Does
this
sound
familiar?
Another
late
night
at
the
office.
It’s
9
p.m.
and
you’re
staring
at
another
stack
of
briefs.
Your
phone
buzzes
with
a
text
from
your
spouse
asking
when
you’ll
be
home.
Again.
The
thought
crosses
your
mind:
When
can
I
actually
retire
from
all
this?
If
you’re
like
most
lawyers
I
talk
with,
that
question
feels
overwhelming.
Between
law
school
debt,
lifestyle
creep,
and
the
constant
pressure
to
keep
up
with
your
colleagues’
big
houses
and
shiny
cars,
retirement
planning
gets
pushed
to
the
back
burner.
So
you
may
not
feel
prepared.
Then
there’s
the
question:
How
much
will
my
retirement
cost
anyways?
But
understanding
your
retirement
costs
isn’t
just
important.
It’s
your
biggest
lever
for
making
retirement
actually
work.
It’s
the
number
that
drives
all
the
rest
and
can
give
you
clarity
with
your
purpose
beyond
the
law.
Why
This
Math
Actually
Matters
I’m
going
to
be
brutally
honest
with
you.
The
difference
between
understanding
your
expenses
and
taking
a
wild
guess
could
cost
you
years
of
retirement
funding.
Let
me
show
you
what
I
mean
with
a
simple
example.
Take
a
hypothetical
example
of
a
$1,000,000
portfolio
growing
at
7%
annually.
If
you
withdraw
$7,000
monthly,
your
money
lasts
27
years.
Bump
that
up
to
just
$8,000
monthly?
You’re
looking
at
only
20
years.
That’s
right—$1,000
per
month
makes
a
seven-year
difference
in
the
depletion
rate
of
your
portfolio
throughout
your
retirement.
This
is
why
getting
super
clear
on
your
expenses
isn’t
just
helpful
financial
planning.
It’s
the
difference
between
a
comfortable
retirement
and
running
out
of
money
when
you’re
85.
Step
One:
Know
What
You’re
Actually
Spending
Today
Before
you
can
figure
out
what
retirement
will
cost,
you
need
to
know
what
you’re
spending
right
now.
And
no,
looking
at
your
bank
account
balance
and
shrugging
doesn’t
count.
You’ve
got
two
approaches
here,
and
I’ll
walk
you
through
both.
The
Top-Down
Approach
(My
Personal
Favorite)
This
is
perfect
for
busy
attorneys
who
want
answers
without
drowning
in
spreadsheets.
Here’s
how
it
works:
Grab
your
tax
return
and
your
401(k)
statements.
That’s
it.
(Well,
maybe
your
IRAs,
brokerage
accounts,
or
anywhere
else
you
save).
Take
your
gross
income,
subtract
what
you
paid
in
taxes,
then
subtract
what
you
put
into
retirement
accounts
and/or
savings.
What’s
left?
That’s
your
actual
lifestyle
spending.
For
example,
let’s
say
you
earned
$300,000
last
year.
You
paid
$90,000
in
taxes
and
saved
$60,000
for
retirement.
Your
lifestyle
spending
was
$150,000.
Is
this
method
perfect?
No.
But
it’s
quick,
and
it
gives
you
a
solid
starting
point
without
getting
bogged
down
in
the
weeds.
The
Bottom-Up
Approach
(For
the
Detail-Oriented)
Some
attorneys
prefer
tracking
every
expense
category.
You
know
who
you
are—the
ones
who
color-code
your
case
files
and
have
perfectly
organized
desk
drawers.
This
approach
means
listing
everything:
mortgage,
groceries,
insurance,
that
expensive
coffee
habit,
your
kid’s
soccer
cleats.
Everything.
The
upside?
You
get
a
detailed
picture
of
where
your
money
goes.
The
downside?
It’s
tedious,
and
people
often
forget
important
costs
anyway.
You’ll
remember
your
property
taxes
but
might
overlook
home
maintenance.
You’ll
include
health
insurance
but
miss
out-of-pocket
medical
costs.
If
you
go
this
route,
track
your
spending
for
at
least
three
months
first.
There
are
even
apps
that
can
help
with
the
heavy
lifting
here–You
link
your
accounts
and
watch
the
breakdown
of
your
spending
habits
appear.
But
don’t
get
hung
up
on
tech
as
a
spreadsheet
will
do
just
fine
if
getting
into
the
weeds
is
your
thing.
Step
Two:
Factor
in
Inflation
Once
you
know
your
current
spending,
you
need
to
account
for
inflation
between
now
and
retirement.
Let’s
say
you’re
spending
$150,000
today
and
plan
to
retire
in
five
years.
With
3%
annual
inflation,
that
same
lifestyle
will
cost
about
$173,000
in
five
years.
How
Your
Expenses
Change
in
Retirement
Good
news:
Your
expenses
probably
won’t
stay
the
same
when
you
retire.
In
fact,
they’ll
likely
drop
more
than
you
think
assuming
a
similar
lifestyle.
Your
Tax
Bill
May
Shrink
You’ll
need
to
add
taxes
back
into
your
overall
need
for
retirement.
But
taxes
might
look
a
bit
different.
First,
you
wave
goodbye
to
FICA
taxes—that’s
7.65%
of
your
paycheck
right
off
the
top.
If
you
own
your
practice,
you’re
currently
paying
double
that
amount!
Social
Security
benefits
get
better
tax
treatment
than
your
salary
does.
Depending
on
your
other
income,
only
0%
to
85%
of
your
benefits
might
be
taxable.
Many
states
also
cut
retirees
a
break
with
special
tax
treatment
for
retirement
account
withdrawals
as
well.
Work
Expenses
May
Vanish
Think
about
all
the
costs
that
simply
disappear
when
you
retire:
malpractice
insurance,
bar
dues,
continuing
education,
professional
clothes,
daily
commuting,
business
lunches.
These
expenses
often
add
up
to
$10,000
or
more
every
year
for
many
attorneys.
The
Mortgage
Factor
Some
lawyers
reach
retirement
with
their
home
either
paid
off
or
close
to
it.
Since
housing
usually
takes
up
about
a
third
of
your
expenses,
eliminating
your
mortgage
payment
makes
a
huge
difference
in
how
much
you
need
each
month.
What
if
you
still
have
a
mortgage?
Perhaps
you’re
one
of
the
lucky
ones
still
holding
on
to
a
3%
mortgage.
Assuming
your
investments
are
positioned
to
earn
a
higher
rate
of
return,
it
could
make
sense
to
maintain
the
mortgage.
Just
account
for
the
eventual
drop
in
expenses
when
that
mortgage
is
fully
paid
off.
No
More
Saving
for
Retirement
This
one
surprises
people.
Those
big
chunks
of
money
you’ve
been
putting
into
retirement
accounts?
That
cash
was
never
part
of
your
spending
money
anyway.
Many
attorneys
in
their
peak
earning
years
have
the
capacity
to
put
away
$50,000
to
$70,000
annually
for
retirement.
Once
you
retire,
you
can
stop
saving
for
retirement
(obviously!),
which
means
you
need
less
income
to
maintain
the
same
lifestyle.
Putting
It
All
Together:
Your
Retirement
Portfolio
Target
Now
comes
the
fun
part—figuring
out
exactly
how
much
you
need
saved
to
make
this
whole
retirement
thing
work.
Let’s
walk
through
this
step
by
step
with
a
real
example.
Say
you’ve
determined
you’ll
need
$180,000
annually
to
maintain
your
lifestyle
in
retirement
(after
accounting
for
inflation).
Step
One:
Subtract
Your
Guaranteed
Income
First,
you
subtract
any
guaranteed
income
sources.
For
most
lawyers,
this
means
Social
Security
and
possibly
a
pension
if
you
worked
in
government
or
academia
early
in
your
career.
Don’t
forget
to
include
your
spouse’s
resources
here
as
well.
Let’s
say
Social
Security
will
provide
$48,000
annually
for
you
and
your
spouse
combined.
Your
annual
income
gap
becomes
$180,000
–
$48,000
=
$132,000.
This
is
the
amount
your
investment
portfolio
needs
to
generate
each
year.
Step
Two:
Calculate
Your
Portfolio
Target
Here’s
where
that
famous
4%
rule
comes
in
handy
as
a
starting
point.
If
you
need
$132,000
annually
and
plan
to
withdraw
4%
of
your
portfolio
each
year,
you’d
need
$132,000
÷
0.04
=
$3,300,000
in
total
savings.
Yikes,
right?
But
before
you
panic,
remember
what
we
talked
about
earlier—your
expenses
will
likely
be
lower
than
you
think,
and
the
4%
rule
isn’t
the
only
game
in
town.
A
More
Realistic
Example
Let’s
get
super
clear
with
numbers
that
reflect
what
I
actually
see
with
most
attorneys.
Continuing
with
our
example,
this
is
the
step
where
we
begin
adjusting
different
variables
to
help
solve
for
the
retirement
goal.
After
learning
more
and
discussing
a
dynamic
withdrawal
strategy
(as
opposed
to
a
static
4%
withdrawal
rate),
the
couple
may
decide
they’re
comfortable
with
an
initial
withdrawal
rate
of
5%.
To
generate
$132,000
per
year,
they
would
need
$2,640,000
saved
($132,000
÷
0.05).
Still
a
big
number,
but
suddenly
more
achievable
than
$3.3
million.
As
a
safeguard
to
the
higher
withdrawal
rate,
they’ve
identified
key
portfolio
values
that
would
trigger
either
a
small
spending
decrease
or
increase
depending
on
the
performance
of
their
retirement
accounts–Income
guardrails.
The
Income
Gap
Reality
Check
This
exercise
often
reveals
something
important:
the
gap
between
what
you
have
and
what
you
need
might
be
smaller
than
you
thought.
Or
it
might
highlight
that
working
a
few
extra
years
could
make
a
dramatic
difference.
Either
way,
it
provides
actionable
direction
for
what
needs
to
happen
next
with
your
retirement
plan.
Need
to
save
more?
Better
to
know
5-10
years
out
from
retirement
than
at
retirement.
Realized
you
spend
more
than
you
thought?
Not
a
bad
thing–just
something
to
plan
around.
Money
is
meant
to
be
spent
after
all.
In
better
shape
for
retirement
than
you
realized?
Great!
Now
you
can
shift
your
mindset
towards
your
purpose
in
retirement.
The
Dynamic
Spending
Strategy
At
this
point,
hopefully
you
can
see
the
impact
that
expenses
have
on
your
retirement.
However,
you
may
also
feel
a
little
bit
uneasy
since
everything
feels
so
precise.
But
this
next
part
may
help
you
breathe
a
bit–You
don’t
have
to
get
this
calculation
perfect
if
you’re
willing
to
make
adjustments
throughout
retirement.
Research
shows
that
most
retirees
don’t
increase
their
spending
with
inflation
every
year
anyway.
Instead,
spending
follows
more
of
a
“smile”
pattern:
higher
in
early
active
years,
lower
in
the
middle
period,
then
rising
again
with
healthcare
costs
in
later
years.
I
find
this
true
in
practice.
Even
with
the
last
few
years
of
high
inflation,
most
of
my
retirees
have
taken
inflationary
bumps
to
their
withdrawals,
but
much
lower
than
the
actual
rate
of
inflation.
A
flexible
spending
strategy
means
adjusting
your
withdrawals
based
on
how
your
investments
perform.
Being
willing
to
reduce
spending
by
just
5-10%
during
major
market
downturns
can
let
you
start
with
a
higher
withdrawal
rate
and
still
make
your
money
last.
For
attorneys
used
to
unpredictable
income,
this
flexibility
comes
naturally.
Bottom
Line
Understanding
your
retirement
costs
isn’t
about
creating
a
perfect
budget
that
you’ll
follow
for
30
years.
It’s
about
getting
clear
on
what
you
actually
need
so
you
can
make
informed
decisions
about
when
and
how
to
retire–and
when
to
adjust
along
the
way.
The
math
might
seem
daunting
at
first,
but
remember
that
small
changes
in
your
expenses
can
add
years
to
how
long
your
money
lasts.
And
with
some
strategic
planning
around
taxes,
work
expenses,
and
flexible
spending,
you
might
find
that
retirement
is
closer
than
you
think.
Start
with
the
top-down
approach—grab
your
tax
return
and
retirement
statements.
Figure
out
what
you’re
really
spending
today.
Then
we
can
worry
about
fine-tuning
the
details.
After
all,
the
goal
isn’t
perfection.
It’s
confidence
that
you
can
maintain
your
lifestyle
without
the
pressure
of
billable
hours
and
court
deadlines.
David
Hunter,
CFP®
is
a
CERTIFIED
FINANCIAL
PLANNER™
and
owner
of First
Light
Wealth,
LLC (Opens
in
a
new
window),
a
financial
planning
&
wealth
management
firm
with
a
unique
focus
on
serving
attorneys
nationwide.
David
has
over
a
decade
of
experience
helping
clients
build
financial
plans
and
has
been
featured
in
publications
such
as
Attorney
at
Work,
ThinkAdvisor,
MarketWatch,
Financial
Planning,
and
InvestmentNews.
David
also
writes
weekly
to
attorneys
in
his
popular Money
Meets
Law (Opens
in
a
new
window) newsletter.
For
more
about
David,
visit firstlightwealth.com/lawyers (Opens
in
a
new
window) or
connect
with
him
on LinkedIn (Opens
in
a
new
window).
Kathryn
