So, you are fresh out of law school and the benefactor of the recent healthy increases in law firm starting salaries. Maybe you have a few years under your belt and are beginning to hit your stride economically. What are you going to do with this new found wealth? Save for your retirement! It may sound premature to address now, but planning early on will create a solid financial foundation for your future.
The first step in this process is to understand what your employer is offering you. This will give you a better idea of the amount of retirement savings you can accumulate over your working years. Since most law firms do not have nonqualified deferred compensation plans for non-partners, we will focus on tax-qualified retirement plans. A qualified retirement plan is tax advantaged wherein an employer gets a tax deduction when contributions are made to the plan, the participant does not pick up income until benefits are distributed, and all amounts contributed grow tax deferred in a special trust.
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