For lawyers, retirement looks very different depending on your practice.

A big-firm litigator, for example, will have spent decades with very high income and very little time. For them, retirement is typically well-funded but might be their first significant free time since law school.

A government regulator, on the other hand, will have spent decades earning a modest income while working nine to five (or something fairly close to). They will retire with a pension and some savings, and will likely have a retirement similar to any other government worker.

Then, small-firm lawyers often have the worst of all worlds. They will likely have spent a career working extremely long hours for relatively little pay. This sizable cohort may retire on modest savings, while also enjoying their first significant time off in more than 40 years.

This is a wide-ranging field, and retirement will depend significantly on the choices made both in and after law school. But there are still some significant trends that every lawyer should pay attention to. In particular, lawyers need to pay attention to the early career savings handicap created by a combination of low incomes and high debt.

A financial advisor can help you navigate your own retirement planning.

Saddle-Shaped Salaries

Arguably the single most important thing to know about finance for lawyers is the saddle-shaped salary curve that dominates all of law. More formally, it’s known as the “bi-modal distribution.”

Most people outside of law believe that lawyers uniformly make high incomes. This is incorrect. In reality, legal salaries cluster at the high and the low and of a standard curve. A significant minority of lawyers make very high incomes, typically more than $200,000 per year. Most lawyers, however, make either a middling or a low income, typically distributed across a range of $40,000 to $90,000 per year.

This creates several distortions and misrepresentations in the data for legal salaries.

Most reporting focuses on the high earning potential of this profession. This ignores the reality that few lawyers make that kind of money. Average, and even median, earnings in this field are significantly distorted by the reality that legal salaries cluster at the high- and low-ends.

What’s more, lawyers who do make high incomes also tend to report extreme unhappiness and job dissatisfaction. This makes those incomes unstable, as high-earning practitioners frequently leave their positions. The result is a profession that appears to be high-earning, but which in reality tends to be relatively low earning, and which is overwhelmingly so among the jobs people actually want.

When it comes to retirement, it’s critical for lawyers to plan around the one-two punch of saddle-shaped income and high student debt.

Early Career Debt

Big-firm or otherwise high-earning lawyers will not necessarily have to manage this issue. While they have lifestyle concerns (to be addressed below), they typically have a lot of financial flexibility.

The majority of lawyers have much tighter finances, however. The average cost of attending law school now exceeds $220,000, including both tuition and costs of living. This can be much higher depending on your institution. For example, this writer’s law school now charges more than $70,000 per year in tuition alone and recommends budgeting more than $300,000 for total costs over a three-year program.

Almost all of this is paid for by high-interest graduate student debt, which must be paid shortly after graduation. For a lawyer earning $60,000 per year, paying off a $300,000 educational mortgage at 8% interest will take up most of their disposable income (if not more).

That leaves very little room for early-career retirement contributions. This is an issue that lawyers absolutely must plan for. For young lawyers, do your best to find some money to set aside for retirement. For mid- or late-career lawyers, this might mean accelerating your retirement contributions to compensate for getting a late start on your retirement portfolio.

For most lawyers, your 20’s and 30’s will be spent balancing retirement needs against debt payments. This will not be easy, but it is central to what retirement looks like for a lawyer. Consider matching with a financial advisor for help charting a course.

Time and Budget Management

This is an issue particular to big-firm lawyers.

Big law, as it’s called, is known for a lucrative but punishing lifestyle. While these jobs pay extremely well, the related stress and misery are comprehensive and well documented. If nothing else, it says quite a lot that someone can make more than a quarter-million dollars per year before age 30 and still hate their job.

All of this has real financial stakes.

Big law attorneys tend to take out this stress through spending. For everything their job demands, it gives financial flexibility in return. So lawyers maximize that spending power in what little time off they have. This can take the form of large expenses (boats and luxury cars are common) or routine ones (daily takeout). Whether large or small, though, that spending adds up. It is not uncommon for lawyers at these firms to spend their money as fast as they make it.

First, you may have spent instead of saved. Every $75 takeout dinner is $2,250 over the course of a month ($75 * 30) that could have gone into a portfolio investment. Over a 30 year career, invested in an S&P 500 index fund, that dining out budget alone could fund a potentially $5 million retirement.

Second, you may have adjusted to a high-spending lifestyle. It’s easy to get used to a career spent eating at expensive places, flying first class, buying designer products and more. Then, multiply that spending by the newfound amount of free time on your hands. This lifestyle, expensive enough on its own, will now fill 24 hours per day.

This means that the higher your income, ironically the more likely it may be that retirement requires budgeting. Make sure to use your money wisely in your working life. That way you will have more of it on hand for retirement (perhaps even an early retirement), and you will be used to living within some boundaries once you get there. Get matched with a financial advisor for personalized help.

Practices as an Asset

If you own your own practice, retirement means either selling or winding down your practice.

For a lawyer, selling your business is more complicated than for most professionals. First, you must navigate the often-significant ethical issues involved with selling a legal practice. How, and even if, you sell your business depends a lot on your state bar’s ethical rules and the structure of this sale.

Then, you must deal with the nature of your business. For a lawyer, the practitioner is the product. A law firm exists to allow the attorney(s) within to sell legal counsel. If you are a member of a larger firm, it is typically easy to sell your equity shares and retire. However, the smaller the firm the more difficult this becomes. For solo practitioners or small partnerships, often there is little value to the business without the lawyer.

All of this means that, as you plan for your retirement, you need to be careful about how you consider your firm as an asset. Equity partners who own shares in a large firm can fairly confidently treat these as assets of value. Anyone else should think carefully before depending on their firm to generate retirement capital. A financial advisor can help you navigate business transitions and retirement planning.

The Bottom Line

Retirement for a lawyer will depend entirely on the nature of your practice. Consider your income, spending and assets as you think about how you will retire, because this is a diverse field with equally diverse outcomes.

Tips On Self-Employed Retirement

If you own your own practice, you must navigate the difficult world of self-employed retirement. Planning for what, exactly, this will look like can take discipline and creativity. Fortunately, we can help you get started.
A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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