FinancialFocusForlawyers
Solo / Small firm Section Chairs : MandiClay – ThreeThirteenLaw , PLLC ; CharlotteKelly – FerneeKellyLaw & ChelsieLamie – LawOfficeofChelsieM . Lamie , P . A .
Let ’ s face it : as attorneys , making our own financial futures a priority in our day-to-day lives often doesn ’ t happen .
Hopefully , this short article will help all readers understand where to focus your limited time when it comes to your finances .
One of the first questions I always get , especially from younger practitioners , is , “ Should I be contributing to my firm ’ s 401K , and if so , how much ?” While the answer to this question is very much going to be a case-by-case analysis , I always ask whether their firm is “ matching ” up to a certain percentage of their 401K contribution ; and then I advise my clients to contribute at least that much ! If your employer is willing to give you “ free money ” to bolster your retirement accounts , then my advice is always to take full advantage of this compensation benefit . Contribute at least the most the firm is willing to match .
The next most common question I receive from attorneys is whether or not to open a traditional IRA , Roth IRA , or both , in conjunction with their employer-sponsored 401K . Again , this answer is highly dependent on your personal situation , so let ’ s start with briefly defining each . A traditional IRA is made up of money that has not yet been taxed ( but will be taxed at
some point in the future ); 1 a Roth IRA is money that has been taxed already , but the account , including the interest it earns , will never be taxed again . 2 Sounds like a pretty good deal , right ? A Roth IRA can be a very powerful tool for lawyers to use . But it does come with certain restrictions to be aware of , like maximum earnings ( income ) limitations . 3 You must be aware of these limitations so you don ’ t run into a penalty from the IRS . So , which is better ? Both traditional IRAs and Roth IRAs have their place and should be considered with your financial advisor as part of your planning .
The last issue I want you to consider is the importance of working with a trusted advisor who can help create a financial plan with you and your family . The considerations should include a conversation about each of the following :
• Income Planning for Your Retirement : “ How much do I need to retire comfortably ?”
• Investment Strategy : Am I invested in the right funds and accounts ( like a 401k , a traditional IRA , or Roth IRA ), and am I using them in the most advantageous way for myself in the short and long term ;
• Legacy Planning : What would be the consequences to your
oneofthefirst questionsialways get , especiallyfrom youngerpractitioners , is , “ shouldibe contributingtomy firm ’ s401k , andifso , howmuch ?”
family if you were to pass away early ? Is an estate plan in place to protect them ? Is life insurance required for my spouse or children ?
• Health Care and Long-Term Care Planning : Have I considered what the costs would be if I were to get sick , end up in a nursing home , or have a loved one that required full time care and attention ? I hope this provides a very basic framework for some of your financial concerns . n
1
Individual Retirement Arrangements ( IRAs ), Internal Revenue Service ( Sept . 19 , 2022 ), https :// www . irs . gov / retirement-plans / individual-retirementarrangements-iras .
2
Id .
3
Amount of Roth IRA Contributions That You Can Make for 2022 , Internal Revenue Service ( Sept . 22 , 2022 ), https :// www . irs . gov / retirement-plans / plan-participant-employee / amount-ofroth-iracontributionsthat-you-canmake-for-2022 .
Author : Aaron Saoud - AWS Law Firm
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