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http://finance.yahoo.com/news/bonus-withdrawal-puts-bankers-malaise-050100338.html

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Bonus Withdrawal Puts Bankers in "Malaise"
By Max Abelson | Bloomberg – 16 hours ago.. .
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.Citigroup, Inc.
Deutsche Bank AG
The Goldman Sachs Group, Inc.
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Andrew Schiff was sitting in a traffic jam in California this month after giving a speech at an investment conference about gold. He turned off the satellite radio, got out of the car and screamed a profanity.

"I'm not Zen at all, and when I'm freaking out about the situation, where I'm stuck like a rat in a trap on a highway with no way to get out, it's very hard," Schiff, director of marketing for broker-dealer Euro Pacific Capital Inc., said in an interview.

Schiff, 46, is facing another kind of jam this year: Paid a lower bonus, he said the $350,000 he earns, enough to put him in the country's top 1 percent by income, doesn't cover his family's private-school tuition, a Kent, Connecticut, summer rental and the upgrade they would like from their 1,200-square- foot Brooklyn duplex.

"I feel stuck," Schiff said. "The New York that I wanted to have is still just beyond my reach."

The smaller bonus checks that hit accounts across the financial-services industry this month are making it difficult to maintain the lifestyles that Wall Street workers expect, according to interviews with bankers and their accountants, therapists, advisers and headhunters.

"People who don't have money don't understand the stress," said Alan Dlugash, a partner at accounting firm Marks Paneth & Shron LLP in New York who specializes in financial planning for the wealthy. "Could you imagine what it's like to say I got three kids in private school, I have to think about pulling them out? How do you do that?"

Bonus Caps

Facing a slump in revenue from investment banking and trading, Wall Street firms have trimmed 2011 discretionary pay. At Goldman Sachs Group Inc. (GS) and Barclays Capital, the cuts were at least 25 percent. Morgan Stanley (MS) capped cash bonuses at $125,000, and Deutsche Bank AG (DBK) increased the percentage of deferred pay.

"It's a disaster," said Ilana Weinstein, chief executive officer of New York-based search firm IDW Group LLC. "The entire construct of compensation has changed."

Most people can only dream of Wall Street's shrinking paychecks. Median household income in 2010 was $49,445, according to the U.S. Census Bureau, lower than the previous year and less than 1 percent of Goldman Sachs CEO Lloyd Blankfein's $7 million restricted-stock bonus for 2011. The percentage of Americans living in poverty climbed to 15.1 percent, the highest in almost two decades.

House of Mirth

Comfortable New Yorkers assessing their discomforts is at least as old as Edith Wharton's 1905 novel "The House of Mirth," whose heroine Lily Bart said "the only way not to think about money is to have a great deal of it."

Wall Street headhunter Daniel Arbeeny said his "income has gone down tremendously." On a recent Sunday, he drove to Fairway Market in the Red Hook section of Brooklyn to buy discounted salmon for $5.99 a pound.

"They have a circular that they leave in front of the buildings in our neighborhood," said Arbeeny, 49, who lives in nearby Cobble Hill, namesake for a line of pebbled-leather Kate Spade handbags. "We sit there, and I look through all of them to find out where it's worth going."

Executive-search veterans who work with hedge funds and banks make about $500,000 in good years, said Arbeeny, managing principal at New York-based CMF Partners LLC, declining to discuss specifics about his own income. He said he no longer goes on annual ski trips to Whistler (WB), Tahoe or Aspen.

He reads other supermarket circulars to find good prices for his favorite cereal, Wheat Chex.

"Wow, did I waste a lot of money," Arbeeny said.

$17,000 on Dogs

Richard Scheiner, 58, a real-estate investor and hedge-fund manager, said most people on Wall Street don't save.

"When their means are cut, they're stuck," said Scheiner, whose New York-based hedge fund, Lane Gate Partners LLC, was down about 15 percent last year. "Not so much an issue for me and my wife because we've always saved."

Scheiner said he spends about $500 a month to park one of his two Audis in a garage and at least $7,500 a year each for memberships at the Trump National Golf Club in Westchester and a gun club in upstate New York. A labradoodle named Zelda and a rescued bichon frise, Duke, cost $17,000 a year, including food, health care, boarding and a daily dog-walker who charges $17 each per outing, he said.

Still, he sold two motorcycles he didn't use and called his Porsche 911 Carrera 4S Cabriolet "the Volkswagen of supercars." He and his wife have given more than $100,000 to a nonprofit she founded that promotes employment for people with Asperger syndrome, he said.

'Crushing Setback'

Scheiner pays $30,000 a year to be part of a New York-based peer-learning group for investors called Tiger 21. Founder Michael Sonnenfeldt said members, most with a net worth of at least $10 million, have been forced to "reexamine lots of assumptions about how grand their life would be."

While they aren't asking for sympathy, "at their level, in a different way but in the same way, the rug got pulled out," said Sonnenfeldt, 56. "For many people of wealth, they've had a crushing setback as well."

He described a feeling of "malaise" and a "paralysis that does not allow one to believe that generally things are going to get better," listing geopolitical hot spots such as Iran and low interest rates that have been "artificially manipulated" by the Federal Reserve.

Poly Prep

The malaise is shared by Schiff, the New York-based marketing director for Euro Pacific Capital, where his brother is CEO. His family rents the lower duplex of a brownstone in Cobble Hill, where his two children share a room. His 10-year- old daughter is a student at $32,000-a-year Poly Prep Country Day School in Brooklyn. His son, 7, will apply in a few years.

"I can't imagine what I'm going to do," Schiff said. "I'm crammed into 1,200 square feet. I don't have a dishwasher. We do all our dishes by hand."

He wants 1,800 square feet -- "a room for each kid, three bedrooms, maybe four," he said. "Imagine four bedrooms. You have the luxury of a guest room, how crazy is that?"

The family rents a three-bedroom summer house in Connecticut and will go there again this year for one month instead of four. Schiff said he brings home less than $200,000 after taxes, health-insurance and 401(k) contributions. The closing costs, renovation and down payment on one of the $1.5 million 17-foot-wide row houses nearby, what he called "the low rung on the brownstone ladder," would consume "every dime" of the family's savings, he said.

"I wouldn't want to whine," Schiff said. "All I want is the stuff that I always thought, growing up, that successful parents had."

Vegas, Ibiza

Hans Kullberg, 27, a trader at Wyckoff, New Jersey-based hedge fund Falcon Management Corp. who said he earns about $150,000 a year, is adjusting his sights, too.

After graduating from the Wharton School of the University of Pennsylvania in 2006, he spent a $10,000 signing bonus from Citigroup Inc. (C) on a six-week trip to South America. He worked on an emerging-markets team at the bank that traded and marketed synthetic collateralized debt obligations.

His tastes for travel got "a little bit more lavish," he said. Kullberg, a triathlete, went to a bachelor party in Las Vegas in January after renting a four-bedroom ski cabin at Bear Mountain in California as a Christmas gift to his parents. He went to Ibiza for another bachelor party in August, spending $3,000 on a three-day trip, including a 15-minute ride from the airport that cost $100. In May he spent 10 days in India.

Wet T-Shirt

Earlier this month, a friend invited him on a trip to Mardi Gras in New Orleans. The friend was going to be a judge in a wet T-shirt contest, Kullberg said. He turned down the offer.

It wouldn't have been "the most financially prudent thing to do," he said. "I'm not totally sure about what I'm going to get paid this year, how I'm going to be doing."

He thinks more about the long term, he said, and plans to buy a foreclosed two-bedroom house in Charlotte, North Carolina, for $50,000 next month.

M. Todd Henderson, a University of Chicago law professor who's teaching a seminar on executive compensation, said the suffering is relative and real. He wrote two years ago that his family was "just getting by" on more than $250,000 a year, setting off what he called a firestorm of criticism.

"Yes, terminal diseases are worse than getting the flu," he said. "But you suffer when you get the flu."

'Have to Cut'

Dlugash, the accountant, said he's spending more time talking with Wall Street clients about their expenses.

"You don't necessarily have to cut that -- but if you don't cut that, then you've got to cut this," he said. "They say, ‘But I can't.' And I say, ‘But you must.'"

One banker who owes Dlugash $20,000 gained the accountant's sympathy despite his six-figure pay.

"If you're making $50,000 and your salary gets down to $40,000 and you have to cut, it's very severe to you," Dlugash said. "But it's no less severe to these other people with these big numbers."

A Wall Street executive who made 10 times that amount and now has declining income along with a divorce, private school tuitions and elderly parents also suffers, he said.

"These people never dreamed they'd be making $500,000 a year," he said, "and dreamed even less that they'd be broke."

To contact the reporter on this story: Max Abelson in New York at mabelson@bloomberg.net.

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.


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2 words...

WAAAAAHHHHHHHHHHHHHH WAHHHHHHHHHHHHHHH


Awww...i cant send my daughter to the most expensive private school, i cant go on a 4 month vacation...instead i have to go on 1, i cant afford a 1.5 million dollar town house, my kids have to share a room, we have to do our own dishes wahhhhhhhh

give me a gosh darn break...

i wanna throw up. I make less money than some of those people pay per month in bills.

I'm immensely sick of the class-warfare mentality lately.

Who cares?
So what.. the guy makes a buttload of money and lives a lifestyle that his income affords him... and guess what, when the income gets reduced, he has stress. Shocker - it's NO DIFFERENT than anyone else. Take away a significant chunk of my income and I'll be screaming expletives and wondering how I'm going to pull off living the way I've been living... because EVERYONE wants a better quality of life... just because you/we/the author cannot relate to THEIR elevated level doesn't make it any less frustrating for them when they take a hit.

I do have little sympathy for those who make a ton of money and save nothing for a rainy day.

I will say, though, that housing in NYC is like nowhere else on earth. There is no way I'd live there, because there is no way on God's green earth that I would pay a million bucks for a 300 sq ft apartment in need of serious repair.

I'll happily stay in Ohio, and pay less than $500/month for my mortgage. lol

And that is true.

One of the unseen "millionaires and billionaires" in the "tax the crap out of the top 1% because those greedy SOBs can afford it is someone like this.

If a guy busts his ass and makes $400,000 ....... he's down to $200,000 after taxes. When you take cost of living into account, that might not be enough to support your family on in certain areas of the country. I have little sympathy for those bemoaning the loss of a vacation when I cancelled cable to save a few bucks ...... but I can see how the loss of 20% of a person's income could be devastating for his family, especially in an ungodly expensive area like NYC.

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"If you're making $50,000 and your salary gets down to $40,000 and you have to cut, it's very severe to you," Dlugash said. "But it's no less severe to these other people with these big numbers."

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This is the only part I have a problem with.. it should be less severe. Somebody making $50K a year really has no choice than to live at or near the edge of their income... if you are making $450K and living at or near the edge of your income then those are choices that you are making..

So while I understand they are feeling the stress, I have less sympathy for them if they just didn't plan for the fact that one day their income could go down or they could hit a hard time...

And I understand that yanking their kids from a $30K a year private school is going to be hard on the kids because you are ripping them away from friends etc.. maybe it would teach the kids a valuable lesson about entitlement...

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I have little sympathy for those bemoaning the loss of a vacation when I cancelled cable to save a few bucks

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Sympathy? No. Hey, they can make quality of life cuts just like anyone else.
Empathy? Heck, yes! I know that I wouldn't like it very much.



Side Note: Nobody should ever be so stupid as to plan their living expenses on bonuses. Live within your salary and realize that a bonus is a bonus - they aren't ever guaranteed.

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Nobody should ever be so stupid as to plan their living expenses on bonuses. Live within your salary and realize that a bonus is a bonus - they aren't ever guaranteed.

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No they aren't and it is prudent to structure your budget to not include them and then just enjoy them when they come... with that said, if you've been working for 12 years and for 12 years you have gotten a progressively bigger bonus.. well human nature says that at some point you will come to expect it.

I fully agree.

And to take your thought a step further I don't feel bad for this guy at all. He was paid a salary that was offered to him and that he accepted. If he doesn't like it then he can back out and go somewhere else.

However, I feel this way towards anyone. If you are making $450,000 ... or $45,000 and are a blue collar factory worker.

It's all relative income. To a guy like me who "net" a number in 4 figures last year (still fresh out of college ... ) ... someone who makes $45,000 and complains about it is a joke to me and they make me want to throw up. Or at least they would except I realize that they worked hard for it and deserve their wage. The same way that a guy making $450,000 or even 45 million deserves theres.


It is upsetting however to see the shocker of class warfare rising up once again.

If a guy has to adjust his lifestyle and cut back then "it's a tragedy and the economy is lousy and we should feel sorry and why aren't our politicians doing enough and .... oh wait ... he has more than us to begin with? Serves that lousy S.O.B. right!" and so on....

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I'm immensely sick of the class-warfare mentality lately.

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...and the main purpose of this article is to perpetuate it.

he's struggling,, just at a different level than most of us...

I don't see what lambasting these folks accomplishes. I also don't envy them in the least. Standard of living is a relative thing...If I'm making $45000/yr, and my OT is cut to where I lose 15-20% of my salary...I'm pretty sure I'd complain. It's the same deal, the numbers are bigger is all.

Should they live more modestly and save some? Sure. I try to put back at least 5% a week for an emergency fund. I don't resent the rich for having money. I sort of feel bad and worry about their inability to budget...I mean they are bankers.

Just a case of a guy that's used to be making a specific amount of money and now making much less.

You make more money and your cost of living rises, and too many people get comfortable with what they're making and don't think about the implications of what happens if they make less (and bonuses aren't set numbers, but where these guys make their big money).

He's gonna have to make some cut backs. This is the case for a lot of the bankers in my area (and there's tons, as I'm CT suburb of NYC). He'd be better off living in the suburbs, like the rich towns around me though, and throwing his kids into their public schools. Top-notch public schools, the kids that go there all go to good colleges, and you're at least getting equity on a house (which will always have some value because it's on the water, not in the boonies, safe, good public schools, and a 50 minute train ride to Grand Central)

I don't think its a huge deal for this guy to complain.

I think it is easier being rich and having to cut back on a lot of luxuries, than being poor and having to cut back on necessities or work excessively.

I can empathize though, thinking you're going to get 500k and then you get 300k, thats a lot of changes you're going to have to make. Obviously he wouldn't trade his wealth for a poor persons lack of wealth, so objectively of course the poor person will have the upper hand in any discussion. But emotionally it still must be a pretty stressful experience.

I would imagine a good portion of the rich are capable of relaxing themselves by remembering they have their primary needs met. That would be what I'd suggest to this guy. There was an old Stoic trick of living really really poor for a month, and then when you find out its not so bad..you're less afraid of losing money and more capable of coming up with solutions if it happens.

Hey Andrew come on down to Ohio buddy, I will sell you a 4300 square foot home with 4 bedrooms and 2 1/2 baths for less than a million and a half, with a great public school system. I bet somebody will even walk your dog for half the price your paying now.

jc


My only issue with the first guys is WHAT he is complaining about. He has a right to be stressed about a decrease in income, although if the only decrease came from lower bonuses, then it's his own fault for relying on a bonus as steady income.

But have some common sense to realize that many people had to give up their homes, cars, moved in with family members, uprooted their entire family and moved to a another part of the country, etc. So complaining about your bonus shortage causing you trouble to pay your high tuition and vacation home payments is a little egocentric. Again, if your entire budget hinges on your bonus, your an idiot anyway, especially if here we are 4-5 years into a recession and your still counting on that bonues as primary income and never once considered they might stop.

First of all,

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If a guy busts his ass and makes $400,000 ....... he's down to $200,000 after taxes.

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Please explain under what tax structure you lose 50% of your income to taxes.

The highest federal income tax rate is 35%, and that is only on household income exceeding $379,150.

http://www.irs.gov/pub/irs-pdf/i1040tt.pdf

If this guy is filing as "single" and makes $400,000 of AGI (after all deductions) his tax total is $117,314. His take-home pay is $282,686. If $400,000 is before deductions, his take-home pay is higher than that.

If he is filing "married, jointly" and has a $400,000 AGI, his after-tax amount is $290,128. That is two American median household incomes above what you said he makes after taxes on a $400k salary.

I don't think it gets quite to 50% but federal income tax is not the only tax taken out of the paycheck.

though there's a cap on SS at just over $100K, but none on medicare. the total is 7.65% (can be 15% if self-employed)
http://www.ssa.gov/pressoffice/colafacts.htm

then there are the local level taxes too. also possible short-term capital gains and a littany of other types of taxes (usually people making $400K / year are not making everything strictly on salary but a mix of revenue streams)

The social security tax rate is 4.2% up to $110k. Then it's zero. For our imaginary $400k-aire, the effective SS rate is just over 1%.

Steve your forgetting about state taxes, local taxes, and school district taxes

35% Federal tax rate.

15% Medicare/SS tax rate up to the legal limit. (cut by 2% due to the tax holiday nonsense)

The New York state tax rate can go as high as 6.85%, but it is a sliding scale starting at 4% at zero taxable dollars, and working up by tiers.

New York City tax ranges from 2.907% to 3.648%.

http://ssa-custhelp.ssa.gov/app/answers/...axable-earnings

For 2012, the maximum taxable earnings amount for Social Security is $110,100. Currently, the Social Security tax (OASDI) rate for wages paid in 2012 is 4.2 percent for employees and 6.2 percent for employers. For example, an individual with wages equal to or more than $110,100 would contribute $4,624.20 to Social Security in 2012. The employer would contribute $6,826.20.

Tax on Cigarettes. Tax on alcohol. Tax on license plates. Tax on property. Tax on gasoline. Sales tax. Got a boat? You paid a tax on it, over and above sales tax.

Married? You pay a tax. Hunt? You pay a tax. Fish? You pay a tax. Plan to die eventually? There is a tax on that, too.

There is a tax on your home phone bill, I won't say what the original purpose was because you won't believe it. Look it up and blow your mind.

Also, there is no such thing as an "employer's contribution" to SS tax. This is a sham, a deception, a lie to fool those who are simple enough to believe it. The employee pays the ENTIRE tax, but because half of it is removed from your paycheck before it is written, most folks think their employer is paying this out of the goodness of their heart. Since the money falls out of some magic bucket in the sky, they believe their tax rate is only half of what it really is. Same job, same pay, same economics, but you're self-employed, then you will understand.

You are being fooled by a sleight-of-hand that most kindergarteners would not fall for.
Moreover, the entire purpose of the lie is to cheat you out of more of your hard-earned wages.

Taxes are not a surprise. They are a known quantity. When you enter into an agreement for compensation with your employer, both of you (should) understand what amounts you will receive and what the government will receive.

If you choose to buy a boat, hunt, fish, etc. then you are also choosing to pay whatever associated fees exist.

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Also, there is no such thing as an "employer's contribution" to SS tax. This is a sham, a deception, a lie to fool those who are simple enough to believe it. The employee pays the ENTIRE tax, but because half of it is removed from your paycheck before it is written, most folks think their employer is paying this out of the goodness of their heart. Since the money falls out of some magic bucket in the sky, they believe their tax rate is only half of what it really is. Same job, same pay, same economics, but you're self-employed, then you will understand.

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I'm sorry, I'm going to need some help on this one.

oh, ok. so he's wrong.

do you really think a company would give you a 6.2% raise out of the goodness of their hearts if they no longer had to make a contribution to your SS?

yeah, I appreciate the interpretation. The "you" was a lazy, general "you" that I was hypothetically asking the the internet.