With the stock market down so far this year, is it a surprise that lawyers’ financial strategy is to keep working through 2016?
In a recent survey conducted across ALM’s legal news websites for about three days, 170 respondents out of more than 200 said they would work longer or stay the course to stave off investment pinches.
The approach dovetails with the culture at many law practices, where seniority means more power and business. Nearly every stock index has fallen this year since Jan. 1, with the exception of some Latin American markets, so law firm partners across the U.S. this week asserted that their plans to stay in the workforce have not wavered.
“If I retired, I wouldn’t know what to do all day,” said David Bercuson, a Miami entertainment lawyer who has been practicing law for 45 years. He has his own firm.
“Some lawyers have an uncomplicated retirement plan. It’s a two-word description: Keep working,” said Frank Strickland, a partner in Atlanta firm Strickland Brockington Lewis and the former chair of the Legal Services Corp. Strickland, who is in his 70s, added that he relies on professional investment advisers’ help because, “I’m in the legal profession, not the investment profession.”
Indeed, many in Big Law may have less to worry about than high-earners in other service professions.
Some law firms offer retirement planning guidance to their partners already, by investing through defined contribution plans in safer funds or setting up other funds that help partners save. Several major Am Law 100 firms still offer nonqualified pension plans which guarantee retired partners a set income out of firm profits until they die, according to Stanley Kolodziejczak, who leads the law firm services group at accounting firm PricewaterhouseCoopers. Yet unfunded pensions plans are less widespread in the industry than they were several years ago, he added.
Alan Weisberg, founding partner of Weisberg Kainen Mark in Miami and a tax attorney for more than 40 years, says he’s not losing sleep over the stock market situation. “It’s a bit disconcerting, but I’ve been through this before,” he said, adding that he still contributes to a 401K. “Cross your fingers, hold your breath and hold on for the ride.”
He joked that he isn’t too worried because he’s recently gotten an email from Nigeria that he’s going to inherit $100 million.
International tax attorney Martin Press, a shareholder at the law firm Gunster in Fort Lauderdale, Florida, recommended that lawyers near retirement should calculate if they could live on 4 to 5 percent of their total assets each year.
“If he can’t do that, then maybe he should continue working,” Press said.
The recent stock market volatility is cause for concern for others.
With one daughter in college and another in law school, solo practitioner Eduardo Palmer in Florida said it’s hard to keep contributing to retirement. He’s cut his expenses to meet his pledges to pay for his daughters’ graduate schooling. He said he’ll start contributing to his retirement meaningfully again when they’re done in four years.
In the NLJ poll—an unscientific survey posted online—only five respondents out of more than 200 said they would rescind plans to pay for their children’s educations.
“I’m a Cuban refugee and my father put me through law school. If my parents could do it with far less, so can I,” said Palmer, who said his goal is to continue working until he’s at least 67, in another dozen years. “It’s depressing when you look at your statement and see it’s gone down 30 percent in six months. You’ve just got to hang in there. I’m going to tough it out.”
Palmer said belt tightening starts by him not taking flowers home every week and could progress to cutting restaurant reservations and vacations.
“Growing up poor gives you perspective,” Palmer said.
The strategy of “Just hold on, it’ll be OK!” matches what even some professional investment advisers recommend.
Greg Friedman, chief executive of the Marin County, California, wealth management firm Private Ocean, says you “need to maintain a long-term perspective.” The problem with down markets is that “people only remember last week.”
He recalled that before the current drop, “We had five years when the markets went straight up.” While Friedman, a certified financial planner, acknowledges the current pain of stock prices, the drops aren’t that alarming compared to the Great Recession.
“We’re telling clients what we always tell them, ‘Let’s see how it affects your plan,’” he said.
Joe Votava, chief executive of Seneca Financial Advisors in Rochester, New York, chuckled when he heard that 29 percent of ALM survey participants said they would simply work longer to make up shortfalls in their retirement plans.
“That’s a typical lawyer’s reaction,” he said.
However, he added, “You’re not going to be making millions a year forever.”
Instead, Votava advocates building a long-term plan. It would focus on saving now, limiting tax and managing cash flow, which is particularly important for lawyers who have fluctuating income, Votava said.
Kristi Sullivan, founder of Sullivan Financial Planning in Denver, shared advice for those worried about the shrinking balances in their retirement plans: Diversify, and don’t make many changes based on short-term stock market results.
And she cautioned, “Watch as little financial TV as possible.”
“Don’t advise yourself” came through in several other financial planning and tax specialists’ interviews with ALM publications.
Despite lawyers’ professional acumen, members of the legal professional just aren’t always that investment savvy, Kolodziejczak, the tax specialist at PricewaterhouseCoopers, said.
On a scale of the wise investment decisions of green-shade accountants to bankruptcy-plagued former NBA players, he said, lawyers fall about in the middle.
“We’re lawyers, so I’m not sure we’re really good market-timers,” said Bobbi Bierhals, a partner in McDermott Will & Emery’s private client practice.
Still, lawyers can take advantage of dips in the market with strategies such as estate planning and retirement plan conversions that capitalize on an investor’s ability to pay taxes when a retirement fund has less value, she said.
Walter “Skip” Campbell, a Fort Lauderdale trial attorney who met with his financial adviser Wednesday to discuss the market losses, framed the choices he’s making as a joke.
“I heard you dropped some money on Wall Street. Were you a bull or a bear?” he said.
“Neither, I was an ass for investing.”
This story was written by Katelyn Polantz of The National Law Journal. Contributing reporters from other ALM publications include: Brenda Sapino Jeffreys of the Texas Lawyer, Meredith Hobbs of the Daily Report, Monika Gonzalez Mesa of the Daily Business Review and James Green and Bernice Napach of Investment Advisor Group.