MML #017: Ready to Retire? Start Here with a Complete Financial Inventory

“I know I should have a better handle on this,” the managing partner admitted during an initial consultation. Despite expertly managing complex legal matters at the helm of a successful six-attorney firm, she hadn’t applied the same level of diligence to her own retirement planning.

Her financial assets were spread across several accounts, and she had only a general sense of what she’d need to maintain her lifestyle once she stepped away from practice.

This scenario is surprisingly common among attorneys. When you're deeply invested in building a firm and serving clients, your own financial planning can easily become an afterthought.

In our previous newsletters, we discussed reframing retirement as your next chapter and maximizing your law firm's value. Today, let's explore how to take a comprehensive inventory of your financial resources beyond your practice.

Creating Your Financial Inventory

Think of this process as building a case file for your retirement. Just as you'd organize evidence for trial, you need a clear picture of your assets, income sources, and expected expenses.

Step 1: Asset Inventory

James, a commercial litigation attorney planning to retire in five years, was surprised by what we discovered during his inventory process. 

Beyond his primary retirement accounts, he had forgotten about a small 401(k) from his early career at a law firm and underestimated the value of his vacation property.

Create a comprehensive list including:

• Retirement accounts (401(k)s, IRAs, Roth accounts)
• Cash balance pension plans
• Real estate holdings (noting whether you plan to maintain or sell)
• Brokerage accounts and other investments
• Cash reserves and emergency funds
• Business interests beyond your primary practice
• Valuable personal property

Action Step: Gather your most recent statements for all financial accounts. Create a simple spreadsheet listing each asset, its current value, and whether it's pre-tax or after-tax.

Step 2: Income Source Projection

When Patricia, an estate planning attorney, mapped out her potential retirement income streams, she realized she had more options than she initially thought. 

By strategically timing when to activate different income sources, she created a more tax-efficient plan.

Identify all potential retirement income streams:

• Social Security benefits (at various claiming ages)
• Pension payments, if applicable
• Anticipated law firm buyout installments
• Expected rental income from properties
• Projected investment income
• Any part-time work or consulting fees

Action Step: For each income source, note when it could begin, how much it might provide annually, and whether it's adjusted for inflation.

Step 3: Expense Planning

This is where many retirement plans falter. Underestimating expenses can jeopardize even well-funded retirements.

Michael, a family law attorney who retired last year, shared how our expense planning sessions revealed spending patterns he hadn't noticed. 

"I was shocked to see how much was going toward business development lunches and professional memberships that wouldn't be relevant in retirement. But I'd underestimated what I'd spend on travel and healthcare."

Create a realistic retirement budget by:

• Reviewing your current spending patterns
• Identifying expenses that will decrease or disappear in retirement
• Estimating expenses likely to increase (healthcare, travel, hobbies)
• Planning for periodic large expenses (vehicle replacements, home repairs)
• Accounting for inflation, especially in healthcare costs

Action Step: Track your current after-tax expenses for at least three months. Then draft a retirement budget, noting which expenses might change and how.

Stress-Testing Your Plan

Once you've compiled this inventory, the next critical step is determining whether your resources align with your needs and goals.

Carolyn, a securities attorney with a seemingly substantial nest egg, initially felt confident about her retirement readiness. 

However, when we ran her plan through multiple market scenarios, we discovered vulnerabilities to sequence-of-returns risk that could have significantly impacted her long-term security.

Consider working with an advisor to:

• Run Monte Carlo simulations testing your plan against thousands of potential market scenarios
• Calculate your sustainable withdrawal rate based on your asset allocation and time horizon
• Identify potential shortfalls before they become problematic
• Implement "guardrails" that adjust your spending based on market performance

Coming Next Week

In our final newsletter of this series, we'll explore tax-efficient income strategies that can help your retirement savings last significantly longer. 

We'll discuss Roth conversion opportunities, managing Required Minimum Distributions, and charitable giving approaches that benefit both you and the causes you care about.

As always, our team specializes in helping attorneys create comprehensive retirement plans tailored to their unique situations. If you'd like to discuss your specific circumstances, simply reply to this email or schedule your confidential consultation.