Sixty-five was selected as the targeted retirement age because, at the time, only a small percentage of the population lived beyond it, and thus the cost of insurance was manageable.
Today, many people live 20 years and more beyond 65 (hence the title of the book, “Life After Law: What Will You Do With the Next 6,000 Days?”)
As lawyers near retirement age, many experience conflicting emotions. Those who love practicing law will want to continue doing it, perhaps until they “die with their boots on.” Those who are ready to move on will be more willing to leave their practices, most likely by selling them.
However, except for those in large firms that enforce a mandatory retirement age, or mandatary departure in the event their revenue production falls below a stated amount, most lawyers are unwilling or financially unable to leave their practices.
How many lawyers in solo or small-firm practices (who typically are not known for financial foresight) have adequately made provisions for life after the law?
Some states now require lawyers to have estate plans for their practices, providing for succession in the event of a lawyer’s death or disability. But considerations related to retirement go well beyond that. Here are three that are paramount:
1) A financial plan
It should go without saying that life insurance and a disability policy are essential for any sole practitioner. Other steps to take include drafting a will and an estate plan that states your direction for the wealth you have earned. The plan can create trusts to conserve assets, to provide financially for all the expenses necessary to close a practice and to value properly the practice for insurance or sale.
2) A succession plan
If you intend to stay in practice, you should designate a conservator or other representative to handle matters if you suddenly die or are disabled. If the practice is not sold, the best succession alternative is to groom a successor, initially brought on board as an associate or a lateral partner. Ideally, this succession plan can be structured to phase in over a period of up to five years, as client responsibilities gradually move to the new lawyer.
During this period, there can be ongoing conversations with important clients about the coming transition, an opportunity to forge new ties between the successor and both current and new contacts, and sufficient planning to ensure that the new lawyer is completely up to speed on what clients need and expect.
Preparing makes all the difference when you’re trying to avoid a rocky transition while turning your practice over to a successor.
3) A retirement plan
Having one of these can be the toughest of all. Successful people are typically passionate about what they do for a living, but the questions get trickier when they’re concerning personal satisfaction, self-worth and well-being. It’s particularly hard when lawyers must ask themselves: Would it truly make me happy to quit working completely and perform community service? Or, alternatively, would starting a new career lead to fulfillment?
Lawyers can feel conflicting emotions when they’re trying to decide if they should retire. A successful transition will require all the traits that defined your success as a lawyer: motivation, acceptance of risk, resiliency and commitment. Each person’s approach will be different from all others and can change over time, so don’t feel as though you’ve burned bridges to your past life.
What is common to all lawyers is that these realities and needs must be faced. Lawyers who fail do so in effect are throwing away the value of their practices, and in the process, relinquishing their life’s work without getting anything in return.
A lawyer should not ignore perhaps the largest asset in his estate: his practice. The value is there. After investing years of hard work and financial resources in expanding the practice, effective planning allows a lawyer to reap the benefits of that value and the extensive investment of time and effort that created it.
No matter what your age, the time to start planning is now.
If you ask me, the simplest way to reduce stress in your financial life is to build a sound plan with accurate projections. To this end, technology is immensely helpful. Whether you use a spreadsheet or a tool like OnTrajectory.com or some other website — you have to get everything out in front of you so you can make smarter decisions. Once you do that, then implementing your disciplined retirement strategy becomes critical.