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, and without a plan in place, you may find yourself scrambling to replace a substantial income during a period when you were hoping to be able to slow down. Here are a few key steps for lawyers to consider when navigating the retirement planning process.
Analyze Your Finances
With most lawyers earning much higher incomes than the U.S. average worker, retirement planning should be easy. However, along with a higher income may come higher expenses, like malpractice insurance, partnership buy-in costs and even significant dry-cleaning bills. The higher expenses may come from lifestyle creep to more expensive tastes. It is important to take stock of the assets available to you before you decide to give up full-time work.
Ask yourself the following questions:
- What is my current net worth?
- What are the sources of income available to me in retirement? (e.g., a pension, Social Security, 401(k) withdrawals, rental income or taxable savings)
- What are 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?
For those who own their law firm, this process may require the help of a financial professional, who may work with you to value your practice, transfer the business to a successor or find potential buyers.
Gather Client and Referral Information
For lawyers with an active client list, retiring is not as simple as putting in your two-week notice. Your state's bar association may have regulations on how to transition away from active practice, such as requiring you to name an attorney surrogate to take over your clients or cases once you officially retire.
By having your client information available, including the current status of any active litigation, you may find it easier to pass clients to your successor without compromising their representation.
And if you have an active referral practice, it is also a good idea to create a master referral list and contact those on the list to let them know of your plans. Having reliable referral sources may increase your firm's value, so maintaining these relationships may help get a good price for your business.
Set Up a Retirement Team
Retirement may be a significant transition for those who have spent decades in a high-pressure career. Having a retirement team to help you handle the personal, professional, and financial aspects of leaving the workforce might make this an easier adjustment.
Members of your retirement team might include:
- Your spouse, significant other or children
- Close friends (especially those who also practice law and know firsthand the pressures associated with it)
- A financial professional
- A business broker
- An insurance agent
- An estate planning attorney who may help you create a wealth plan
This list is not exhaustive but may help identify those whose experience, advice, and support may be useful when shifting to your life after law.
Have specific questions? Don't hesitate to reach out to me today
Wes Garner, CRPC
Principal Wealth Strategist
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 makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
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