500K is tough to live on

New York Times

Commentary

The cold math in the article irrefutably demonstrated that $500,000 is a tough cap for executives living in New York. It will cause terrible hardship and changes in life style. No longer will it be possible for personal trainers at $80 an hour three times a week, twice yearly vacations to sun and snow. And perhaps even the sacred gala circuit will be affected, no more new gowns for the balls and dressing well for the country clubs.

Excerpts

Five hundred thousand dollars — the amount President Obama wants to set as the top pay for banking executives whose firms accept government bailout money — seems like a lot, and it is a lot. To many people in many places, it is a princely sum to live on. But in the neighborhoods of New York City and its suburban enclaves where successful bankers live, half a million a year can go very fast.

“As hard as it is to believe, bankers who are living on the Upper East Side making $2 or $3 million a year have set up a life for themselves in which they are also at zero at the end of the year with credit cards and mortgage bills that are inescapable,” said Holly Peterson, the author of an Upper East Side novel of manners, “The Manny,” and the daughter of Peter G. Peterson, a founder of the equity firm the Blackstone Group. “Five hundred thousand dollars means taking their kids out of private school and selling their home in a fire sale.

Like those taxes. If a person is married with two children, the weekly deductions on a $500,000 salary are: federal taxes, $2,645; Social Security, $596; Medicare, $139; state taxes, $682; and city, $372, bringing the weekly take-home to $5,180, or about $269,000 a year, said Martin Cohen, a Manhattan accountant.

A modest three-bedroom apartment, she said, which was purchased for $1.5 million, not the top of the market at all, carries a monthly mortgage of about $8,000 and a co-op maintenance fee of $8,000 a month. Total cost: $192,000. A summer house in Southampton that cost $4 million, again not the top of the market, carries annual mortgage payments of $240,000.

Many top executives have cars and drivers. A chauffeur’s pay is between $75,000 and $125,000 a year, the higher end for former police officers who can double as bodyguards, said a limousine driver who spoke anonymously because he does not want to alienate his society customers.

“Some of them want their drivers to have guns,” the driver said. “You get a cop and you have a driver.” To garage that car is about $700 a month.

A personal trainer at $80 an hour three times a week comes to about $12,000 a year.

The work in the gym pays off when one must don a formal gown for a charity gala. “Going to those parties,” said David Patrick Columbia, who is the editor of the New York Social Diary (newyorksocialdiary.com), “a woman can spend $10,000 or $15,000 on a dress. If she goes to three or four of those a year, she’s not going to wear the same dress.”

Total cost for three gowns: about $35,000.