Retirement Plans For Lawyers: Top 4 Things To Consider

Attorneys are often in a high tax bracket, making retirement planning tricky. Explore this aspect of retirement plans for lawyers, plus three others.


As an attorney, you likely earn a salary that puts you in a high tax bracket, which can make timing and other aspects of retirement planning tricky. In this blog post, we’ll dig into this aspect of retirement plans for lawyers, plus three other key considerations to discuss with your financial advisor as you approach retirement.

4 Elements That Retirement Plans For Lawyers Must Include

1. Engaging in Proactive Tax Planning

Attorneys often receive a final capital disbursement (also known as an equity payout) upon retirement, which can land them into an even higher tax bracket for the year than they would be based on their salary alone. This makes proactive tax planning especially important as you near retirement.

Retirement plans for lawyers must take a strategic approach to your retirement date. If your final year’s salary is substantial, you may consider retiring mid-year to avoid reporting an entire year’s income at tax time. This is a smart move if you also will be required to take your capital payout during the same year. Alternatively, you may opt to work a full year before retirement but take your capital payout in the following year to reduce your tax burden.

2. Determining Your Spending Needs

When planning for retirement, attorneys often underestimate their spending needs. For example, many lawyers choose to retire before age 65. If you go this route, you’ll have to figure out a plan for healthcare insurance between the time you retire and when you turn 65. You must also consider how long you might live, regardless of when you retire, and prepare to support your income needs into your 90s.

People who have had high-stress careers in the legal profession often want to engage in luxury travel or other meaningful but pricey endeavors in their retirement years. In addition, because of long hours spent in the office or courtroom, home renovations have often been overlooked, and new retirees often want to update and modify their home to accomodate a post-work lifestyle. Both travel and home renovations carry a hefty price tag that, as part of a retirement plan, attorneys must consider.

Finally, be careful not to overestimate your investment returns. After several years of above average returns, many Americans have forgotten what standard returns look like. According to global investment bank Goldman Sachs, 10-year stock market returns have averaged 9.2% over the past 140 years. Between 2010 and 2020, however, the annual average return has been approximately 13.6%.

3. Understanding Your Pension Plan

Some large law firms still offer pension plans, but attorneys often don’t understand their options or know which option is best. If you’re trying to decide between taking a lump sum or receiving your pension as monthly income, keep in mind that the best choice for you depends on your retirement plan itself and your personal financial situation.

As a general rule, a lump sum is often favorable. Once you turn your pension into monthly income, only you (and your spouse if you reduce your monthly income in return for a survivor benefit) can use the funds, and you can’t pass down the money to your children. This is why it’s crucial that all lawyer retirement plans consider your personal financial resources and objectives.

4. Diversifying Savings And Investments

Not diversifying properly is often an issue for attorneys. it’s common to have a solid amount of pre-tax wealth (retirement accounts) but not enough after-tax savings (money you’ve already paid tax on). This is why, prior to retirement, lawyers must save and invest wisely.

If you work for a law firm, you’ll often have a 401(k) account, profit sharing, and potentially another employer-based defined contribution plan. These vehicles are terrific, but if that is all you have, you are left without funds you can withdraw without the funds you need to spend being taxed. This can cause you to end up in a cycle where every dollar you spend is taxed, so you need to pull more money out of your pre-tax account to pay that tax, only to be taxed again on the money you’ve withdrawn. One solution is to open a regular brokerage account (an after-tax account) while you’re still employed and save at least some of your income there to reduce your tax bill.

In addition, pay close attention to your investment portfolio and pare down your equities as you get closer to retirement. This is crucial because as you approach retirement, your needs change from wealth accumulation to wealth preservation. If you lose money in the market just before retirement, you won’t have sufficient time to recoup the losses before you need to begin taking withdrawals.

Experts In Lawyer Retirement Plans

At Curio Wealth, we’re proud to serve many attorneys as our clients. We have a solid understanding of retirement plans for lawyers and the unique elements of these plans compared to standard retirement plans. We’re also tax planning buffs, which means we’ll always proactively look for tax savings opportunities for you and your family as you enter your golden years. Schedule a call with us today to learn more about how we can help.

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