By Antonio Porretta
The life of an attorney has often been romanticized in movies and books. And while it’s true that it can be a very rewarding career, it isn’t without its challenges. Let’s discuss the top 5 financial and retirement planning challenges attorneys face so you can know how to overcome them. (After all, as an attorney, we know you’re no stranger to prevailing despite difficulties!)
1. Late Start
It takes a while to earn a bachelor’s degree. Then you must get through law school and the bar exam. Sometimes it even takes a while to get into law school. As a result, attorneys are usually a little behind others their age when it comes to starting their careers.
That doesn’t only mean that attorneys are late bloomers when it comes to earning an income. They also get a late start in saving for retirement, which can be even more challenging. When saving and investing for the future, time is one of your most powerful tools because of the power of compounding interest. When you enter the workforce late because of all of your schooling, you’re not only missing out on years’ worth of income but years’ worth of compounding growth for your retirement accounts as well.
2. Student Debt
For most attorneys, they aren’t just starting their careers late, they are starting them deep in debt. It can take years to dig yourself out from under several hundred thousand dollars’ worth of student loan debt. Every one of those years is a lost year of compounding interest for your retirement savings, and every payment is a lost contribution to your retirement accounts. Student loan debt can be even more detrimental to an attorney’s finances than getting a late start in your career.
3. High Taxes
While it can take quite a while to become an attorney and start earning an income, once you do, you can earn a pretty high income. Unfortunately, a high income usually equates to high taxes. This is especially a problem for contingency fee and trial attorneys when they win a big case.
One way to limit your tax liability is to set up a retirement plan that allows you to minimize taxes while maximizing retirement savings. A 401(k) or cash balance plan allows you to put away a lot of money pre-tax. To combat the taxes that come from winning big cases, you can set up a structured fee arrangement that allows you to reduce taxes while still being able to invest the money.
4. Unpredictable Income
Another financial challenge for attorneys is that many have an unpredictable income. It can be hard to tie up money in a retirement account when you are unsure of what the future holds, and your income fluctuates regularly. The unpredictability also makes it hard to budget strategically and make a plan for your finances.
5. Lack Of Succession Planning
It may sound silly, but many attorneys have trouble knowing when or how to retire. Once you’ve made the decision to slow down, how do you step away from the business? If you own your own firm, how will you sell it? If you’re part of a small firm, who will buy you out and how will they fund the buyout? These are things best thought of many years in advance.
How We Can Help
We at Blackbridge Financial help attorneys just like you every day. We help develop law firm succession plans to help make a smooth and painless transition when the time comes to step away. We assist firms in setting up appropriate retirement plans that allow them to save large amounts of money for the future while minimizing current taxes. And if you’ve just won a big case, we can help you set up a structured fee arrangement so that you can reduce taxes and be more strategic with your money.
Are you an attorney looking for a financial professional that understands your unique challenges? Let’s start the discussion to find out if we’re the right partner for you on your journey to a comfortable retirement. Email me at email@example.com or call 704.960.9646 to get started today!
Antonio Porretta is an independent wealth manager at Blackbridge Financial with over 20 years of experience. He specializes in helping people create, distribute, and preserve their wealth. Antonio received an executive MBA from Saunders College of Business at Rochester Institute of Technology in 2007 and also holds the Accredited Asset Management Specialist (AAMS®) designation. Originally from Rochester, NY, Antonio has been a resident of Harrisburg, NC, since 2007. Outside of work, he enjoys playing soccer and tennis, coaching, and spending time with his wife, Laura, and their children, Cristiano, Victoria, and Matteo. To learn more about Antonio and how he can make a difference in your financial life, visit www.blackbridgefinancial.com.
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Content in this material is for general information only and not intended to provide specific advice.