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Attorneys: Life After Law

A career in law can offer intellectual stimulation, personal satisfaction, and lucrative compensation. It can also be demanding, stressful, and all-encompassing. With pressure to perform and your head buried in your onerous workload, it is unlikely you have a spare minute to fathom what life after law may hold. From the time you were an associate, it is likely you were told to maximize your retirement savings and stay invested to benefit from compound returns, and the result would be an adequate nest egg that would support you in your later years. This is a major misconception with some potentially serious consequences. With significant career income, many attorneys live a lifestyle that is expensive to maintain and difficult to give up. Without prudent planning, you run the risk of excessive portfolio withdrawals and early depletion, especially considering the impact of inflation, rising healthcare costs, down markets, and longevity risk. With upward of 2500 billable hours to maintain, it is a challenge for attorneys to devote the requisite time and attention to their personal wealth planning. As tax laws change, the economic landscape shifts, and your personal situation develops, it is critical to have a comprehensive plan in place that addresses every aspect of your unique financial life and helps you leverage your resources today for a more fulfilled tomorrow.

With the onus of your portfolio on you, the need for careful management and monitoring of your investments is amplified. With high savings rates and potentially generous firm contributions, your firm 401(k) may be your largest retirement asset, yet it is likely the most neglected. Your mix of investments and “ride-out-the-markets” strategy may have been appropriate in your prime accumulation years, but all the rules change as you prepare to start taking withdrawals. With market volatility and lower yields on fixed-income investments, how will you convert your savings into a durable, reliable income stream that can withstand market events? You need to apply a disciplined, thoughtful process to your wealth management to create paychecks that you won’t outlive.

You may have access to additional retirement income in the form of a firm pension plan. Understanding exactly how your pension works is essential to a successful future. Will you receive systematic payments or a lump sum? What is the term of the payout? Is there a cost of living adjustment associated to combat inflation? Is there a survivor guarantee in the event of a premature death? What firm-related events could impact/reduce your retirement payout? While some firms offer quite generous compensation packages, more and more firms are moving away from these traditional defined benefit pension plans and are shifting the burden of retirement preparation to the individual through defined contribution plans like aforementioned 401(k)s.

Consider how Social Security will factor in. While you can collect a reduced benefit at 62, the longer you wait to collect your benefit, the higher that benefit will be, up until age 70. Depending on your retirement age, health, additional income sources, and potential spousal benefits, you may have copious collection strategies at your disposal. Without careful consideration, you could elect a strategy that leaves tens of thousands of dollars on the table and locks your spouse into a reduced survivor benefit. Social Security planning is complex and there isn’t a one-size-fits-all solution. To plan prudently, calculations need to be done that consider your lifestyle, outside income, and a spouse’s financial picture.

While we’ve just touched on some basics here, a financial professional can help you plan for every aspect of your financial life by addressing the issues that are unique to your personal financial situation. Other considerations not discussed above including Medicare planning, tax-bracket management, and Required Minimum Distributions, to name a few. Just as your clients hire you for your experience and expertise, a CERTIFIED FINANCIAL PLANNER™ professional can take the time-consuming burden of financial planning and investment monitoring off your shoulders to help secure your financial future. If you would like to learn more about how to most efficiently leverage your financial resources and plan for tomorrow and beyond, please contact Rebecca Meares at rebecca.meares@mcadamfa.com or via LinkedIn.