Retirement is Coming: Where Your Plans Should be In Your 20s, 30s, 40s, and 50s

  • Lawyers tend to have obstacles to saving enough for retirement—beginning full-time work a bit later than their peers, and law school debt
  • Use your 20s to establish healthy financial habits—pay down debt and start contributing to a 401(k). Use your 30s to contribute more as your salary increases
  • In your 40s and 50s, resist the temptation to dip into your retirement savings to pay for your kids’ college, and start thinking more about the details of your retirement plan

We all know that saving for retirement is necessary and should start as soon as you enter the working world.

But everyone isn’t always great about starting the saving early enough, saving the right percentage of their salary, or even knowing if they’re on the right track. Everyone’s retirement needs are different, but there are some general goals you should hit depending on your age.

Lawyers tend to have two main obstacles to saving enough for retirement:

  1. Beginning full-time, well-paid work a bit later than their peers, due to being in law school while non-legal types are building themselves up at their first jobs.
  2. The crushing debt that comes with attending law school.

These obstacles are not insurmountable, though—they just need to be kept in mind. Now, most experts say that you should aim to live on 80% of your final income in retirement. The amount will necessarily adjust based on your personal circumstances and how much money you’ll be bringing in from other sources, such as Social Security and pensions, as well as your planned lifestyle. By saving at least 15% of every paycheck in a 401(k) or other retirement vehicle from the minute you start your career, you should be able to hit that mark. And of course, saving more is always better.

In Your 20s

This is the time to establish healthy financial habits. If you’re like most lawyers, you’ll be paying a hefty amount towards your law school debt each month. Stay on top of that, as well as focusing on any other debt you might have—work on paying off your credit cards and avoid adding to them. If you are unable to contribute 15% to your 401(k), contribute what you can, being sure to set aside at least enough to receive any company match.

It can be difficult to envision a retirement that is decades away, raising the temptation to skimp on your contributions—but just remember how important compounding interest will be to your future. An exact dollar amount of how much you should have saved by the end of your 20s will be different for each person, but shoot for having approximately one year’s salary saved in your retirement account by age 30. Don’t panic if that’s not possible—paying off law school loans and starting your saving a bit on the late side means you might not be able to meet that goal, but it’s a good one to have.

In Your 30s

Assuming your income will increase regularly, you should be able to raise your contribution percentage by a point or two every year. As you get closer to 40, you should be finishing up with your law school debt, freeing up money to put towards retirement saving as well as other things like a buying a home. Aim to have about one and a half times your yearly income saved for retirement by age 35.

Hopefully, you talk to a financial professional on occasion to ensure your portfolio remains well balanced. He or she will make sure you’re properly diversified and your investment aggressiveness level is right where it should be for your age and goals. You also might want to discuss opening an IRA or other ways that you can add to your retirement saving goals.

In Your 40s

Your 40s are when you will be on your way to reaching your peak earning potential. If you weren’t able to set aside enough to have one and a half times your yearly income saved for retirement at 35, you can use these high-earning years to catch up. If you can swing it and your salary allows, go ahead and save a little extra. Aim to have about two and a half times your yearly income saved for retirement by age 45.

At this stage in life, it becomes even more important to avoid burdening yourself with heavy debt that you may end up continuing to pay once you’re actually retired. You should, of course, be saving for college if you have children—but don’t make the mistake of robbing yourself of your own retirement to take out crushing loans to pay for their schooling. Your kids can get loans, grants, and scholarships, but you can’t get those things to fund your retirement.

In Your 50s and Beyond

Your choices at this time are especially important since you’re almost at the retirement finish line. If you’ve been a bit behind, 401(k)s and other tax-favored accounts allow higher catch-up contributions for those who are 50 and older, so take the opportunity to sock as much money away as you can.

At this point, you should be thinking about how retirement is going to look for you in a more specific manner. Start imagining an end date, and what you’ll do once you stop working. Meetings with a financial advisor should include discussions of withdrawal strategies and estate planning. If you can, pay extra towards your mortgage to get closer to having it paid off once retirement is on the horizon.

Retirement planning can seem daunting—it’s such an important, all-encompassing task. But if you set things up to happen automatically, take it step by step, and follow the advice of financial professionals, all your planning will pay off.

What's Next

When’s the last time you met with a financial professional to talk about retirement? Make an appointment.