Reader Case Study: Can we retire in 11 years? Move to Bay Area?

[bluelion]

Age: 38 & 40 (married 10 years, similar incomes)
Kids: 2
Fixed Income:  320K (pre-tax salaries)

Assets: 

Wife Retirement Accounts: 262K (includes Roth, Rollover and 401K, always contribute max to 401K however company does not match)
Husband Retirement Accounts: 287K (includes Roth, Rollover and 401K)
CASH: $300K (sitting at 0.9%, we were hoping to buy some investment property in Las Vegas, however it did not work out)
Trading Account: 333K (VTSAX and about 10 stocks)
Condo: 220K (principal paid to date, probably won't make money selling when we factor in renovations, comissions, etc, so let's keep it simple here)
Cars: 2 (4 and 6 years old, fully paid for)

Total Assets: $1,402K + paid for newish cars

Liabilities
Outstanding Mortgage: 400K @ 3.5%

NetWorth: $1,002K

Monthly Expenses:
Condo: $3,000 (Mortgage+ HOA+ Property Taxes+ Condo Insurance)
Home Maintenance: $30 (renovations completed 3 years ago, so now just minor maintenance, no cleaning lady or anything)
Food: $1,200 (mostly organic groceries, farmers market and eating out once a week)
Auto Gasoline + Maintenance $300 (work is actually close, gas money covers almost every weekend at the beach or visiting relatives/friends)
Auto Insurance: $130
Childcare: $1,600 (preschool+after-school care)
Health: $400 (includes our portion of dental+medical insurance)
Charity: $400
Gifts: $200 (x-mas, b-days, etc)
Cellphones: $20
Internet: $0 (paid for by employer)
Gas: $30
Electricity: $175
Personal Care: $100
Gym: $200 (Crossfit)
Clothing: $200
Entertainment $100
Vacation fund: $500
Husband Life Insurance: $50 (for $1 million)

Total Monthly Expenses: $8,435

x12= Total Yearly Expense=$101,220 per year

Considering a move to the Bay Area and based on offers we received, our income can increase by almost 20%. The company my hb would go for had a recent IPO and is stable and I would go to a 3 year old start-up. The condo could be rented out for about $2,700, which does not make much financial sense, but it would be around in case we don't like living in the Bay area. If we were to sell it, realtor comissions, closing costs, etc... we will barely break even counting the renovations. Not sure how to decide whether to rent our condo or sell it, or whether to even consider moving to the Bay Area for that amount of income increase. We currently live in SoCal, which is not as expensive as the Bay Area. There is almost no chance of increasing our income with our current employers, as we have topped out for what we want to do. We do not want to enter management as we cannot deal with being on international calls at night. Work-life balance is very important to us and we greatly value family time. 9-7 is enough time spent at work. Other employers in the area seem to offer similar pay, so no 20% increase possible. There is also the lure of the ISOs with the start-up company that has been courting me. I know that probably 8 out of 10 startups fail, but I keep on hoping for FU money and this company has good management and great product. ISOs are my version of the lottery...


We do not have student loans as we worked through university/grad school (CS degrees). No cable, watch free TV.  Our goal is to retire in 11 years or earlier. At least one of us needs to retire in 11 years as the first kid reaches high school and we want to help with homework, sports, etc.. We are not opposed to having one parent home and the other still working for a few more years just to tuck more money away. Given our high expenses, we need a plan to make this work. We want to retire near family and friends, thus either stay or come back to SoCal. Should we move to Bay Area for 20% income increase? Will we just wasting it on the cost of living increase there? Are those of you living with kids in the Bay Area spending less than us? I gather rents are even higher than SoCal and we would be almost priced out of buying in many areas.  If the move makes sense, should we rent or sell the condo given that we might come back early or just come to retire here?

What to do with the CASH? We are conflicted about putting it all in the market as the market seems high, however there's no magic ball. The market can keep on going up and can just keep on missing out...like we have for almost 2 years that we were hoping to buy property in. Should we dump it all in VTSAX or do it at the rate of 20k a month?


Any obvious places to cut expenses? We are going to tackle the Food category, probably just stick to organic meat, dairy and buy organic whatever's on the dirty dozen list. This will probably save us about $300. Any other suggestions on where to cut? Vacation fund seems obvious, but we do spend that much since we tend to travel to Europe and give cash gifts to relatives there. We have felt that charity begins at home and we have helped less fortunate relatives pay for surgeries, medications, etc... We do not stand to inherit anything, so this is not the motivation, nor would it factor into our retirement plan.


Sorry if the post is a bit on the rambling side. We would be very grateful to any insight/advice you can offer.

Thank you in advance! Cheers!

[wtjbatman]

Not sure how you can possibly live on only $320,000 a year. What do you pay your servants? Clearly not enough. Just kidding.

Did you realize that if you invested your cash, your investment stash alone would be over $1.1 million, and you could withdraw nearly $50,000 a year with a 4% SWR?

I know this doesn't actually answer any of your questions, but I'm just curious, what is your end game? How much will you spending be in "retirement"? What is your savings rate? You say one of you intends to retire in 11 years, how much will you have saved by then? Enough to withdraw $102,000 a year (good god) to support your current expenses? Do you have any mustachian tendencies and do you want to start stretching your frugality muscles, or are you happy with your current path and are just looking to cut a few corners and squeeze a few extra hundred grand out before your ER?

[MDM]

bluelion, welcome aboard.

Some thoughts:
  - Q. "Can we retire in 11 years?"  A.  Likely yes, barring any major catastrophes
  - Q. "Move to increase income?"  A.  Don't know enough about COL and quality of life differences for you.

  - You can make 3.5% on your cash by paying down your mortgage.  That's one middle ground between staying in cash vs. investing now.
  - No way to know if the market will drop far enough soon enough to make "holding cash" the correct play.
  - How's that Trading Account working?  I.e., are you beating the market on individual stocks or should you go back to playing the odds and stick with index funds?
  - You have ~$90K/yr available for after-tax investing, correct?  Are you in fact investing that much each year?  This is a big factor in your "can we retire?" question.
  - Minor point: the listed monthly expenses total $8,635 not $8,435. 

That should be enough for starters....
 

[former player]

You are FI now, provided you invest your assets in the stock market and reduce your expenses sufficiently to live off 4% of your invested income.  Somehow I don't see this happening, but it might be worth you reminding yourselves that you are rich, and that if you carry on working you are doing it in order to become richer.  You don't need to ask "when" you can retire: the question for you is "how much is enough?"  Knowing "how much" will answer "when".

You would be moving for $64,000 a year increase in income, plus the chance of an ISO "win".  You would have the higher costs of living in SF to set against that, but you are already in a high COL area and I doubt that SF would cost you $64,000 more a year (I suppose it could, if you wanted it to, but then you are not remotely mustachian so why would you be on this forum?).  You are doing more than fine financially where you are, so the extra money would be a "want" not a "need".

So this isn't primarily a financial decision.  It's a "which is the best place for us as a family to live?" decision.

On the condo, the first question is "if we were starting again with the same amount of money, would we buy this condo again? If not, sell it.  The second question is "is this the place we would ideally live in for the rest of our lives once we come back to SoCal, and if not, can we either buy something better for the money now or something better for the money we will have when we come back"?  If you will want to live in it, keep it, if you don't then it is purely a financial investment and keep it if the rental return and appreciation make sense.

[alsoknownasDean]

I guess it's up to you as to whether you'd want to use the cash to pay off the mortgage.

Whilst spending $100K a year is in no way Mustachian, once the mortgage is gone and one person retires, half of that expenditure goes.

$200 a month for the gym? Time to find a cheaper one!

[Jennifer in Ottawa]

You could both retire immediately if you wanted to, and definitely one of you could retire today.

I see at least $3300 in monthly expenses you could trim, if you were willing to make the lifestyle changes necessary to making that happen. Groceries $800 chopped, Childcare - $1.6k, Gasoline - $150, Charity - $200, Electricity - $75 to start, Personal Care - $75, Gym - $200, Clothing - $150, Entertainment - $50. Vacation - Well really 6k for a family vacation once a year isn't over the top, but that's based on what Canadians would pay.  I suspect American's can travel to and enjoy vacation destinations for much less.

Heck, even if you didn't change a single spending category, you are swimming in money.  On one salary alone, after your current expenses, you have an average American's salary left over.

You have FU money and then some, by most people's definition of it.




 

[bluelion]

Appreciate everyone taking the time to read and post. To clarify:

Many of the comments we received in response to our post are that we are not Mustachian, however it is all relative to income, location, etc.. In relation to our friends, we have the cheapest home-- we bought a 600K condo vs their 1.2 million and up houses. We do our own home cleaning versus having a $450/month cleaning service. We shop at outlets versus Neiman Marcus. We eat out once a week, they eat out 4-5 times a week. Our kids went to daycare, theirs had live-in nannies til 5. We have decided to retire in expensive SoCal as this is where we have our support system. Our friends are mostly doctors, lawyers and business owners.

Crossfit might seem excessive to some of you, but even Mrs. MMM uses Crossfit because it works. Lately our natural tendency has been more towards couch potato than elite athlete and Crossfit actually gets our butts in shape. Family health history being what is is, we feel that investing in health/fitness would be our best "insurance". BTW, we have tried everything from dive gyms to high end gyms via Groupons, and none of the gyms offered classes that worked for our schedule, they seemed more tailored to housewives or to people that can take 2 hour lunches.

Vacation spending will continue to be high as we have grandparents and cousins in Eastern Europe. It is important for us that our kids know their relatives in Eastern Europe. When the kids are older, it will be a good reality check for them to see life in a third world country.

We graduated during the DOT COM burst and our incomes were much lower than those of the people graduating before us. For the most part we've lived on one income and saved the other. We've also lost some money investing in a friends' business and learned some valuable lessons along the way. I also took 1 year off work with each kid, which I know is a luxury in this country but it was something essential to us.

Bay Area living is pricey and we are very conflicted about even making the move. If we are to live close to our prospective jobs, rents are higher than our mortgage payment but farther away you have the commute, money and time lost with those. I guess I'm having a hard time running the numbers and seeing if it makes sense to move at all. We do have friends from college that live in the Bay Area, but they are multi-millionaires and unable to provide true prospective. Besides, they are biased and want us to move.

We can run the numbers on investing the cash, however it's more of a question of market timing. The talking heads are all screaming the market is too high, however no one has a crystal ball. Usually I am the riskier investor, however in this case I'm actually a bit scared. Trying to figure out whether to go for the dollar cost averaging and invest 20k every month or to just dump it all in VTSAX. Even considering buying BRK-A. I guess I need to do a worst case scenario calculation, based on the previous crash.

Would we purchase this condo again? Yes we love the condo and the community here. Neighbors are friendly, helpful, will bring you food when you are sick and sweets when you are not. Kids come and knock on your door to play with our kids. Only problem we see going forward is that the building is getting old and there is no earthquake insurance. When we purchased, they said the HOA was actually in the process of buying earthquake insurance. This has not happened. We've been on the board for 2 years and it gets voted down which is very frustrating. The idea of putting all our cash into this condo and having an earthquake potentially wipe it all out is too risky. Riskier than the stock market right now...

What is our retirement number? About 3 million would make us comfortable with the idea of retiring. Given this high number, you can see how we feel we are behind. We want to have flexibility for helping our kids with college, but not so much help that we cripple their potential. Given our family health history we want to have enough for medical expenses, long term care insurance, etc... Our goal is not to burden our children.

[nereo]

Hello bluelion, and welcome.
I understand that you are far more mustachain than most in your area, especially having lived around the SF bay area.  Still, there's always room for improvement if you so choose.  It just depends on what your priorities are.

We can run the numbers on investing the cash, however it's more of a question of market timing. The talking heads are all screaming the market is too high, however no one has a crystal ball. Usually I am the riskier investor, however in this case I'm actually a bit scared. Trying to figure out whether to go for the dollar cost averaging and invest 20k every month or to just dump it all in VTSAX. Even considering buying BRK-A. I guess I need to do a worst case scenario calculation, based on the previous crash.

Regarding the cash-on-hand.  Ignore the talking heads.  They get paid to stir up emotions, and what's worse no one ever holds them accountable.  As you said no one knows whether hte market will go down this year or month or week, but since you are looking at 11 years until retirment it is very likely that the market will have gone up after 11 years.  Which is more than you can say for holding cash, where you loose money every day to inflation.  More than 95% of 11 year periods, the market beat out inflation.
The safest play you could make is to use that money to pay off the mortgage.  Personally I'd still invest it in the market.  Holding it in cash at <0.9% is the worst thing you can do.

Any obvious places to cut expenses?

Food is the obvious one.  Even buying organic, it's possible to eat very well at home for a family of four for under $800.  Also, I'd start reconsidering a $1M life insurance policy when you already have $1M in net assets.  $50/month is a small potato, but consider at what point you would be comfortable letting that go.  With vacations, challenge yourself to go on a family vacation for half what you are budgeting.  My Fiancee and I spent a week in yosemite off-season and we spent less than $600, including meals and travel.

What is "entertainment" to you if you already have 'eating out' and 'vacations' and 'internet' listed.

[$_gone_amok]

We live in the Bay Area and can offer you some insight base on our experiences.

In the South Bay (Mountain View, Palo Alto, Menlo Park etc.) $3,000 is barely enough to rent a 3 bedroom house and may not be as good as your current living condition.  Houses in desirable school districts (Palo Alto, Cupertino, Mission San Jose in Fremont) are selling for $1.1 M or more. Unless you are welling to send the kids to private school ($1.5 to 2K/month each child) by settling for a house ($700K) in a less stellar school district, I predicate the increase in housing cost will be much more than 20%.  Cost in San Francisco is slightly higher (both housing and child care).  So by moving to the Bay Area and to retain the same quality of living in SoCal, you will actually be further removed from your retirement goal.

As for what to do with the 300K in cash.. If I were you, I'd gradually invest in a few index funds over the next 12 months.

Edit...

You may also want to factor in the commute time to your jobs by moving to the Bay Area.  A 20% bump in pay may not worth it if you are stuck in the traffic over an hour each way.

[bluelion]

nereo, entertainment is museum membership, San Diego Zoo/Safari Park membership, concerts, etc...

$_gone_amok, thank you for the Bay Area prospective.  The more we look into it, the more we think we need to negotiate a work from home agreement with periodic flights into HQ. Is this common? Moving just doesn't make sense financially. 

[MDM]

The more we look into it, the more we think we need to negotiate a work from home agreement with periodic flights into HQ. Is this common?

Common, no.  Ever done, yes.

You won't know unless you ask.

[Another Reader]

Here are some MLS listings of rentals that give you an idea of rents in Silicon Valley.

http://mlslistings.com/browse-listings/santa-clara-county/mountain-view/filter/forrent#/

http://mlslistings.com/browse-listings/santa-clara-county/sunnyvale/filter/forrent#/

http://mlslistings.com/browse-listings/santa-clara-county/palo-alto/filter/forrent#/

http://mlslistings.com/browse-listings/santa-clara-county/cupertino/filter/forrent#/

http://mlslistings.com/browse-listings/santa-clara-county/santa-clara/filter/forrent#/

San Jose and points south are a little less pricey, depending on neighborhood.  Craigslist and property management companies will have listings that are not on MLS, but the prices are about the same.

[bugbaby]

Hello, Math alert: your net worth is 1402K. If you only count the equity in the condo as asset, you can't then deduct the mortgage.  Only if you counted its full value ie 600k...

Now re: retirement: at the minimum of 25x annual expenses of 100k you'll need 2.5 m... Prob a lot less if you'll have mortgages paid off etc but that's counteracted by travel and other leisure expenses:    Add in kid's college, healthcare etc I'd estimate extra 500k so 3m: so you need 1.6m more: over 11 years minus 400k pretax that's 1.2 ( of course in today's $$ but that's hedged by pay raises etc. 

Congrats! You only need to save 110k a year to maintain current lifestyle.... And as you said one of you will keep working which is all gravy at that point.

Sent from my Lenovo S6000L-F using Tapatalk

[ch12]

We do not have student loans as we worked through university/grad school (CS degrees). No cable, watch free TV.  Our goal is to retire in 11 years or earlier. At least one of us needs to retire in 11 years as the first kid reaches high school and we want to help with homework, sports, etc.. We are not opposed to having one parent home and the other still working for a few more years just to tuck more money away. Given our high expenses, we need a plan to make this work. We want to retire near family and friends, thus either stay or come back to SoCal. Should we move to Bay Area for 20% income increase? Will we just wasting it on the cost of living increase there? Are those of you living with kids in the Bay Area spending less than us? I gather rents are even higher than SoCal and we would be almost priced out of buying in many areas.  If the move makes sense, should we rent or sell the condo given that we might come back early or just come to retire here?

If you want to retire in SoCal to be near family and friends, then why not move to SoCal? There's a serious tech community burgeoning in Los Angeles.  http://time.com/57159/silicon-valley-goes-to-los-angeles/

[emilypsf]

Are you looking to live in SF, on the Peninsula, or somewhere else?  Housing costs can vary quite a bit.  We haven't moved for three years, but from what I hear, $3,000 doesn't go far in the city or on the Peninsula these days.  If you're going to work in the city, the East Bay/Bart is probably your best bet for good rental prices.

What ages are your kids?  Full time preschool at the cheaper places here (in SF) is around $1,500/month, so if you're paying $1,600/month for two kids in full time preschool, that cost is going to double.  If that's preschool plus aftercare for elementary school, I'd expect it to go up but not double.  I think it is cheaper in the suburbs, and the bigger tech companies often have their own daycare/preschools, so that's worth looking into. 

Other than those two (obviously major) items, I don't see that your expenses would be higher here.  Hard to say whether that will eat up your salary increase without running the exact numbers.

Good luck!

[historienne]

$_gone_amok, thank you for the Bay Area prospective.  The more we look into it, the more we think we need to negotiate a work from home agreement with periodic flights into HQ. Is this common? Moving just doesn't make sense financially.

My husband has this setup with a Bay Area tech company.  However, we did live in the area when he got this job, so the negotiations were to let him stay in the job when we moved away (which is an easier sell, since they already knew him and his work ethic).  Still, it happens.

[starguru]

You listed your expenses, your income, but not your savings rate.  In this case it would depend on your taxes.  Also, do you get RSUs, ESPP, any other compensation?

Its eery; our numbers are almost exactly the same as yours.  We were talking about this the other day.  You need at least 25x your yearly expenses to be able to stop working (4% SWR, we are shooting for 30x, so a 3% SWR).   With income around 350k combined, expenses of ~100k a year, and getting ass-reamed by the governemnt, er I mean, paying our fair share of close to 30% in federal taxes, we are saving about 120k a year.  So with a million in the bank, saving 120k a year, we should have at least 2.2M in ten years (assuming no move in the market).  So there is a good chance we will have 3 million if the market delivers average returns.  Of course, this simple analysis does not consider a lot of factors:  the markets could move lower, we are not counting expected raises, and the big X factor, if we have another child...but I digress.

So, how much are you saving a year?  You have a good chance of making it if you can save at least 100k.  The more you save, the more you will be able to stop working with the same lifestyle you are used to.  But if I were you, I would look at it as "We need to get to X, and we will be financially independent"  For you, X seems to be a min of 2.5 million, and could be more.  Then, figure out how much you are saving a year, and then the match becomes simple.

[dragoncar]

Good responses here so I'll just add some notes:

After tax pay bump is only 10%, or around $32k/yr.  Does that change the calculus for you?  Do you know how much your housing expense will increase?  Sorry if answered, but which cities will these jobs be in?

I would consider doing it with the plan to get cheapest possible housing and pull out after hitting a target to low COL area.  Risk is that you love it here, build great relationships, and don't want to move your kids again.  Welcome to your new $1 million Palo Alto shack mortgage slavery.

If you think a 3 year startup is gonna offer work life balance, well you may be right, but be sure because that's not my impression.

Edit: also don't get defensive about your expenses... You asked where the obvious places I cut are, but a ton of that stuff should be real obvious. 

[$_gone_amok]

The more we look into it, the more we think we need to negotiate a work from home agreement with periodic flights into HQ. Is this common?

Common, no.  Ever done, yes.

You won't know unless you ask.

I agree. It is uncommon but not impossible. Ask.

[zedpol]

Where in the bay area are you planning on moving?  Costs are going to vary wildly depending where you end up.  In our area child care will probably end up being more than the 1600 you pay, like 2000-2200.  Rent for a 3 bedroom starts around 4k and is more likely in the 5K range.  All that will eat up a raise pretty quickly.  Feel free to PM me and I can probably help you with some of the COL stuff.

-z

[desrever]

I might get flamed for this, but your combined income actually seems on the low end of the scale for two folks with computer science degrees. My wife and I are in your same industry (we also entered the workforce in the dot com bust) and in terms of total compensation make more than double what you've shared, working for established companies as individual contributor software engineers. And we are dealing with Seattle costs and commutes, not San Francisco ones.

I'm saying this not to brag (well maybe I'm bragging about how awesome Seattle is) but to let you know there might be a third way that involves negotiating for substantially more in the Bay Area, or else getting the salary bump while moving someplace with lower costs and less sprawl.

You say that startups are a shot at FU money. I guess it's possible, but be aware of how much the lottery ticket costs, and for that matter, why you think you'd be made happier by winning that lottery. The important revelation of MMM, for me, is that your personal "fu money" threshold is something you have control over, and it's realistically much lower than people intuit. Without that understanding, fu money is just a shorthand for whatever you have, plus some fuzzily obtained percentage more. News flash:you already have fu money. Our generation of tech people has been taught that to really make it you've gotta found something and sell it off. But the truth is that with compensation what it is today, you can get insanely rich just selling your labor, and that's an outcome that's less of a gamble. A lot of people are chasing startups for wrong reasons that have a lot to do with social status and the mythology of startup culture. And maybe that's a valid choice for them. There are right reasons to want to work at a small unestablished company, but getting rich with high probability (so that you can tell people to go f themselves??) is not among them.

[dragoncar]

I might get flamed for this, but your combined income actually seems on the low end of the scale for two folks with computer science degrees. My wife and I are in your same industry (we also entered the workforce in the dot com bust) and in terms of total compensation make more than double what you've shared, working for established companies as individual contributor software engineers. And we are dealing with Seattle costs and commutes, not San Francisco ones.

I'm saying this not to brag (well maybe I'm bragging about how awesome Seattle is) but to let you know there might be a third way that involves negotiating for substantially more in the Bay Area, or else getting the salary bump while moving someplace with lower costs and less sprawl.

You say that startups are a shot at FU money. I guess it's possible, but be aware of how much the lottery ticket costs, and for that matter, why you think you'd be made happier by winning that lottery. The important revelation of MMM, for me, is that your personal "fu money" threshold is something you have control over, and it's realistically much lower than people intuit. Without that understanding, fu money is just a shorthand for whatever you have, plus some fuzzily obtained percentage more. News flash:you already have fu money. Our generation of tech people has been taught that to really make it you've gotta found something and sell it off. But the truth is that with compensation what it is today, you can get insanely rich just selling your labor, and that's an outcome that's less of a gamble. A lot of people are chasing startups for wrong reasons that have a lot to do with social status and the mythology of startup culture. And maybe that's a valid choice for them. There are right reasons to want to work at a small unestablished company, but getting rich with high probability (so that you can tell people to go f themselves??) is not among them.

Uh, you make $640k (you+spouse)?  This is the high end of CS salaries, by far.

[desrever]

I might get flamed for this, but your combined income actually seems on the low end of the scale for two folks with computer science degrees. My wife and I are in your same industry (we also entered the workforce in the dot com bust) and in terms of total compensation make more than double what you've shared, working for established companies as individual contributor software engineers. And we are dealing with Seattle costs and commutes, not San Francisco ones.

I'm saying this not to brag (well maybe I'm bragging about how awesome Seattle is) but to let you know there might be a third way that involves negotiating for substantially more in the Bay Area, or else getting the salary bump while moving someplace with lower costs and less sprawl.

You say that startups are a shot at FU money. I guess it's possible, but be aware of how much the lottery ticket costs, and for that matter, why you think you'd be made happier by winning that lottery. The important revelation of MMM, for me, is that your personal "fu money" threshold is something you have control over, and it's realistically much lower than people intuit. Without that understanding, fu money is just a shorthand for whatever you have, plus some fuzzily obtained percentage more. News flash:you already have fu money. Our generation of tech people has been taught that to really make it you've gotta found something and sell it off. But the truth is that with compensation what it is today, you can get insanely rich just selling your labor, and that's an outcome that's less of a gamble. A lot of people are chasing startups for wrong reasons that have a lot to do with social status and the mythology of startup culture. And maybe that's a valid choice for them. There are right reasons to want to work at a small unestablished company, but getting rich with high probability (so that you can tell people to go f themselves??) is not among them.

Uh, you make $640k (you+spouse)?  This is the high end of CS salaries, by far.

In salary no. With stock and bonuses yes. I imagine you're right that we're on the upper end of things. You indicated that you had topped out the job ladder in your current organization, what I'm offering is a example of what could happen in an organization where the ceiling is higher. Maybe you could get a similar package with a more exhaustive search. Maybe not. But we've found it easier to ask for more once we had a clue that more was possible, and that's all I'm trying to provide you.

[$_gone_amok]

I might get flamed for this, but your combined income actually seems on the low end of the scale for two folks with computer science degrees. My wife and I are in your same industry (we also entered the workforce in the dot com bust) and in terms of total compensation make more than double what you've shared, working for established companies as individual contributor software engineers. And we are dealing with Seattle costs and commutes, not San Francisco ones.

I'm saying this not to brag (well maybe I'm bragging about how awesome Seattle is) but to let you know there might be a third way that involves negotiating for substantially more in the Bay Area, or else getting the salary bump while moving someplace with lower costs and less sprawl.

You say that startups are a shot at FU money. I guess it's possible, but be aware of how much the lottery ticket costs, and for that matter, why you think you'd be made happier by winning that lottery. The important revelation of MMM, for me, is that your personal "fu money" threshold is something you have control over, and it's realistically much lower than people intuit. Without that understanding, fu money is just a shorthand for whatever you have, plus some fuzzily obtained percentage more. News flash:you already have fu money. Our generation of tech people has been taught that to really make it you've gotta found something and sell it off. But the truth is that with compensation what it is today, you can get insanely rich just selling your labor, and that's an outcome that's less of a gamble. A lot of people are chasing startups for wrong reasons that have a lot to do with social status and the mythology of startup culture. And maybe that's a valid choice for them. There are right reasons to want to work at a small unestablished company, but getting rich with high probability (so that you can tell people to go f themselves??) is not among them.

Do you mind sharing what software industry you are in? I'm in the "big data" group with a well established public company but I can't image a total compensation package of 300K+ as an individual contributor. Would you mind break down what percentage of the compensation are salary vs options/grants? Also, is this just the last few years or has this always been the case for you?

[msilenus]

Yeah, lot of good advice so far.  Dragoncar nailed the tax thing, which is hugely important.  Just to show his work: if you see $250k+ or so in income in California, you immediately know the marginal tax rate is in the 45%-50% range.  (AMT 28% + AMT phaseout 7% + CA 10% + Medicare and smaller numbers.  Not being able to deduct any of this makes the math real easy.)  So, yes, cut the 20% raise in half right off the bat.

$30k less COL change shouldn't be enough money to entice you on its own.  However, the flip side of the very high COL here is that it means you get huge savings from lifestyle compression.  (Decreasing square footage, accepting imperfect school districts, living farther away --esp in combination.)  So if you downsize your lifestyle while moving, you could wind up keeping most or all of that $30k.  Note that this could be a lot better than just downsizing in Socal, because doing that wouldn't return as much money per unit of lifestyle compression or come with a raise.

Still, it's going to be hard to make it enticing.  The big problem here is you're looking at moving up here with kids.  To illustrate: if you move here right out of college, that 20% COLA can pay more than your entire rent on a 1 BR shitpartment close to work, allowing you to save a metric ton of cash.  Hoard money like mad for a decade, and the enormous step up in housing costs to get the kids into a good school district stings, but isn't terrible.  (Or just retire then, if you're really hardcore.)  You've already built your careers somewhere else, so coming here with kids in tow is going to get you the worst of both worlds.

If I were in your shoes, I'd figure out what API score school district you want, figure out what that costs in Socal, and figure out what zip codes in the Bay Area offer comparable schools.  Run the numbers, compare then to $30k, and decide if enough money is falling out to entice you.  I suspect it won't, but think it's probably worth running the numbers.