At Lifeguard Wealth we work with a variety of clients but over the years we have developed a niche for working with successful attorneys. We recently undertook a research project to better understand the challenges attorneys face and have summarized our findings in the paper below. Take a look and be sure to share it with a successful attorney that may find it helpful to them.
Before the sun goes down: will you be ready to retire?
As your Financial Lifeguard, we provide these services in the interest of building, protecting, and utilizing wealth to make your Life Plan possible.
We love working with attorneys here at Lifeguard Wealth. These are smart, hardworking professionals who overcome complex challenges to be successful and serve their clients well.
We interviewed 12 attorneys to get a sense of the major obstacles to retirement planning attorneys face. While these were a mix of partners in large firms and founding partners of smaller firms, everyone in this a high-stress job seemed to share one sentiment in common.
There is never enough time. Between the pressure of business development and cash flow management, the balancing act of serving clients while maintaining the obligations of personal life, little time is left for self-care. More specifically, it is always tempting to let stress management and personal finance management to fall by the wayside. But that’s not all. Time is running out.
Even successful professionals who practice self-care told us they understand there is a limit to how long they can continue to perform and keep money coming in.
One put it this way: “There is a horizon for many attorneys because of your mental acuity. You need to make hay while the sun is up.”
This begs the question: Are you prepared for when the sun goes down? As we listened to practicing attorneys like you, we identified six obstacles you face to finishing your career well and suggested one simple action step to address each of them:
Time Management
Spending & Saving Worries
Managing Debt
Financial Regrets
Coping with Stress
Keeping Up with Money Management
1. Time Management
“Failing to plan is planning to fail. Living within your means and setting aside funds for saving are key issues.”
“I feel like I’m perpetually behind.” High expectations, little time. There’s great potential in this career for building wealth. It just takes a lot out of you.
The Buck Stops with You
One attorney, who had been practicing intellectual property law for 25 years, explained that it’s hard to delegate when someone else’s errors can be costly.
You’re Constantly on the Hunt
“It’s like whack-a-mole. I feel like I’m perpetually behind,” one attorney said. “Making sure I get paid is very stressful.”
Time Gets Tighter in Later Years
If your growth explodes, you have to figure out how to manage it. Sometimes work comes in that is outside of your core competency, and you have to squeeze in time to find new resources.
No One Hires You to Lose
“There’s a high perfection bar,” said one attorney who had been in practice for 27 years. It’s hard to prioritize self-care. “There are a lot of clients putting a lot of money into winning.”
Good Advice from Lawyer Business Advantage
When you’re running like mad to take care of the details, maintain client expectations and make sure you’re getting paid, it’s easy to forget about self-care.
That’s why Alay Yaznik, a consultant at Lawyer Business Advantage, advocates a strict 20/10/5 rule for time management: 20 billable hours, 10 hours for business development, and 5 hours for administration per week. They also insist on vacation. “We use a tool called Paradise Planner,” Alay said. “It forces you to take time off. We drive the firms we work with to push for a two-week vacation goal.”
Alay understands that attorneys can be hotshots at running the business, but meanwhile, personal financial management is falling by the wayside. “Failing to plan is planning to fail. Living within your means and setting aside funds for saving are key issues,” he said. You know that, of course. But in the midst of this stressful time crunch, how can you begin to ask yourself if you’re ready for retirement?
OBSTACLE: You often feel unable to prioritize self-care as you approach retirement.
ACTION STEP: Adopt a balanced schedule like the 20/10/5 rule and incorporate time for self-care into it. Set non-negotiable hours for stress management into your daily and weekly routine, and time for financial management into your monthly and annual calendar. (More on how to fill that time below.)
2. Spending & Saving Worries
Do You Have a Tax Problem? A Quick Look at Cash Balance Plans
Attention owner-partners: If you’re paying a lot of taxes because the business has grown, a Cash Balance Plan may be a good option. It allows you to put more money into your retirement account.
- WHAT IS IT? A Cash Balance Plan (CBP) is a structured plan to supplement your 401k with additional retirement savings. For example, if your 401k lets you put in up to $20K, a CBP lets you put away far more, perhaps $500K.
- WHY CHOOSE THIS OPTION? Your main benefit as an owner is how much you can write off. Your employees benefit from the tax-deferred growth potential with higher contribution limits than with a 401k alone.*
- WHAT COSTS ARE INVOLVED? You will need to work with an actuary, and to go through a third party administrator for tax filing. That’s why you’ll want to grow first before taking this step.
*You will need to be mindful of certain requirements around compensating all full-time employees. Discuss this with your tax professional. “I’m a make it, spend it kind of guy.” With so much money coming in and going out, so quickly, your eye is always on the business. That can make you unsure sometimes about your personal financial decisions.
How Much Can You Afford to Spend?
A managing partner we spoke with said he’s a good saver. He doesn’t stress much about money … except when he thinks about retirement. He wondered about the long-term effect of going on a trip to Israel. “I stress sometimes about giving myself permission to spend money like that.”
Another was considering a major home remodel. There was more than enough in savings, but will this take too much out for the long run in terms of retirement savings? “I’m a make it, spend it kind of guy. I do save for retirement and college, but I also like to spend it,” he said.
Is Retirement for Other People?
A successful attorney we spoke with said he was doing great business, but he recognized a healthy income doesn’t necessarily equal personal wealth security. “I don’t ever see retirement as likely,” he admitted.
Save Early, Save Often … and What Else?
Making a commitment to set money aside for the future was a common word of advice the attorneys we spoke with give themselves and their colleagues. But what we see is that in the absence of a clear plan for personal finance, worries abound. Are you saving enough? How much of it can you spend? What impact does your spending have on retirement?
OBSTACLE: You don’t have a clear idea of how much your personal financial decisions today will affect your ability to retire.
ACTION STEP: Use self-care time to create a savings plan. If you do not already have a 401k or profit sharing plan in place, consider a Cash Balance Plan (see info box above). Once your income supports it, this is a smart and effective way to save for retirement and defer taxes at the same time.
3. Managing Debt
“It’s a big issue.”
Some of the attorneys we spoke with came from wealthy families and were able to pay for college and law school without incurring much, if any, student debt. Most were not so fortunate.
An Aggressive Payment Plan
One was able to pay off her $250K in debt (at 12% interest!) working for large firms over 12 years. Looking back over the last 14 years running her own firm, she admits, “There have been some periods I was robbing Peter to pay Paul.” Debt liability would have been all the more difficult to tackle.
20 More Years or So
Another has been able to pay down a lot of his $120K student loan debt, but like many attorneys, still has a long way to go. About 20 more years. “I spend about $400 a month on it. It’s a big issue,” he said.
Unmanaged Debt Saps Retirement Wealth
The cost of tuition has risen dramatically at the best law schools in the country. Attorneys are increasingly faced with the demands of a stressful job on the one hand and a heap of debt on the other. The basic principle has not changed. Healthy retirement requires aggressive, early loan repayment.
OBSTACLE: Any lingering student loan debt payments are significantly reducing your future wealth in retirement.
ACTION STEP: Use self-care time to examine your personal monthly expenses. Determine what you can sacrifice to increase your payments, and commit to raise the amount again at regular intervals, i.e. once a year. It will be well worth it in the long run to endure some pain now.
4. Financial Regrets
“Life can throw a lot of curveballs at us. We can’t plan for everything, but we can plan for a lot. To stick your head in the sand and hope everything will be okay is preparing for disaster.” – Joe Delaney, Managing Director, Lifeguard Wealth
“I took a bath in real estate.” Neglecting debt repayment is just one of many mistakes you can easily make in this fast-paced, high-pressure job. It’s also easy to misfire with investing, or to miss opportunities.
Bad Condo Timing
Even smart people can make mistakes when living life at full throttle.“I bought the wrong condo. It wasn’t worth what I paid for it, so I dumped it. It would be worth more today if I had held it! It was a mistake to buy and then sell,” one attorney admitted.
Taking Bad Advice
Another admitted making a common mistake: trusting the wrong financial advisors. You’re busy trying to get your clients the best deal. You expect other professionals to do the same for you. “Nobody can time the market,” she said, referring to promises advisors have made to her in the past. “I pay more attention now.”
It’s All About Knowing Who to Trust
Others shared stories about making too many purchases and getting over-extended, or lacking a firm understanding of acceptable risk and missing out on lucrative investments. Failing to take steps to mitigate losses related to divorce was another regret we heard. Much of this can be avoided with proper guidance.
OBSTACLE: You lack either the knowledge or the time to properly gauge risk in investment opportunities.
ACTION STEP: Research fiduciary advisors. These are persons legally and ethically bound to act in the client’s best interests. At Lifeguard Wealth, we hold to this standard as we put our clients’ needs ahead of our own.
5. Coping with Stress
“I see it all the time. Attorneys are not very aware of the resources that are available.” Neglecting the threats of work stress, mounting debt and other money worries leads to more than financial regret. Worst case, you don’t make it to retirement. At least not to a healthy and happy one.
A High Risk of Substance Abuse
Some attorneys we spoke with have seen a lot of drug and alcohol abuse. We heard stories about everything from narcotics to heavy smoking. It’s all detrimental to physical sustainability, career and long-term financial health. “Substance abuse is big,” one attorney told us. He said he had seen plenty of it first-hand, especially among younger attorneys in large firms.
Taking Care of Yourself
“Health and fitness are very important. Something that gives you a true break,” one attorney said. He rides his bike to and from work. Another likes to listen to and make music. He also does Pilates, does the New York Times crossword puzzle, soaks in his hot tub – anything that gets his mind and body away from work.
Seek Help Before You Burn Out
We learned drug and alcohol abuse is also a big problem among litigators. That makes sense, given litigating is arguably the most stressful task an attorney can take on. “I see it all the time,” one attorney said. “Attorneys are not very aware of the resources available.” That may be out of ignorance, or because high-powered attorneys are just used to taking care of themselves. The trouble is, some burn out or worse before they realize they can’t fix addiction alone.
OBSTACLE: Burnout is threatening to kill your career before you’ve seriously planned for retirement.
ACTION STEP: Make an appointment with a mental health counselor, or at least take a mental health inventory to assess your risk of serious health problems. It could be the most important investment of your time you’ll ever make.
6. Keeping Up with Money Management
“Call it lack of financial literacy.” Attorneys know how to make money. The hunter mentality is essential to being successful in this field. But managing it on the personal side when your focus is always on the hunt for new business can be extremely challenging.
Using Your Brains for Your Profession, Not Personal Finance
One attorney described lawyers as a naturally conservative group. Most attorneys understand the basics about financial security, like the importance of life and disability insurance. But it often stops there.
“They use their brains for their profession. They are not good with money,” he said. “Call it a lack of financial literacy. They’re also naturally skeptical and call BS when they hear stuff they don’t understand.” Some were open about their experiences with divorce and the financial burden it placed on them. They described not knowing what to do. One had to stop funding the 401k just to get by.
When DIY Doesn’t Work
One attorney said he tried to manage his own finances for a while and reports it simply did not work. He could not devote enough time and brainpower to continually assess his financial situation. “An attorney’s financial life is very complicated,” another said. “What they sell is their time. But you need to find the time to figure it (money management) out, or hire someone to help you.” We couldn’t have said it any better ourselves!
OBSTACLE: You have a lack of financial literacy that comes with the job, as you are busy applying your mind to your demanding profession.
ACTION STEP: Hire a fiduciary advisor to review your safety net, help you make a plan and to hold you accountable to it. The demand of business development and the costs of personal setbacks all but ensure you will run out of time to prepare for retirement unless someone is protecting your financial future.
Conclusion: What to Do Before the Sun Goes Down
Our interviews helped us articulate six obstacles every attorney should have to give themselves the best chance of retiring well. We have suggested one action step for each:
- OBSTACLE 1: You often feel unable to prioritize self-care as you approach retirement.
- ACTION STEP: Adopt a balanced schedule and incorporate time for self-care into it. Set non-negotiable appointments for stress management and financial management.
- OBSTACLE 2: You don’t have a clear idea of how much your personal financial decisions today will affect your ability to retire.
- ACTION STEP: Use self-care time to create a savings plan. Consider a Cash Balance Plan to accelerate retirement savings.
- OBSTACLE 3: Any lingering student loan debt payments are significantly reducing your future wealth in retirement.
- ACTION STEP: Use self-care time to determine what you can sacrifice to increase your student loan payments.
- OBSTACLE 4: You lack either the knowledge or the time to properly gauge risk in investment opportunities.
- ACTION STEP: Research fiduciary advisors.
- OBSTACLE 5: Burnout is threatening to kill your career before you’ve seriously planned for retirement.
- ACTION STEP: Make an appointment with a mental health counselor, or at least take a mental health inventory to assess your risk of serious health problems.
- OBSTACLE 6: You have a lack of financial literacy that comes with the job, as you are busy applying your mind to your demanding profession.
- ACTION STEP: Hire a fiduciary advisor to review your safety net, help you make a plan and hold you accountable to it.
We see ourselves as more than financial advisors here at Lifeguard Wealth. As your financial lifeguard, we look at retirement planning in a holistic way. That means we look forward to discussing everything connected to your financial well being, from mental and physical health to lifelong wealth management. We call this our Second Opinion Service– a response to your S.O.S. We review your current plan to help you answer the question you might have been afraid to ask as time keeps ticking away.
“When my career is over, will I be ready to retire?”
Don’t delay. Step away for a moment from taking care of clients so you can take care of your own future. Contact Lifeguard Wealth today.
Joe Delaney Founder, Managing Director and “Financial Lifeguard”
joe@lifeguardwealth.com
415.578.3160
We want to thank our attorney friends for contributing to this white paper.
Adeel Akhtar, Knobbe Martens
Craig Daniel, Gluck Daniel
Jason Geller, Fisher Phillips
Chris Holland, Holland Law
Katie Martinka, Law Offices of Katie Martinka
Rich McDerby, Osborn McDerby
David Nied, Ad Astra
Steve Osborn, Osborn McDerby
Scott Smith, Hanson Bridgett
JJ Stein, Shartsis Friese
Sarah Van Voorhis, Van Voorhis & Sosna
Alay Yaznik, Lawyer Business Advantage