The Altman Weil Flash Survey on Lawyer Retirement found that about half of all major U.S. law firms have mandatory retirement policies, yet 29% of attorneys surveyed plan to continue working in some capacity after retirement and 4% hope never to retire.1 Still, even for attorneys who are not subject to forced retirement at age 65 or 70, planning one's retirement is worth considering.
Financial and personal circumstances may change quickly. Without a plan in place, you may find yourself unexpectedly scrambling to replace accustomed income. Here are a few key steps for lawyers to consider when navigating the retirement planning landscape.
Analyze Your Finances
With many lawyers earning higher incomes than the U.S. average worker, maybe it seems like retirement planning should be easy. However, higher expenses can come from lifestyle creep. Expenses like office overhead, entertainment expenses, business travel, and dry-cleaning might reduce at ‘retirement’ or during ‘scaling down’, but probably not personal care, dining out, or travel expenses. And those meals and entertainment may no longer be ‘business expenses”.
It is important to take stock of the assets available to you before you decide to give up full-time work. For example, ask:
- What is my current net worth?
- What sources of income are available to me in retirement? (e.g., a pension, Social Security, 401(k) withdrawals, rental income or taxable savings)
- How does that income compare to my monthly expenses?
- What expenses are possible to eliminate?
- How much income do I need to continue bringing in to cover the remaining expenses?
- What major non-budgeted items might arise over the next few years? (e.g., a new roof, vehicle or major home repairs)
- If hoping to retire before age 65, do I plan to purchase and pay for health insurance before I qualify for Medicare?
- If unexpectedly I’m not able to work, how will I cover the expense of any temporary or permanent long-term care need?
Whether you are a solo practitioner, own or work for a small or big firm, or practice inside a business, governmental, or pro bono organization, this process can benefit from the help of a financial professional who can work with you to define cash flow sources and uses before and after any planned retirement or scaling back – and, to prepare for any planned exit strategy.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial and MacNaughton & Associates LLC make no representation as to its completeness or accuracy.
This article was prepared by WriterAccess and Ann L. MacNaughton CFP® CPWA® CRPC® CAP®, former Council Member, ABA Law Practice Management Section and Past Chair, State Bar of Texas Corporate Counsel Section.