As a lawyer you will be no stranger to considering outcomes and planning for eventualities, but when it comes to your personal retirement planning, clearing time to plan for the future can be a challenge amid the demands of the present. To make time for getting a personal retirement plan in place start with these four steps:
Step 1: What does retirement mean to me?
Just as it is important to set goals for your practice, it’s important to do the same for your retirement so that you can build a financial plan accordingly. Imagine what retirement will look like for you. Create a vivid picture of how you would ideally spend your days. Next, set clear, attainable retirement goals, and then prioritize them.
Step 2: How much money will I need to achieve my retirement goals?
There is no magic number. The easiest way to estimate your retirement spending is to begin with what you are spending right now and then think about what might change in retirement. You can use this Retirement Lifestyle Expenses worksheet to get started.
Step 3: Where will my income come from?
Look at your potential sources of retirement income. Will you have a part-time practice or do consulting work? For Canadian lawyers, consider employer pensions, government pensions such as the Canada Pension Plan (CPP) and Old Age Security (OAS), registered savings, non-registered savings and other income. For US attorneys you will want to consider employer pensions, 401Ks and IRAs, and other registered and non-registered savings and other income.
Step 4: How much do I have to save now? (otherwise known as Gap Management)
To find out how much you need to save for retirement, use either the Money Coaches Canada Financial Freedom Calculator or this US Retirement Calculator. You will need your estimated annual expenses figures and some of your income and investment information from Steps 2 and 3. The calculator will factor in: inflation, the estimated rate of return on your investments, when you expect to retire, and how long you expect your savings will have to last (It is a good idea to run retirement numbers to age 95 to ensure that you don’t outlive your money). Using the calculator, you can see what happens to the numbers when you change one of the many factors.
It’s possible you’ll discover a shortfall or gap between how much money you estimate having in retirement (income) and how much money you think you will need to live the life you want (expenses). Don’t be discouraged, having a gap is not uncommon. The important thing is being aware of it and planning accordingly. If you need assistance with planning, reach out to a Money Coach or other financial advisor.
Taking steps to understand your retirement needs, personally and financially, can serve as a reference point when setting your professional goals. Start your planning this weekend with step one and follow through with getting a plan in place this year so you know where you are heading and can stop worrying about the future and enjoy the tomorrow that is around the corner.