Hi from young CA atty

[boglegal]

Hello all,

I'm a single mid-20's attorney in California. I stumbled onto this site a few days ago and have learned quite a bit from browsing the forum.

Here is my situation: I finished law school with no debt, have maxed out my 401k and have opened a taxable account with Vanguard. I contribute a few thousand to the Vanguard account every month.

What else should I be doing in terms of setting myself up for the future?

As I've maxed out my tax-advantaged space, I've been thinking of taking a part-time federal job (say at a local commissary) for investing/TSP purposes. Any thoughts on this? Can someone hold a full-time private sector job and a part-time federal job? If I were to go the part-time federal route, all of that part-time income would go to TSP.

 

[Purron]

Live below your means and save money. IMHO, the TSP is a great thing, but working part time for the Feds and putting some money there won't get you across the finish line. Watch your expenses, save as much as you can and also don't forget to live life now! You're a young person with many years ahead of you. Good luck and welcome

 

[calmloki]

BTW - Purron IS the Caatty person on the board...

 

[Purron]

BTW - Purron IS the Caatty person on the board...

OK, I've been outed. Adopt a homeless cat too, OK?

 

[jimnjana]

Hello all,

I'm a single mid-20's attorney in California. I stumbled onto this site a few days ago and have learned quite a bit from browsing the forum.

Here is my situation: I finished law school with no debt, have maxed out my 401k and have opened a taxable account with Vanguard. I contribute a few thousand to the Vanguard account every month.

What else should I be doing in terms of setting myself up for the future?

As I've maxed out my tax-advantaged space, I've been thinking of taking a part-time federal job (say at a local commissary) for investing/TSP purposes. Any thoughts on this? Can someone hold a full-time private sector job and a part-time federal job? If I were to go the part-time federal route, all of that part-time income would go to TSP.

You are already maxing out your 401k so you wouldn't be able to contribute to another...You could open a Roth or Regular IRA and contribute to that. If I were you I'd focus on your career as a lawyer, and forget about the part time job gig.

 

[freebird5825]

...Can someone hold a full-time private sector job and a part-time federal job? If I were to go the part-time federal route, all of that part-time income would go to TSP.

Welcome to the forum

I can answer the private sector and federal employment question. Using my 18+ years as a federal government employee as background, the only time you will have to report private employment to the federal government is when you are what is called an "acquisition official".
In plain English, that means you have authority to evaluate proposals and/or approve proposals for funding or award contracts and/or do direct purchases of any type for goods and services from vendors and suppliers and contractors. In a commissary environment, there is an outside chance that you might have to do some ordering and/or direct purchasing, so it would be best to disclose your private sector employment just to stay on the safer side of the "conflict of interest" street.

CYA never hurts.

 

[boglegal]

You are already maxing out your 401k so you wouldn't be able to contribute to another...You could open a Roth or Regular IRA and contribute to that. If I were you I'd focus on your career as a lawyer, and forget about the part time job gig.

Thanks, everyone.

To confirm based on jimnjana's quote above, if I max out my 401k in a private sector job, I cannot contribute to TSP, is that correct?

 

[MooreBonds]

Thanks, everyone.

To confirm based on jimnjana's quote above, if I max out my 401k in a private sector job, I cannot contribute to TSP, is that correct?

That is correct. You are allowed to contribute up to a total of $16,500 (currently) per year in all 401(k)s, regardless of how many 401k plans you participate in. If you wanted to, you could get a part time job w/ the Feds and put as much of your $16,500 limit in the TSP.

The ROTH IRA has an individual income limit that starts to phase out at $107,000 AGI, and is completely wiped out at $122,000 AGI. If you fall under this limit, you should also max out your ROTH contributions (which you can do up until April 15 of the following year).

However, another option to consider (if it's possible) is to do some part time consulting work as an independent contractor, or open up some other part-time business. As a self-employed individual, there are additional tax-advantaged options you have in addition to your 401k at your primary employer.

For instance, as a self-employed individual, you can open up a SEP IRA with Vanguard (or anyone else), and you are allowed to contribute up to 25% of your net self-employed income (self employed revenue minus self employed expenses). Being self-employed also opens up your expenses to be partially written off for various categories (home office, phone, internet, generous mileage deductions, etc.).

Sounds like you're off to a fantastic start with a very rare work ethic. Keep it up and stick around the forum...you can't beat the membership dues!

In terms of what else to do for the future? As your knowledge of investing increases, you'll learn about the finer points of what types of investments and funds to hold in your 401k (more of your fixed income allocation) vs your taxable accounts, different types of investments that you might hear about (some like real estate, some dabble a tiny amount in options, etc.).

But, the biggest single factor is living below your means and saving, because living a modest lifestyle not only allows you to save more, but it decreases the amount (by a factor of 25-35!) that you need to have saved up to meet your average annual expenses when retired.

 

[obgyn65]

Welcome, boglegal.

 

[donheff]

Boglegal -- you just got some good news. The part time Federal job isn't necessary. Just keep up what you are doing. With the extra free time suddenly available go out and have some fun.

 

[chinaco]

Develop a LBYM attitude and stick with the discipline the rest of your days!

Do not get caught up in the American view of being successful. IOW we tend to want purchase outward and visible sign of success. Big House, expensive cars, expensive toys, etc... are expenses that generate future expenses. For example: buying a larger home than is really needed just creates a long-term drag on your accumulation of retirement assets. Buying a modest vehicle and driving it for say 10 years instead of trading cars every 4 years.

That is not to say that you should not enjoy your hard earned money or live an overly spartan lifestyle.... But think about what it means and how it will affect your future.


One other thing.... People often assume that they will be able to work till they choose to stop working. But it does not always turn out that way. Consider the risks to your financial situation and mitigate them. For example what if you become disabled, how will you support yourself? Do you need LTD insurance? As an atty, you might consider a personal policy vs a group policy... it will stay with you if you shift jobs. You invested a lot of time and money in your earning potential (human capital), it is likely to makes sense to protect your human capital (future earnings) from loss.

 

[Midpack]

You are on the right track. As others have said, LBYM is the key. The greater the spread between your income and spending, if you invest those savings prudently you will reach FI and then have lots of options. LBYM is simple, but not easy for most, but you appear to have the LBYM gene and you will be richly rewarded if you stick with it.

 

[boglegal]

That is correct. You are allowed to contribute up to a total of $16,500 (currently) per year in all 401(k)s, regardless of how many 401k plans you participate in. If you wanted to, you could get a part time job w/ the Feds and put as much of your $16,500 limit in the TSP.

The ROTH IRA has an individual income limit that starts to phase out at $107,000 AGI, and is completely wiped out at $122,000 AGI. If you fall under this limit, you should also max out your ROTH contributions (which you can do up until April 15 of the following year).

However, another option to consider (if it's possible) is to do some part time consulting work as an independent contractor, or open up some other part-time business. As a self-employed individual, there are additional tax-advantaged options you have in addition to your 401k at your primary employer.

For instance, as a self-employed individual, you can open up a SEP IRA with Vanguard (or anyone else), and you are allowed to contribute up to 25% of your net self-employed income (self employed revenue minus self employed expenses). Being self-employed also opens up your expenses to be partially written off for various categories (home office, phone, internet, generous mileage deductions, etc.).

Sounds like you're off to a fantastic start with a very rare work ethic. Keep it up and stick around the forum...you can't beat the membership dues!

In terms of what else to do for the future? As your knowledge of investing increases, you'll learn about the finer points of what types of investments and funds to hold in your 401k (more of your fixed income allocation) vs your taxable accounts, different types of investments that you might hear about (some like real estate, some dabble a tiny amount in options, etc.).

But, the biggest single factor is living below your means and saving, because living a modest lifestyle not only allows you to save more, but it decreases the amount (by a factor of 25-35!) that you need to have saved up to meet your average annual expenses when retired.

Thanks, everyone! I really appreciate your thoughts. To follow up on MooreBonds' suggestion on part-time consulting work/business, what could be some consulting possibilities for an attorney?

Also, to follow up on chinaco's LTD insurance suggestion, what are some pros/cons of doing this? LTD insurance is not something I've thought about, but it's an interesting suggestion.

 

[MooreBonds]

Thanks, everyone! I really appreciate your thoughts. To follow up on MooreBonds' suggestion on part-time consulting work/business, what could be some consulting possibilities for an attorney?

Also, to follow up on chinaco's LTD insurance suggestion, what are some pros/cons of doing this? LTD insurance is not something I've thought about, but it's an interesting suggestion.

Well, the biggest drawback is liability insurance. Any insurance premium if you go solo will require a HUGE revenue stream just to break even. As a result, if you do some part-time consulting work for companies or individuals, it would have to be understood ahead of time with your cilents that you're just working "on the side" and are not providing liability insurance. Try some law firms in your area that practice in the area that you might have a little experience in, whether it's true legal matters or paralegal-type stuff. They might occasionally have a large case that they need some extra hours on, so it would definitely make sense to hire someone part-time for just that one case, rather than work the other people even more crazy than usual, or add the expense of hiring another full-time attorney.

What area of law do you have a background in? Just try any businesses that might have work related to that area. For instance, if you have studied land-related contract/development issues, you could talk to a real estate developer or real estate investment group to see if they would have a need to hire a lawyer part-time for occasional as-needed services. Even something like a local utility might have a need for a part-time lawyer in a variety of capacities. You could even post your resume with an industry related website (or even monster/career builder) as a lawyer available for part-time work.

 

[Milton]

If I were you I'd focus on your career as a lawyer, and forget about the part time job gig.

+1. Establishing yourself in your profession is much more important than nickle-and-dime moonlighting.

Your post doesn't say, but presumably you are now working full-time at a law firm. Billing respectable hours, developing a speciality, charming partners, and fostering relationships with clients will take substantial time and effort.

If you are making the necessary commitment, you will likely have little enough energy for a social life and a modest hobby or two ... let alone working on the side.

 

[Alan]

Also, to follow up on chinaco's LTD insurance suggestion, what are some pros/cons of doing this? LTD insurance is not something I've thought about, but it's an interesting suggestion.

I always had LTD through my employer. It didn't cost too much and I did need to use it when I had back problems, including surgery, and was off work for 11 weeks. The policy I had provided full pay for 6 months and half pay for the next 18 months.

 

[SpencerM]

+1. Establishing yourself in your profession is much more important than nickle-and-dime moonlighting.

Your post doesn't say, but presumably you are now working full-time at a law firm. Billing respectable hours, developing a speciality, charming partners, and fostering relationships with clients will take substantial time and effort.

If you are making the necessary commitment, you will likely have little enough energy for a social life and a modest hobby or two ... let alone working on the side.

Welcome to your new career. As someone just out of law school and starting out you should know that your career as a lawyer may not be what you expect it to be. Many, if not most, new lawyers make many career changes. You should emphasize the portability of your investments, but also make sure what you are spending most of your time on every day is what gets you excited. If not, no matter how good you are with investing, you will waste your life.

SM

 

[67walkon]

Bog, I'm an older Florida lawyer. Your employment might very well prevent outside consulting or work, it is hard to tell without knowing more.

LBYM, don't try to keep up with the hotshots who have more expensive cars and vacations. Work hard. Save lots.

I'm 61. I have lived below my means. We have 2 houses, total value in the $1.7 to $2 million range, remaining mortgage on one of $140,000 and we could write a check for that. Our retirement next egg includes some commercial rental property, lots of tax free muni bonds, some stocks and some cash. If I never go to work again, I don't think we can run out of money. So at this point, being a lawyer is a hobby and it helps the other people at my law firm. The law is a great way to figure out what you really want to do. While it is a jealous mistress, it can also be a great way to make a very good living without killing yourself. You just have to decide if a bigger house and a Porsche are more important than God, family and life style.

You are wise to be looking at this early in your career. Have fun.