MML #055: Retirement Investing: Why You’re Most Likely Asking the Wrong Question

You've seen the headlines. AI stocks up 200%. Bitcoin hitting new records. Your college roommate texting you about some tech IPO that's "can't miss."

And somewhere in the back of your mind, a question nags: Should I be investing in this?

Let me shoot it to you straight. That's not actually the question you need to answer first.

For most attorneys approaching retirement, the instinct is to find the best investments. The shiniest opportunities. The highest returns. It's the same analytical drive that made you successful in practice: identify the strongest case, pursue it aggressively, win.

But building a retirement portfolio works backward from how you might expect.

The Portfolio Follows the Plan

Before you can determine whether you should have an 80/20 stock-to-bond allocation, a 60/40 split, or anything in between, you need to know what your portfolio is supposed to do for you.

Not in theory. Not based on some general rule of thumb for "people your age."

For you specifically.

This means the actual first step in investment planning has nothing to do with investments at all.

Step 1: Design the Life You Actually Want

What does retirement look like? Not the generic version with golf and grandkids—though those might be part of it.

I mean specifically:

• Where will you live?
• Will you travel? How often and where?
• What activities or hobbies will fill your time?
• Will you do any consulting or reduced legal work?
• What does a typical week look like?

Most attorneys I work with discover they haven't actually thought this through in concrete terms. They know they want to retire "someday," but the details remain fuzzy.

The details matter because they cost money. And those costs determine everything about how your portfolio should be constructed.

Step 2: Translate That Life Into Numbers

Once you know what you want to do, you need to know what it costs.

This is the same exercise I walked through in my article over at Above The Law about whether you can retire on $1 million. You're identifying your true retirement expenses—not your current salary, but the actual after-tax income needed to support your lifestyle.

Remember:

• Your taxes will be different (no more FICA, different treatment of Social Security)
• Many expenses disappear (Some business expenses, mortgage drops off at some point)
• You're no longer saving for retirement from your income

A $250,000 working income might only require $150,000 in retirement income to maintain the same lifestyle.

Step 3: Map Your Stable Income Sources

Now list everything that's coming in regardless of market performance:

• Social Security (yours and your spouse's)
• Any pension income
• Rental property income
• Practice sale installment payments

These stable sources create a floor of reliable cash flow.

Step 4: Find Your Gap

Subtract your stable income from your projected expenses.

Whatever's left? That's what your investment portfolio needs to cover.

And here's where we can start to cover some ground with our investment strategy.

Why Your Portfolio Will Look Different From Everyone Else's

Let's say you have $1 million saved. Sounds like a straightforward scenario, right?

Not quite.

Scenario A: You're 62, have a $30,000 annual pension, and Social Security will provide another $45,000. Your retirement expenses are $100,000. Your investment gap? $25,000 per year, or 2.5% of your portfolio.

Scenario B: You're 62, have no pension, and Social Security will provide $35,000. Same $100,000 in expenses. Your investment gap? $65,000 per year, or 6.5% of your portfolio.

Same age. Same portfolio balance. Same lifestyle.

Completely different investment needs.

Scenario A can take far less risk because the portfolio doesn't need to work as hard. A conservative allocation makes sense—you're not relying on significant growth, just modest returns to supplement your other income.

Scenario B needs more growth potential to sustainably cover that larger gap. A more aggressive allocation might be necessary, balanced against your timeline and risk tolerance.

This is why "age-based" investment advice misses the mark. The 60/40 portfolio that's "right for someone in their 60s" might be perfect for one attorney and completely wrong for another.

Your portfolio allocation isn't about finding the best investments in the market. It's about designing the right portfolio for your specific gap.

What About Those Hot Investment Tips?

So where does Bitcoin fit? Or that AI stock? Or whatever the next headline-grabbing opportunity will be?

Maybe nowhere. Maybe as a small, speculative position if your plan has room for it.

But you can't know until you've done this foundational work.

The attorneys who struggle most in retirement aren't the ones who missed out on the hottest investments. They're the ones who built portfolios without a plan—chasing returns without knowing how much return they actually needed, or taking risks without understanding how much risk they could afford.

Next Week: What Goes In the Portfolio

Once you've worked through this process—life design, expense calculation, income mapping, gap identification—then we can talk about actual investments.

What mix of stocks and bonds makes sense for your situation. How to think about diversification. Whether alternatives have a place. What role cash reserves should play.

But those decisions only make sense in the context of a plan.

The portfolio follows the plan. Always.

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