As a lawyer, you like to think about what's next. You spend your career climbing the ladder from first-year associate to income partner to equity partner. But have you spent enough time thinking about life after the law and, importantly, how you're going to pay for that life after the law? It's likely you've at least thought about retirement, but taking a proactive, planning-based approach, especially at the start of your career, is another story. Here are some common retirement planning pitfalls that lawyers often experience. Do any of these sound familiar?

Waiting too long to start planning. You're not going to sell your legal business and ride off into the sunset like your business-owner clients. A large, retirement-securing liquidity event is not in your cards, so time is truly of the essence. You have a limited number of years to maximize your savings, and the longer you wait to start planning the more pressure you will put on yourself in the later stages of your career.

If you're early in your career, start by taking advantage of the retirement plans your firm makes available to you. If you're not currently maxing out your contributions, set a goal for getting to that point by increasing your contribution percentage each quarter until you hit the maximum.

If you're later in your career, take heart—there's hope. You may need some help to run this calculation, but start by figuring out how much you need to put away between now and your ideal retirement age to maintain your preferred lifestyle. Hopefully that figure is realistic. If not, you could instead solve for a sustainable spending number that will ensure you don't run out of money and make the necessary lifestyle adjustments over time to hit that spending number by the time you reach retirement age. As a (usually) last resort, you could potentially work longer.

Bottom line is, the sooner you start planning, the more desirable your options will be.

Thinking your portfolio is enough. There's no question that your investment portfolio is a critically important component of your retirement. The assets you work hard to save over the years will be the main funding mechanism to finance your life after the law. However, your portfolio alone is not enough to give you complete confidence that you will be able to sustain your desired lifestyle throughout retirement. It's easy to say, “I've got $X million in my portfolio, I'll be fine.” However, without a clear handle on other key data points, you actually have no idea whether that will be enough.

Start by building a set of retirement planning assumptions that you can use to project how long your money will last. For example, consider the following factors:

• How long you will work. This factor can vary greatly for lawyers, depending on your partnership agreement and health. If you're a partner at a firm with some version of mandatory retirement, you may have very little control over how long you work. Other firms have more flexible agreements, allowing partners to work for as long as they are able. The impact of this factor is enormous. Working just one to two more years and not tapping into your portfolio for those years can significantly change the likelihood of your money lasting.
• How much you spend. Seems so obvious, right? You would think most people would have a crystal-clear understanding of their monthly spending rate. However, as lawyers advance throughout their careers and compensation increases, they often lose track of their monthly cash burn. Do you know how much you spend each month, to within $1,000? If not, look at your last few credit card statements and figure it out. It is impossible to know how large your portfolio needs to be at retirement without knowing what it costs to finance your lifestyle.

There are certainly other assumptions that need to be hashed out in projecting how long your money will last, but these two are a great starting point.

Relying only on firm-sponsored retirement plans. Law firms have traditionally done a great job of providing quality firm-sponsored retirement plans, and in turn lawyers typically do a good job of maxing out their contributions to these plans. It's common for law firms to even offer multiple firm-sponsored plans.

A growing trend in the legal community is seeing more firms adopt a defined benefit plan, such as a cash balance plan, to complement their existing 401(k) plans. These plans can significantly increase the amount that lawyers are able to sock away each year in tax-deferred retirement savings, in some cases well north of $100,000 each year.

While these firm-sponsored plans are great savings vehicles, they all have one very important trait in common: contribution limits. There is only so much you can save into these plans, like it or not. The critical question is whether the combined savings into all your retirement plans will be enough to fund your entire retirement? Very often the answer is no. Depending on your spending habits, your retirement plan savings may only fund a fraction of your retirement.

So, what's the solution? After-tax savings. As I wrote in a Law.com article earlier this year, lawyers should figure out “the number,” which is the annual after-tax savings target needed to give themselves a high probability of a successful retirement. This is savings to a brokerage or trust account above and beyond your firm-sponsored plans. A financial planner can help you figure out what that number should be and help you build a plan for hitting the target.

Important Disclosure: Investments involve risk, and past performance may not be indicative of future results. Balasa Dinverno Foltz LLC (BDF) investment and wealth management strategy recommendations may not be profitable, suitable or equal historical performance. BDF's current written disclosure statement discussing advisory services and fees is available for review at www.BDFLLC.com or upon request.

Justin Peacock is an owner and wealth manager at BDF, a wealth management firm based in the Chicago area with assets under management in excess of $4 billion. He leads the firm's attorney practice group and can be reached at [email protected].