:05 AM

And the kids are in school.

So you need a full time nanny when the kids are in school?

They'd at least need one on call. What if the kids need to be picked up sick in the middle of the day?
Isn't that what PTO is for?

Sorry, I'm speaking as your average every day parent.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: Chris22 on May 18, 2016, 12:41:10 PM

And the kids are in school.

So you need a full time nanny when the kids are in school?

They'd at least need one on call. What if the kids need to be picked up sick in the middle of the day?
Isn't that what PTO is for?

Sorry, I'm speaking as your average every day parent.

From an opportunity cost perspective, it may make sense for them.  Even my wife and I, lowly corporate middle managers, have to play the "who is less busy today" game when our daughter gets sick or has a doctor's appt.  If the one parent has a waiting room full of patients/appointments, and the other has demanding clients or whatever else, it is absolutely possible they can't always drop everything and go pick up a kid.  I have a ton of flexibility at work, but I still have certain meetings on certain days where I just can't miss it unless there is a life or death crisis. 

It's also possible/likely that the $60k for the nanny reflects that the nanny only has the kids for X hours a day as they are at school, and if it was for 40-50-60 hours (ie no school) the $60k would be more.  Or that only 1-2 of the kids is school age and there are others at home not in school yet.

Or a zillion other possibilities. 
Title: Re: I make $900K per year, but I'm only middle-class
Post by: I'm a red panda on May 18, 2016, 01:07:30 PM

And the kids are in school.

So you need a full time nanny when the kids are in school?

They'd at least need one on call. What if the kids need to be picked up sick in the middle of the day?
Isn't that what PTO is for?

Sorry, I'm speaking as your average every day parent.

I was replying from the perspective of "I make almost a million dollars a year".

It probably actually works out better to pay someone $60k then for a parent to take time off. 
If this job makes money by billing hours, or by being there (which I imagine day trading is an in the moment kind of thing)- PTO loses money
Title: Re: I make $900K per year, but I'm only middle-class
Post by: Norioch on May 18, 2016, 06:24:57 PM
$900K is more than what 99.33% of households in the US make, according to the calculator here:
http://www.shnugi.com/income-percentile-calculator

That's a pretty big "middle" class.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: GrumpyPenguin on May 19, 2016, 05:36:17 AM
I vote troll.  Also, don't something like 99.5% of people think they're middle class?
Title: Re: I make $900K per year, but I'm only middle-class
Post by: Camarillo Brillo on May 19, 2016, 07:34:26 AM
what the heck are they doing with the other $400k or so

On $950k of income, federal and state taxes are likely ~$400k.

I always assumed people at that level have figured out pretty well how to manage to not pay much in taxes.

As an accountant who has seen this income and the related taxes:  Nope.  I think that actually starts at the next level up (which I have not seen).
I've made 800K+ the past two years and some thoughts:

1) it's a falacy to think that somehow W2 income can be magically immune from taxes
2) it would really frost my ass if I had to pay a nanny to watch my kids
3) and it would also drive me fricken nuts if I had to send my kids to private schools

It's not what you make . . . . it's what you save.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: soupcxan on May 19, 2016, 09:48:53 AM
[I've made 800K+ the past two years and some thoughts:

So then you would be considered upper-middle class?
Title: Re: I make $900K per year, but I'm only middle-class
Post by: Camarillo Brillo on May 19, 2016, 10:22:58 AM
[I've made 800K+ the past two years and some thoughts:

So then you would be considered upper-middle class?
I have no idea, and really don't think about it, but I realize we're in the high 1% bracket.  We live an average lifestyle for our community (small, Midwest town), and no one besides my employer, wife, accountant, trust attorney, and financial planner have any idea we make that kind of dough.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: The Happy Philosopher on May 19, 2016, 10:30:33 AM
Interesting. I don't think the guy is a troll, because I have met people with this mindset in similar situations.

First of all they are living in one of the most expensive areas in the country in one of the highest tax areas in the country. There is no escape from the tax code when your income is W2 or similar.

Of course the amount of spending is crazy by almost anyone's standards (especially on this forum), but step back a bit and try to understand the psychology of what is going on here.

Humans are really bad at knowing absolutes (rich, poor, strong, good looking,whatever). Most of the time we use relative values. I had a fascinating discussion with a guy in this income range (Two full-time highly pain physician couple) and he said at this income level you get a taste of what it's like to be really rich (.01% - where price starts to become completely irrelevant to almost all purchasing decisions). He said in some ways it makes things worse because you start to entertain things that you never would have considered at the 100k income level. It opens more doors, but also more decisions. It is a bizarre thing that is only really understood by actually being in that position.

Also the guy didn't say he was middle class, he said he FEELS like middle class in some ways. Those two things are pretty different.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: mm1970 on May 19, 2016, 10:34:18 AM

And the kids are in school.

So you need a full time nanny when the kids are in school?

They'd at least need one on call. What if the kids need to be picked up sick in the middle of the day?
Isn't that what PTO is for?

Sorry, I'm speaking as your average every day parent.

From an opportunity cost perspective, it may make sense for them.  Even my wife and I, lowly corporate middle managers, have to play the "who is less busy today" game when our daughter gets sick or has a doctor's appt.  If the one parent has a waiting room full of patients/appointments, and the other has demanding clients or whatever else, it is absolutely possible they can't always drop everything and go pick up a kid.  I have a ton of flexibility at work, but I still have certain meetings on certain days where I just can't miss it unless there is a life or death crisis. 

It's also possible/likely that the $60k for the nanny reflects that the nanny only has the kids for X hours a day as they are at school, and if it was for 40-50-60 hours (ie no school) the $60k would be more.  Or that only 1-2 of the kids is school age and there are others at home not in school yet.

Or a zillion other possibilities.
Yeah, I realize that.  Husband and I are both engineering "middle managers" though I don't manage people any more, just projects.  And we play the "who is less busy" game - mostly scheduling around our meetings.  I can understand the doctor aspect with patients (or teacher, or dentist, etc. less schedule flexibility).

But I live in a HCOL area too, and $60k for a nanny is pretty much a full time nanny.  At their income, they can afford it.  But it seems like they are complaining about it.  If you can afford a full time nanny AND private school at $120k a year, you are not middle class.  You aren't. Either put your kids in public school (and pay for the nanny), or stick with private school and choose a "cheaper" method of childcare.  They do exist.  After school care, emergency babysitters/ childcare.  On-call nurses.  All of that would very likely add up to less than $60k per year.  Of course it's not as convenient.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: joleran on May 19, 2016, 01:51:34 PM
I have no idea, and really don't think about it, but I realize we're in the high 1% bracket.  We live an average lifestyle for our community (small, Midwest town), and no one besides my employer, wife, accountant, trust attorney, and financial planner have any idea we make that kind of dough.

Are you two doctor surgeons/specialists?  I can't imagine what else would possibly have you making that kind of money in a small, Midwest town without you being a business owner.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: Camarillo Brillo on May 19, 2016, 01:54:06 PM
I have no idea, and really don't think about it, but I realize we're in the high 1% bracket.  We live an average lifestyle for our community (small, Midwest town), and no one besides my employer, wife, accountant, trust attorney, and financial planner have any idea we make that kind of dough.

Are you two doctor surgeons/specialists?  I can't imagine what else would possibly have you making that kind of money in a small, Midwest town without you being a business owner.
No, I'm on the Exec Team at a midsize company.  My wife is a homemaker.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: TheGrimSqueaker on May 19, 2016, 02:22:44 PM
Also the guy didn't say he was middle class, he said he FEELS like middle class in some ways. Those two things are pretty different.

It's because his life still has OR in it, and he's allowed himself to believe there's such a thing as a lifestyle that doesn't.

When a person is really poor, they might have to choose between rent OR food. With a bit more income, they can have rent AND food. At the middle class level there's enough AND to cover the needs, some wants, and a few nice-to-haves. But not all of the wants or nice-to-haves, because those are still OR decisions.

People fantasize about having a completely AND lifestyle, where they don't have to make tough decisions or give up things or experiences that they want in order to get others. But it's just a fantasy.  Nobody ever truly gets to a complete AND. It's a desert mirage or the end of the rainbow. No matter what dollar figure people think they need, when they attain it they might have the pot of gold but the end of the rainbow is somewhere else. Why? Because the AND is not complete, and new OR options have appeared out of nowhere. They always do. Resources are finite, but options for consumption is not. Potential expenditures always appear to consume and then exceed all means that you choose to make available.

No matter how high your income becomes, there are always tradeoffs to make. There's always a lifestyle that's even more AND-ish that would allow you to exercise both options simultaneously if you so chose. That I think is what it means to "feel" middle-class the way the author stated.

There's such thing as a happy, relaxed life, but a person simply needs to stop chasing the complete AND. That's what happens when some billionaire decides to give it all away, or when a Mustachian goes FIRE. They are satisfied with the level of AND they have.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: jinga nation on May 19, 2016, 02:44:40 PM
Also the guy didn't say he was middle class, he said he FEELS like middle class in some ways. Those two things are pretty different.

It's because his life still has OR in it, and he's allowed himself to believe there's such a thing as a lifestyle that doesn't.

When a person is really poor, they might have to choose between rent OR food. With a bit more income, they can have rent AND food. At the middle class level there's enough AND to cover the needs, some wants, and a few nice-to-haves. But not all of the wants or nice-to-haves, because those are still OR decisions.

People fantasize about having a completely AND lifestyle, where they don't have to make tough decisions or give up things or experiences that they want in order to get others. But it's just a fantasy.  Nobody ever truly gets to a complete AND. It's a desert mirage or the end of the rainbow. No matter what dollar figure people think they need, when they attain it they might have the pot of gold but the end of the rainbow is somewhere else. Why? Because the AND is not complete, and new OR options have appeared out of nowhere. They always do. Resources are finite, but options for consumption is not. Potential expenditures always appear to consume and then exceed all means that you choose to make available.

No matter how high your income becomes, there are always tradeoffs to make. There's always a lifestyle that's even more AND-ish that would allow you to exercise both options simultaneously if you so chose. That I think is what it means to "feel" middle-class the way the author stated.

There's such thing as a happy, relaxed life, but a person simply needs to stop chasing the complete AND. That's what happens when some billionaire decides to give it all away, or when a Mustachian goes FIRE. They are satisfied with the level of AND they have.

I am not a Buddhist nor particularly religious, but I find Buddhism's Four Noble Truths to be Mustachian. Especially in the Second Noble Truth. The Cause of Suffering: By watching people Buddha found out that the causes of suffering are craving and desire, and ignorance. The power of these things to cause all suffering is what Buddhists call The Second Noble Truth.  http://www.buddhanet.net/e-learning/buddhism/bs-s04.htm (http://www.buddhanet.net/e-learning/buddhism/bs-s04.htm)
Title: Re: I make $900K per year, but I'm only middle-class
Post by: bacchi on May 19, 2016, 02:51:49 PM
On $950k of income, federal and state taxes are likely ~$400k.
I always assumed people at that level have figured out pretty well how to manage to not pay much in taxes.

One assumes the day trading income is all short term capital gains, right? Unless the doctor owns her practice (or a part of it), she's getting wage income, not dividends. If she owns it, she may be getting a low salary and taking as much as she can as dividends from the corporation.

The dividends would be taxed as regular income.  You may be able to avoid Medicare taxes, but the dividends are not capital gains.  The bigger area of ownership is the ability to depreciate fixed assets and buildings.  So if she owned the building she was in, then maybe you can lower your tax.  AMT and other provisions will force some tax to be paid.  Most likely she is an employee and therefore not much to do, except max out 401k.

Or using the bogus "carried interest" loophole to pay LTCG rates.

Or it's futures/1256 trading, which is treated as a 60/40 split. Make $100k, pay income tax only on the $40k.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: bacchi on May 19, 2016, 02:53:42 PM
Also the guy didn't say he was middle class, he said he FEELS like middle class in some ways. Those two things are pretty different.

It's because his life still has OR in it, and he's allowed himself to believe there's such a thing as a lifestyle that doesn't.

When a person is really poor, they might have to choose between rent OR food. With a bit more income, they can have rent AND food. At the middle class level there's enough AND to cover the needs, some wants, and a few nice-to-haves. But not all of the wants or nice-to-haves, because those are still OR decisions.

People fantasize about having a completely AND lifestyle, where they don't have to make tough decisions or give up things or experiences that they want in order to get others. But it's just a fantasy.  Nobody ever truly gets to a complete AND. It's a desert mirage or the end of the rainbow. No matter what dollar figure people think they need, when they attain it they might have the pot of gold but the end of the rainbow is somewhere else. Why? Because the AND is not complete, and new OR options have appeared out of nowhere. They always do. Resources are finite, but options for consumption is not. Potential expenditures always appear to consume and then exceed all means that you choose to make available.

No matter how high your income becomes, there are always tradeoffs to make. There's always a lifestyle that's even more AND-ish that would allow you to exercise both options simultaneously if you so chose. That I think is what it means to "feel" middle-class the way the author stated.

There's such thing as a happy, relaxed life, but a person simply needs to stop chasing the complete AND. That's what happens when some billionaire decides to give it all away, or when a Mustachian goes FIRE. They are satisfied with the level of AND they have.

Nicely put.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: With This Herring on May 19, 2016, 04:44:38 PM
On $950k of income, federal and state taxes are likely ~$400k.
I always assumed people at that level have figured out pretty well how to manage to not pay much in taxes.

One assumes the day trading income is all short term capital gains, right? Unless the doctor owns her practice (or a part of it), she's getting wage income, not dividends. If she owns it, she may be getting a low salary and taking as much as she can as dividends from the corporation.

The dividends would be taxed as regular income.  You may be able to avoid Medicare taxes, but the dividends are not capital gains.  The bigger area of ownership is the ability to depreciate fixed assets and buildings.  So if she owned the building she was in, then maybe you can lower your tax.  AMT and other provisions will force some tax to be paid.  Most likely she is an employee and therefore not much to do, except max out 401k.

Or using the bogus "carried interest" loophole to pay LTCG rates.

Or it's futures/1256 trading, which is treated as a 60/40 split. Make $100k, pay income tax only on the $40k.

Just to clarify for other posters:
In Bacchi's futures/1256 trading example, the entire $100K is taxed, but only $40K is taxed as being short-term capital gain (the $60K balance is taxed as being long-term capital gain).
Title: Re: I make $900K per year, but I'm only middle-class
Post by: JAYSLOL on May 19, 2016, 08:08:41 PM

And the kids are in school.

So you need a full time nanny when the kids are in school?

They'd at least need one on call. What if the kids need to be picked up sick in the middle of the day?

The "full time nanny" is either actually a part-time nanny and part-time house cleaner, or really is a full time nanny because even when the kids are out of school the parents are still working and hardly spend any time with their kids
Title: Re: I make $900K per year, but I'm only middle-class
Post by: jengod on May 19, 2016, 10:03:01 PM
This guy's post makes me want to die. Where did we go wrong? Jesus.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: MgoSam on May 20, 2016, 09:47:26 AM
Sadly, I can see a close family member thinking this. Between the two of them, they likely make at least $1M, live in a $2M house in the east coast and have three children. Thankfully they are sensible to voice the concern that they are "middle class," outloud, but they feel stretched by finances at times. My family member gets the bulk of his income from consulting and I think he has more opportunities than he's willing to take, so he might be taking a few more consulting gigs to help them out from time to time.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: LawMMMan on May 20, 2016, 11:13:03 AM
OMG, I am in the Midwest and by all accounts doing well (nearing top 1-2% income in state).  We would plow so much money into investments with just 1 year of that monster income.  It would be glorious and life altering!
Title: Re: I make $900K per year, but I'm only middle-class
Post by: Roboturner on May 20, 2016, 12:01:31 PM
https://www.youtube.com/watch?v=-KTsXHXMkJA

relevant.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: OurTown on May 20, 2016, 03:00:01 PM
Everybody thinks they are middle class.  How's this for an objective standard:  15% marginal tax bracket = working class; 25% = middle class; 28% = upper middle class; everything above that is high income.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: MrsPete on May 21, 2016, 08:41:17 AM
From Bogleheads forum:
https://www.bogleheads.org/forum/viewtopic.php?f=2&t=191337
A variety of thoughts:

- He seems to think being middle class is bad.  Not just beneath him, but bad.

- The three kids are triplets.  That is more expensive than three singletons, but while it might be a difficulty for a middle class family, it shouldn't matter to these guys. 

- I hear Dad's concern about providing his three girls with all the right opportunities, but I hear absolutely nothing about family time.  He mentions his desire to provide them with all the right stuff, to place them in the right schools, but his only nod to spending time with them is a mention of domestic vacations.  If I could speak to him, I'd say, "Priorities, dude, priorities."  I don't think having the nanny for three pre-schoolers is a bad thing, but I also suspect they're not sitting down to dinner together on a regular basis and really talking to these kids.   

- More about the nanny:  Did they actually say they'd continue her full-time status after the kids start school?  As someone else said, I suspect she's actually part-time nanny, part-time housekeeper.  I can see that with three kids they might continue to welcome help; imagine triplets who all need to do their 30 minutes of reading with a parent every evening -- I loved that with my kids, but it was sometimes tough to work in, and I only had one at a time.

- And they say they spend another 15K on help with the yard, etc.  So they're spending 75K/year on help.  I can see needing some help with three kids, and mom is more than making enough money to justify paying for that help, but if they're paying that much for other stuff, they have "too much house". 

- I see a disconnect in one spot.  They say they're both from long-time money families, big inheritances, both encouraged and given "all the right opportunities" as a child ... yet they are giving their parents money.  If the families are really all that wealthy, why can't their retired parents take care of themselves?  I suspect smoke-and-mirrors, families who project the look of money but don't actually have it, big hat - no cattle.  How could the writer not know this?

- Um, this guy thinks that with three in college he will qualify for some financial aid?  Deluded. 

- He received some excellent advice, but his own response made no sense.  He doesn't even acknowledge that he has options. 

- One last thought:  This guy's problem is that he has an external thermometer.  That is, he's not paying attention to himself, his own achievements, his own happiness -- rather, he's looking around at the neighbors and co-workers, and he's measuring himself against what he perceives they have/have accomplished.  Two major problems with this.  First, he's not able to see what they actually do/don't have -- he can only judge by what they allow him to see.  He can see their massive houses, but he can't see their debt.  Second, no matter who you are, someone always has more and someone always has less. 
Title: Re: I make $900K per year, but I'm only middle-class
Post by: franklin w. dixon on May 21, 2016, 10:43:52 AM
Hah!  What gets me is how they can employ a nanny, which they reasonably pay $60K and still have this perspective.  What class do they think the nanny is in?!  How do they think she is getting by on such a tiny salary?  Do they think that simply having 3 kids would automatically add $300K+ to their budgetary needs?!

Yowza.
For a couple years I worked with a woman named Claire whose boyfriend was a Bangladeshi bagooglyaire. I always thought it was funny that she had a really sensitive and well-developed sense of racial politics (because her family was super racist against her boyfriend), but didn't even have a hint of self-awareness regarding class politics. So she'd tell stories about how great Bangladesh is based on events like "traffic was really bad so we went by helicopter" and she'd make generic statements about Bangladeshi people like "oh everyone speaks English half the time" and "oh over there everyone has servants." Occasionally I'd say exactly what you have: "Really? Are you sure everyone has servants? Do the servants have servants?" but it never made any impression.

Anyway her family was hilarious too because I mean. Most people can keep their bigotry inside once you put a few million dollars on the table. But not Claire's mom, so she moved to Bangladesh forever, and more power to her, but I guess she's basically Marie Antoinette now so she better look out for guillotines.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: BlueHouse on May 21, 2016, 07:53:03 PM
bagooglyaire
YA!!!!!
Title: Re: I make $900K per year, but I'm only middle-class
Post by: stylesjl on May 21, 2016, 11:57:24 PM
I tried looking it up in Google and yet 'bagooglyaire' did not return any results, not even this thread.

Is that like the term squillionaire, only for Bangladeshis?
Title: Re: I make $900K per year, but I'm only middle-class
Post by: elysianfields on May 23, 2016, 12:00:39 PM
Everybody thinks they are middle class.  How's this for an objective standard:  15% marginal tax bracket = working class; 25% = middle class; 28% = upper middle class; everything above that is high income.

Nice try, and there's too much variability to use tax brackets this way.  Single vs. MFJ, 0 children vs. 1 vs. 2 vs. 10, standard deduction vs. itemized deductions, low COLA to high COLA...

In Pew Research's latest report on America's Shrinking Middle Class (http://www.pewsocialtrends.org/2016/05/11/americas-shrinking-middle-class-a-close-look-at-changes-within-metropolitan-areas/ (http://www.pewsocialtrends.org/2016/05/11/americas-shrinking-middle-class-a-close-look-at-changes-within-metropolitan-areas/)), they define the middle class as 2/3 to 2x the median household income, after adjusting for household size and area COL.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: StockBeard on May 23, 2016, 02:40:05 PM
$900k/yr really isn't all that much in some areas.
Excuse me? Someone making that amount of money would make in 3 years the amount it takes a life for average household in the US (the richest country in the world) to make.

Where exactly on Earth is $900K a year "not all that much"? And with a more constructive criticism, what is there in that place on Earth that makes it so desirable that people would be ok to feel that 900K is only "average" just so that they could live there...?
Title: Re: I make $900K per year, but I'm only middle-class
Post by: mm1970 on May 23, 2016, 04:05:19 PM
Hah!  What gets me is how they can employ a nanny, which they reasonably pay $60K and still have this perspective.  What class do they think the nanny is in?!  How do they think she is getting by on such a tiny salary?  Do they think that simply having 3 kids would automatically add $300K+ to their budgetary needs?!

Yowza.
For a couple years I worked with a woman named Claire whose boyfriend was a Bangladeshi bagooglyaire. I always thought it was funny that she had a really sensitive and well-developed sense of racial politics (because her family was super racist against her boyfriend), but didn't even have a hint of self-awareness regarding class politics. So she'd tell stories about how great Bangladesh is based on events like "traffic was really bad so we went by helicopter" and she'd make generic statements about Bangladeshi people like "oh everyone speaks English half the time" and "oh over there everyone has servants." Occasionally I'd say exactly what you have: "Really? Are you sure everyone has servants? Do the servants have servants?" but it never made any impression.

Anyway her family was hilarious too because I mean. Most people can keep their bigotry inside once you put a few million dollars on the table. But not Claire's mom, so she moved to Bangladesh forever, and more power to her, but I guess she's basically Marie Antoinette now so she better look out for guillotines.
This is funny. I  have a friend from Bangladesh, but not from a rich family.  She must not really get out  much - I mean, she only has to watch a TV show like Amazing Race when they go to India to get a clue.

I have a friend who was pretty much middle class and married into a wealthy Filipino family.  She waxed on and on at how amazing the Philippines are after her first visit.  Um...you only really saw a small slice.
Title: Re: I make $900K per year, but I'm only middle-class
Post by: jeromedawg on May 24, 2016, 04:09:25 PM
Digression:

Triplets... I was just thinking about this. How common is it to have triplets? Well, it doesn't seem all that common. Either they're really lucky or they're really rich (enough to afford several rounds of IN VITRO)... well, they're probably both lucky and rich. Ahhh, now it's starting to all make sense.

Based on their income, I really would be surprised at all if they dropped $$$ like it was nothing on IN VITRO, and when they found they were having triplets, they were probably like "CHECK - kids done"

Title: Re: I make $900K per year, but I'm only middle-class
Post by: jeromedawg on May 24, 2016, 04:14:44 PM
Interesting. I don't think the guy is a troll, because I have met people with this mindset in similar situations.

First of all they are living in one of the most expensive areas in the country in one of the highest tax areas in the country. There is no escape from the tax code when your income is W2 or similar.

Of course the amount of spending is crazy by almost anyone's standards (especially on this forum), but step back a bit and try to understand the psychology of what is going on here.

Humans are really bad at knowing absolutes (rich, poor, strong, good looking,whatever). Most of the time we use relative values. I had a fascinating discussion with a guy in this income range (Two full-time highly pain physician couple) and he said at this income level you get a taste of what it's like to be really rich (.01% - where price starts to become completely irrelevant to almost all purchasing decisions). He said in some ways it makes things worse because you start to entertain things that you never would have considered at the 100k income level. It opens more doors, but also more decisions. It is a bizarre thing that is only really understood by actually being in that position.

Also the guy didn't say he was middle class, he said he FEELS like middle class in some ways. Those two things are pretty different.

Interesting... I can see my cousin being in this position, just recently getting onto an anesthesiologist's salary coming out of several years of med school and and residency, and working as an engineer prior. He was always raised on a frugal mindset with a keen eye for deals, manufacturing spending, and making money on the side via side-hustles and likely investments. I noticed after he was working on this salary for a while, he started buying stuff that he probably wouldn't have bought prior. But at the same time, he wasn't going too overboard about it, and I'm sure he still looked for the best deals. He probably just felt like he didn't have the time to deal-seek/shop as much and actually had/has the freedom to splurge when he wants. He is marrying into a multi-billion dollar family, FWIW, so I'm pretty sure he's doubly-set to live the most anti-mustachian lifestyle he wants to from this point on. Only time will tell if he still treasures modesty and a simple life of humility vs one filled with toys only the rich and famous would ever touch ;)