50 year old lawyer seeks enlightenment as to ER

Gumby said:
Here, let me help you with that. No, no need to thank me. Really, it was my pleasure.
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Damn, late to the party again...:D Sorry, must have been dragging my knuckles throught the lumpen...
 
I'm travelling at present but this was a thread I have been monitoring, and "holey moley", SEC finally popped his clogs big time.

Great link on some of the top SEC lawyers surfing the porn sites - I don't suppose many folks are surprised.
 
Hmm... No wonder I feel right at home here. For I have been working an erratic part-time and freelance work, and the following description fits me. :(

Lumpen ... rarely have a steady source of income...
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I wonder where Mean Mr Mustard has gone?

At least we know where the SEC Lawyers are hanging out!
 
SEC Lawyer said:
OP, I empathize with you. Our situations are similar. Here are some thoughts:

1. It is critical to get a grip on your expenses, by which I mean "follow the money." Because taxes are so very high, the shift to ER is huge on that score. But you can get a feel for your other expenses. Determine what your "pro forma for retirement" spending will likely be, then add a cushion. Then add another cushion. Believe you will find you are already "there." I am. This is very liberating.

2. If you like being as lawyer (I do), then don't quit. But restrcuture your work to cut out everything you don't like -- even if that will "hurt" your on-going compensation. I am amazed by the fact that so many of the very fine lawyers that I have known have never quit practicing law. And I mean "never." As in, worked until they died. People who could have quit 30 years ago. And why is this? Because they do only what they want to do, and nothing else. An example is William Rehnquist, whom I was privileged to know. When he was asked in his 80s whether he would retire, he replied, "Retire to what?"

3. You DO have the resources to retire now. But rather than do that, in my opinion and experience this is when it starts to get interesting. Because if you can quit, then you can also dictate your terms for staying on. Not in a cruel or difficult way. Just matter of fact. Take advantage of that -- you've earned it.
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SEC lawyer: Thanks for post. I read it a long time ago, but was at the time involved in a bunch of s hearing at about the same, so I had no time to reply. I have been thinking about your post nevertheless ever since. I appreciate your post and thank others for their useful and interesting comments. Sorry it has taken this long to get back to site. Odd to discover many comments accumulated on thread over the months.

Comments: would have loved to have known Rehnquist!

You suggested I restructure lawyer work to cut out everything you don’t like. Maybe. Thinking about it. Here’s the problem. I’m specialized, law-wise. You need to be immersed in the area I am in to be useful. The case law, regulations, political environment change constantly. I’m like a doctor who specializes in toenails. I really know toenails!! I was involved in all the Big Toenail Developments over the last 20 years. But it’s hard to be half-in, half-out. I was kind of a pioneer when I started, but now there are younger, hungrier toenail experts out there. Hard to be an eminence gris in the fast-changing toenail world. Some times I think I should just get out, be an investor, and never think about toenails again.

Expenses: You and many other posters stressed I had to track family expenses. Obvious, but I had never done it. So I figured out what they were. This part is embarrassing to admit. I’ll lay it out anyway, in case it helps others engaged in similar beanhead behavour.

In post that started this thread I foolishly said I thought my expenses were 100,000K. Many commentators berated me for being foggy about this, and rightly so. Some suspected they were higher.

Prompted by posters, I started figuring out what family expenses actually were. Not easy. They had become somewhat intermingled over many years with my law firm expenditures, so eggs had to be unscrambled. Information retrieval problem: wife dealt with home expenditures and had Visa and chequing account statements in piles, but long list of debits and credits not much help in trying to get a grip on the big picture.

Preliminary conclusion a shocker: family expenses in 2009 about $225,000, excluding tax and investments. I could not believe it. What do we spend this money on? I got Quicken about New Year, 2010, and now use it to track all family expenses. Not rocket science, I realize. Expenses in 2010 up to June 30 about 100,000, so could be 200Kto 225K annually. We have jettisoned some doubtful expenditures.

My problem was that, although I paid attention to expenses at law firm and investments for years, I paid little attention to household expenses, and they were dealt with by wife, not a record keeper by nature. I thought there was no need to track expenses closely because she’s not a big spender, and we don’t live a lavish lifestyle.

It’s not that expenses were out of hand, necessarily. The problem was that I was in la-la land as to what they were. Obviously, knowing one’s living expenses is key to any useful analysis of whether ER is possible, a question which pops up in my thoughts more and more.

200K to 225K amount just seems to be what it costs for care and feeding of four teenagers, aged 12 – 20, in urban setting, one in U. No big ticket items really, just endless smaller expenditures on food, dining out, ultilites, clothes, movies, house tax, insurance, gas, cable, getting stuff fixed, concerts, lessons, tuition, residence, school trip, family vacation, camps etc etc.

Fine (once I got over shock). Now I know. Thank you ER boarders for hectoring me to go though this painful but worthwhile exercise. How could I ever have thought I did not need to keep track of expenses? I can only say that I repent my bozo-like former life and am reborn.

So situation is this, to recap: I’m 51, lawyer, wife at home, four kids (12 – 20), about $4,000,000 plus in liquid assets, mostly stocks. Close attention to investments (really!). No mortgage, no debts. Expenses 200 to 225K although presumably not forever as ducklings exit the nest. Earn 1.8 million pre-tax in good year, but can be under a million in bad year. Varies. Pooped out and fed up with toenails. Can I ER? Should I ER? Enlightenment sought from this humble and penitent scribe to wise wizards of ER site.
 
If nothing else, you have learned some valuable info for planning purposes regarding spending. I'd spend some more time drilling down into the spending now versus spending in retirement question before I dumped the big toenail practice (possibly the best analogy I've ever read, and funniest, to describe a boutique practice of any kind!).
 
meanmrmustard said:
So situation is this, to recap: I’m 51, lawyer, wife at home, four kids (12 – 20), about $4,000,000 plus in liquid assets, mostly stocks. Close attention to investments (really!). No mortgage, no debts. Expenses 200 to 225K although presumably not forever as ducklings exit the nest. Earn 1.8 million pre-tax in good year, but can be under a million in bad year. Varies. Pooped out and fed up with toenails. Can I ER? Should I ER? Enlightenment sought from this humble and penitent scribe to wise wizards of ER site.
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I give no suggestions to one with these stats. Just tell us more about doing this. And offload one of those bad years to me, could you? :)

Ha
 
Congrats on making such great headway in "really" understanding where the bucks go.
If you really want to lower the household spending of 200+K, I can assure you, if you drill down and attack the list of where the dollars go, you will find it relatively easy to carve off 20-30%. Much of what we see as "necessary" is, in fact, a matter of habit and/or inattention. The savings may not come in big bucks at one time but increments do matter. With a Million/yr income, it may seem like more work than you want so it really up to deciding it is a priority.
For example, examining the various insurance premiums you pay. If you have not reviewed your deductibles and coverages recently, and multiple cars, you an carve off 10-15% of your insurance bill. Not a huge number in 200k spending and a 1 Million income but the first of many savings.
Now you have your spending defined, suggest you break the expenditures into some categories of choices--eg non discretionary (look for doing different--see insurance above), critical to family happiness/values, nice to have, other
Then, ask yourself, what would happen if you no longer spent any of the bottom categories. Could you get the same satisfaction by spending the $ differently, or better by not spending at all.
Look at the 'critical to family happiness' group and make sure the $ are really the source of the happiness. What other ways would provide the same type/level of satisfaction.
You obviously have a lot of gifts. You will probably find an incredible number of ways that you can carve some big chunks with little or no lost in your or your family sense of worth. Once you and your DW have sorted out the categories, involve the rest of the family. Not only will they see things you do not, but you will also give your kids the gift of future financial independence by helping them to learn the value of choosing.
Best wishes achieving the life you desire.
Nwsteve
 
meanmrmustard said:
My problem was that, although I paid attention to expenses at law firm and investments for years, I paid little attention to household expenses, and they were dealt with by wife, not a record keeper by nature.
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Cf. The Millionaire Next Door.

meanmrmustard said:
200K to 225K amount just seems to be what it costs for care and feeding of four teenagers, aged 12 – 20, in urban setting, one in U. No big ticket items really, just endless smaller expenditures on food, dining out, ultilites, clothes, movies, house tax, insurance, gas, cable, getting stuff fixed, concerts, lessons, tuition, residence, school trip, family vacation, camps etc etc.
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Many Canadians manage similar circumstances on substantially smaller budgets. On the other hand, some people spend considerably more and have fewer teenagers, or none at all. Only you know what is necessary and what is not.

meanmrmustard said:
So situation is this, to recap: I’m 51, lawyer, wife at home, four kids (12 – 20), about $4,000,000 plus in liquid assets, mostly stocks. Close attention to investments (really!). No mortgage, no debts. Expenses 200 to 225K although presumably not forever as ducklings exit the nest. Earn 1.8 million pre-tax in good year, but can be under a million in bad year. Varies. Pooped out and fed up with toenails. Can I ER? Should I ER? Enlightenment sought from this humble and penitent scribe to wise wizards of ER site.
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You can retire tomorrow and enjoy a comfortable lifestyle; but I doubt that $4 million capital would be sufficient to fund $200,000-$225,000 annual after-tax expenses. That would work out to approximately a 5% yield/withdrawal rate: certainly possible, but aggressive.

As I see it,your options are essentially as follows:

(i) re-think what constitutes a "lavish lifestyle", and trim your expenses accordingly;
(ii) continue working and saving/investing until you have significantly increased your capital;
(iii) a combination of (i) and (ii); or
(iv) tinker with the assumptions until you are able to convince yourself that a 5% rate is sustainable in the long-term.
 
You will either need to work a couple more years, until you have at least $5M-$5.5M, or you could retire now, if you could figure out how to realistically cut your expenses to $140K-$160k, with $160k possibly being while the teenagers are still around.

Tuition is going to possibly be a huge expense, state schools may be $10k-15k/year, but the expensive ones can be $30k-40k/year, and you are talking about doing it for four kids at the same time. I am leaning towards working 2-3 more years as pretty likely.
 
200K to 225K amount just seems to be what it costs for care and feeding of four teenagers, aged 12 – 20, in urban setting, one in U. No big ticket items really, just endless smaller expenditures on food, dining out, ultilites, clothes, movies, house tax, insurance, gas, cable, getting stuff fixed, concerts, lessons, tuition, residence, school trip, family vacation, camps etc etc.
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I am a recently semi-retired lawyer with 3 adolescent children. My husband recently retired from his work as well. Back in the day we had spending a little less, but similar, to yours. We are retiring on far less net worth than you have. A few comments:

1. For me I was able to structure a very part-time arrangement (one day a week) doing the part of my work that I really enjoy. I have no ongoing responsibilities on cases but essentially consult with the lawyers that I used to work with. I am being paid a very nice amount for doing this. This made it easier for us to retire/sem-retire while kids are still at home. I will be glad to keep doing this work while I enjoy it, but could manage without it.

2. There are two basic ways to cut expenses. Cuts lots of litte ones (a bottom up approach) or cut a few big ones (a top down approach). Most people, in my experience, focus on the former. This is often easy to do and gives immediate rewards. This is where you cut out some of the lunches out, dine out less frequently, cut down Starbucks, buy clothes on sale, get books from the library instead of buying, and so on.

You undoubtedly can do a lot of this. I never felt that I was living a very lavish lifestyle, particularly since so much our expenses were child related. That said, I took certain things as a given. I was quick to replace things or upgrade them. I didn't sweat the small stuff. I would sometimes see lists of other peoples expenses and had to realize at some point that many of my ordinary expenses were things that most people could live without.

I knew people who had an income a quarter or a third of mine yet somehow managed to support a family with 3 children. So, yes, people were managing to somehow not have a $200 a month cell phone bill or a $150 internet and cable bill and so on.

I found that there were a lot of those small expenditures that could be cut.

But here's the deal. Doing that wasn't enough. (In your case, maybe it would be enough). In some instances I could have cut more, but I also felt that doing so was cutting into hobbies and activities that I truly enjoy. I knew they were luxuries but luxuries I didn't want to give up. So that led to:

3. Cut the big stuff. Ultimately you get much more bang for your buck by cutting the really big expenses. Here is an example. Right now, we have our big, expensive house on the market. Nice house. But we decided to downsize to a smaller house less expensve to maintain. Doing this will have us about $40,000 a year. Just that one change. I could vow to never go out to lunch, read only library books and never go to Starbucks...and I still wouldn't save as much money as simply moving to a smaller, lower maintenance house.

So I encourage you to look at not just your little expenses but the big ones as well. Those can be more difficult to cut but the rewards can be huge, so huge that those may be the only changes you need to make.
 
I think you might want to look at a realistic savings plan. During your high earning years is when savings peak. If the next couple of years are in the mid-range, aim to save half of your net. Then work the extra number of years needed to support your retirement lifestyle. I would suggest that your earliest target date should be when you are empty nesters for the first time?

Make sure to get the buy-in of your spouse. This might take several iterations.
 
chris2008 said:
Hi,
This comes from a 51 year old corporate counsel, planning to ER in 2012.
My 2 cents: Please track expenses in detail (with at least as much effort as your investment research) before you make an irrevocable decision.
With your stated expenses and 20(?) years in practice, your income and ROI there should be more than 4M and a house.
My guess is that there is more than one hole in the expenses. Identify them!
It really is not “…Hard to give a precise figure on annual spending because money seems to leak from many holes in the bathtub on teenager/kid stuff such as lessons, money for movies, concerts, skiing, clothes, food…” once you have started tracking your expenses.
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I only read a few postings, since I was curious about the financial side of the thread, but there's little. Mostly about transition to ER, so pardon my disinterest on this.
Speaking of finances, I DO agree with Chris's advice that you should involve more math in your family's finances. It really sounds strange when you say you love investing and reading about finances/WS, but don't have a basic understanding about your money. Since you're very rich by income and Net Worth, I think you could afford to hire a personal accountant for a year or two to figure out your cashflow.
So, like Chris I also imagine you should be much richer than $4Mln + a house that you claim to be very moderate + successful investing 7%/year for 10 years.
You've been in practice for 20 (or 25, cannot recall) years. You earned $1.8mln/yr for the last 2 GOOD years. So, I kind of assume you made roughly a cool Mln in bad years. Taxes are say 60% (I've heard Canada is brutal in that regard, but hey, no need to buy health insurance). If you say expenses are ONLY $100K/year, so you must have had $200-300K/year to invest in bad years and $600k/yr (conservative #) in good years. It sounds like you had $3mln of savings alone for the last 10 years, not counting your early earnings + growth of 7% as you claim.
Anyway, something doesn't add up for me, but I understand it could be hard to count money when earning so much and perhaps it's hard to determine your outflow, but that's the most important part in your ER.
 
Oops, sorry, I should've read a few posts at the end since now it sounds your expenses are almost $250K (QUITE a jump from $100k). So, how much do you pay in taxes? Just curious, because it still you should have more $$.
OTOH, I'm sure you could retire if your expenses went down to $100K like you initially claimed :angel::flowers:
 
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