With the dollar amount of their 401(k) plans decreasing, the age when many partners expect to retire is increasing.
The dream of trading in timesheets for the tropics has been delayed, and that means partners are looking to stay at firms even longer. The ramifications of this phenomenon have their pluses and minuses.
People in their early 60s who would normally have been close to retirement are now working full bore, Frank D'Amore of Attorney Career Catalysts said. Where in the past they may have been ready to transition their practices to younger attorneys, that's no longer the case, he said.
This could be a good thing in that rainmaking partners might stay on longer than normal, but it's also important to see younger attorneys start building their books of business, D'Amore said.
Having partners stick around might also limit leadership opportunities for younger lawyers, he said. Even if those older partners aren't in leadership positions but are still rainmakers, "it could get crowded" in the firm because those partners still hold a lot of sway.
Loosening mandatory retirement policies -- something firms had begun to do before the economy tanked -- could also bring with it some problems. Even in good financial times, the problem seen with doing away with mandatory retirement policies was that it wouldn't give firms an easy excuse to usher out older partners who were no longer pulling their weight.
Those conversations can cause much more discord when the partner a firm is asking to leave can't afford to go into retirement, D'Amore said.
Lawyers and non-lawyers alike are facing a number of factors that may play into their decision to retire, Altman Weil's Jim Cotterman said. Assets are down, their salaries are likely to be lessened this year, and many are trying to pay off debt and deleverage.
It's difficult to build back the assets when the income is lower and much of that money is going toward paying off existing debt, he said. Those factors are then amplified by the fear of a hyper-inflation period in which retirees on a fixed income would have difficulty weathering a steep rise in inflation, he said.
"I suspect that if you take all these elements and put them together, people are looking at retirement a lot more hesitantly and cautiously," Cotterman said.
But he said he doesn't see that as a negative for law firms. With the huge numbers of baby boomers who were getting ready for retirement, Cotterman said he thinks firms were at risk of losing a significant amount of wisdom and contacts in an age when client generation is at a premium.
Having those attorneys stay on board doesn't inhibit the younger partners looking to move up, Cotterman said. Law firms are run much more like meritocracies and they will make room for any attorney "growing the profit pie," he said.
A BRIGHTER SPOTLIGHT
Jackie Lessman, a certified financial planner and senior vice president for PNC Wealth Management, said she is definitely seeing all types of professionals re-evaluating their retirement plans, and that generally means pushing back their expected retirement date.
The desire to work longer given longer life expectancies has been a topic of conversation since before the recession, she said.
"The recession has put a spotlight on that, where perhaps it may have been a choice before hand, now it may be necessary," Lessman said.
Firms may also have to balance generational issues as there becomes a greater number of older partners, she said. Those firms might want to bring in younger attorneys to even the generational imbalance, but there is a significant cost to that. This is another issue, Lessman said, that was discussed before the recession but that is even more of a concern in a difficult economy.
It's not the people who were looking to retire early to spend their time traveling or golfing that are the problem, Cotterman said. They still have the mental and physical capacity to continue on at the firm.
"People who want to stay beyond when they could do so effectively is where firms could run into problems," he said. "That's where the challenges could come in. So I don't think it's an immediate problem, it's a longer-term one."
But if the legal profession moves away from mandatory retirement policies, which Cotterman said he thinks it will, then this will be an issue firms will have to handle. It will require the creation of a fair and candid evaluation system, he said. There will still be uncomfortable situations when partners who aren't financially ready to retire are asked to leave, Cotterman said.
D'Amore pointed out that many attorneys are so dedicated to their careers that they don't have a secondary occupation to turn to or even a hobby. As lawyers realize they need to extend their career path, he said they may start to think about making a lateral move at a later age.
If a lawyer thought he was only going to practice for another year or so, he would probably stay at his firm despite any problems he saw or despite how well the firm's platform fit his practice. But now that they are looking to practice longer, older attorneys may start to compare the benefits of their firms to others, he said.
The best hope for law firms is that between now and when partners are ready to retire, the attorneys recalibrate their lifestyles and build back assets, Cotterman said.Lessman said the financial advice she gives doesn't change with the economy. She first talks to clients about the importance of having a "rainy day" fund, then gets into budgeting and cash flow and then looks to broader financial and family planning needs.