> You need to save a few million dollars to retire with $40-$80k in investment income. It should be very possible to do this with a backend developer's salary over a period of 10-15 years,
How would a few million be possible? What is your contextual salary for this position, and their expected expenses?
Earn 250k on average across 15 years. This is quite conservative for FAANG. In California, you'll take home about 150k. Each year, live frugally off 50k and put away 100k in index funds. Over 15 years, you'll gain 7% real annual returns from the stock market. In 15 years you'll go from $0 to $2.5m. At a very conservative safe withdrawal rate of 3.5%, you can withdraw about 85k per year for the rest of your life.
If you're dual income for part of that 15 years, you'll have far more money, or you can retire a few years earlier.
You are describing an outlier of an outlier. To follow your advice our developer has to have well above average skills (250k salary would be relatively senior even at FAANG), be single and live in a share house for 15 years (50k would cover rent for a family in areas with high tech salaries, nothing else) and the tech sector has to remain strong for 15 years (looking back 2004 was 4 years before the financial crisis and generally not a great time to be staring a career in a big tech company).
> 250k salary would be relatively senior even at FAANG
Not at all. I joined a FAANG company less than a year ago, am not a software engineer, and I'm at about $250k. Senior software engineers are closer to $400k-$500k. See levels.fyi.
EDIT: You mentioned salary, but I think you're referring to total comp. Base salary at these companies is indeed lower than $200k except for non-senior positions.
Total comp is great and all, but unless you're liquidating immediately after you receive a grant then you're adding another variable into the mix of things that need to go right.
And the stock portion of your comp being valuable is dependent on the company doing well. True for FAANG, but that's only because by definition that group is the companies that are doing well!
A $200K equivalent RSU grant spread over four years could end up being worth 20K a year or 200K a year, depending on whether you get lucky or not. Remember that the biggest tech companies 15 years ago included Dell, Delphi, Cisco and Yahoo.
> unless you're liquidating immediately after you receive a grant then you're adding another variable into the mix of things that need to go right.
Why aren't you liquidating immediately after you receive a grant? Why would you choose to doubly leverage on your primary source of income, and, as you accurately point out, add another source of risk?
Liquidating is the rational action, but people are not always rational. Consider the two outcomes from selling stock early:
- The company tanks. You maybe retained some of the value of your stock, but you're still on a sinking ship.
- The company takes off. Thanks to loss aversion you feel like you lost money that is rightfully yours. And your idiot co-worker who held just turned up for work in a supercar.
I agree that it's difficult to pull this off, but it's not as difficult as you say. 250k is the total comp for someone with one promotion at FAANG, i.e. a couple years out of school. My wife and I spend about 50k a year and we live in a 1-bed in the Bay Area.
Who knows what the future holds, but if you started at FAANG in 2004 you would have far more than a couple million by now. The financial crisis is a fantastic time to invest in index funds.
How would a few million be possible? What is your contextual salary for this position, and their expected expenses?