The Big Five

November 21, 2017

Have you ever been on an African safari?  Sadly, I never have.  Hopefully, someday… maybe once my kids are a bit older and the thought of a trans-continental flight isn’t quite so painful.

For those who have been on a safari, you’re no doubt familiar with the concept of “The Big Five.”  The Big Five are the five animals that every safari-goer is really hoping to see.  They are the lion, leopard, elephant, rhino and cape buffalo.  Side note:  I’m no Jack Hanna, but I’m a little surprised the cape buffalo made the cut.  Every time I’ve seen them on TV there are about 50 of them in a cluster hanging out in the river.  Not exactly tough to spot.  But I digress.

For lawyers, there’s another type of “Big Five” that’s equally as exciting and far more important to your future.  These are “The Big Five of Retirement Planning.”  These are the five factors that will have the most significant impact on how successful your retirement years will be (at least financially).

They are:

  • How long you work
  • How much you spend
  • How much you save
  • How well your money works for you, and
  • How long you live

Each of these deserves its own attention, and a 600-word blog won’t suffice to hit all five, so we’ll start with the first one for now.

How Long You Work

For lawyers this can be a delicate and, at times, divisive issue.  There’s an inherent tension around this factor, given the nature of the legal profession.  Law firms are in the professional services business, so your assets walk out the door every night.  To attract and retain those assets you must provide consistent opportunity for advancement and expansion of responsibilities.   To provide those opportunities there has to be a natural progression to the lawyer’s career path.

To encourage this progression, law firms have instituted a variety of policies over time regarding retirement.  So, depending on your firm’s partnership agreement you may have a great deal of, or very little control over how long you work.

The implications of this are massive.  Think about it… As lawyers your wealth is not created through the equity value growth of your capital account, but rather through year-over-year compensation growth.  So, as would seem appropriate in a profession where timekeeping is a way of life, every minute, hour, day and year really count.

Here’s the issue.  Lawyers are often so busy worrying about their clients and dealing with other people’s problems they don’t spend enough time planning their own future.  For exceptionally busy lawyers, it’s easy to let time get away from you and suddenly you’re five years closer to retirement.  You simply cannot afford to make that mistake.

So what should you do? 

When is the last time you paused and did some cocktail napkin math to figure out how many more years you’ve got to make rain while the sun shines?  Make some realistic assumptions about how many prime-earning years you have left until your comp starts to wane.  Now, assuming you live until age 90, how many years does that mean you have to pay for out of your savings / investments?  Does it seem realistic that you can maintain your current lifestyle for that number of years based on your current savings trajectory?

If not, you need a game plan to figure out how to make the most of your remaining high-income years so you can set yourself up for the secure, comfortable retirement you’ve always envisioned.  A retirement that perhaps even involves a trip to see the Big Five!