Most people start thinking about and saving for their retirement in their 50s, timing they invariably regret. In my career, I have conducted well over 100 retirement seminars. I can attest that at the end of every seminar, attendees undoubtedly say, “I wish I had taken this course sooner” and “Why didn’t I start to plan for my retirement earlier?”

The early years

For those early in their legal careers, it’s too daunting to think 30 or even 40 years into the future. You’ve just completed law school—your priorities are likely student loan payments and establishing yourself as a lawyer. You just started; why even think about retirement at this point? At this stage, don’t think about actually planning your retirement—it’s all about saving as much as possible.

Savings in a retirement plan, commonly a 401(k), can make a significant difference in your bottom line. Since pretax 401(k) contributions are allowable as a deduction on your income tax return, you are growing your account balance not only with your contributions but also with some of the income taxes you would have otherwise paid.

Saving any amount, even $10 per week, sooner rather than later will add up. For example, saving $10 per week at age 30 vs. age 50 through age 65 could have generated $47,231* more:

• ? ? Age 30-65: $59,701
• ? ? Age 50-65: $12,470
• ? ? Difference: $47,231

(*This assumes a $10 contribution made at the beginning of each week, with a 6% annual return compounded weekly. This illustration is hypothetical, is not guaranteed and is not intended to reflect the performance of any specific investment.)

Additionally, your firm may be “giving” you money by matching some of the dollars you are saving in your 401(k) plan—take the “free” dollars! While there are annual limits to how much you can contribute to your 401(k) plan ($23,000 for 2024), I recommend contributing at least the percentage amount that your firm will match and increasing your contributions when you can.

Where do I invest my contributions?

As you start making contributions, you’ll need to decide where to invest your money. Your 401(k) will offer a variety of investment fund options, many with investment holdings like stocks, bonds and cash.

For a beginner or someone without the time or experience, you can use a “prebuilt” investment fund so you don’t need to decide how much to allocate to each single investment type.

Some of the most common prebuilt investment options are target date or retirement date funds—you just choose the fund that’s named for the approximate year you plan to retire (e.g., 2050, 2055, 2060 … ). The underlying investments in these change over time; they become more conservative as you approach your fund-identified retirement year. You’ll notice that investments in these later-dated funds like the 2060 fund, which have a high percentage invested in stocks, will create greater fluctuations in your account than, say, those funds that are invested strictly in bonds.

Remember, your investment selections don’t have to be a forever choice. Most retirement plans offer a large menu of additional fund types, so you can always change your investments to match the level of fluctuations you can tolerate in your account and your financial goals.

The journey

While saving is the goal, at some point you will want to understand how much you may need in retirement. An important consideration as you deliberate what your target balance should be requires you to decide what you want your lifestyle to look like. Where will you live? How will you occupy your time once you retire? Work part time? Volunteer? Garden? Travel the world? Look after children or grandchildren? Or spend more time on your hobbies or engage in a new hobby? These decisions typically evolve over time, so don’t wait for the “perfect” retirement design before you start your planning. (Experience several lawyers’ retirement journeys: “Resting Your Cases: Thinking about retirement? Lawyers give advice about money, goals and happiness”)

To help you with your savings targets, you will need to calculate the dollars you will need to translate your plans into reality.

A straightforward way to calculate how much you may need in retirement requires that you estimate how many years you will be retired. If you plan to retire at age 67 and believe your life expectancy is 82 years, you will need to fund your retirement for 15 years. If you decide you need $80,000 per year to live with today’s spending power, you will need to have a savings target of $1.2 million, available from all income sources, which assumes that you will need to keep up with the rate of inflation. This amount is lower than what Americans believe they need to save for retirement, which is an average $1.8 million, according to an online Schwab survey of 1,000 U.S. 401(k) plan participants between April 19 and May 2, 2023.

As your 401(k) balance grows, you may want help with selecting your investments. Most plans offer professional management for your account through a financial adviser for an extra fee. The investment decisions implemented by the adviser incorporate your other financial holdings, like your investments outside of your plan account.

Nearing retirement

It’s not unusual to start retirement savings until later in life since most people have other obligations in their early career years, like buying a house and raising children and paying for their education.

But even for mid- and late-career professionals, savings continue to be very impactful to your bottom line. As your salary increases, so should your contributions to your 401(k) account and outside accounts. Once you reach age 50, you are able to make additional annual “catch-up” contributions to your plan ($7,500 in 2024).

Your 401(k) plan

ABA members have the opportunity to take advantage of the retirement plans offered by the ABA Retirement Funds Program. This ABA Member Benefit helps law firms of all sizes establish a 401(k) plan and has been helping legal professionals save for retirement for over 60 years. The program is committed to providing the tools necessary to help all legal professionals pursue retirement security.

Historically, program participants have higher average account balances than other 401(k) participants in general. I attribute this to higher savings rates by those in the legal community, which benefit both from earning interest on contributions plus on the interest that accumulates over time. Learn more about this ABA Member Benefit at ABARetirement.com.

The bottom line

The key point to remember is that it is never too late to start planning and saving for retirement. While you may not know what your lifestyle will look like in retirement or how much you need to sustain that desired lifestyle, the key to a successful retirement is all about maximizing your savings.

This column reflects the opinions of the author and not necessarily the views of the ABA Journal—or the American Bar Association.