Looking forward to retirement?
First of four articles for those considering retirement: some points to think about
I have known lawyers who insisted that, if they ever left the office, it would be feet first. “They died with their wigs on” hasn’t got quite the ring of a John Wayne film, but you get the message. Perhaps they were enjoying the game so much, they couldn’t stop playing. Or, perhaps they were making so much money, they couldn’t bear to stop.
Nowadays, it is more likely that we can’t afford to stop.
Your profits may have recovered in recent years; but many firms took a battering in the 1990s. And the recent catastrophic fall in the stock market has made many lawyers look again at their pension funds and plans for early retirement.
The “baby boomers”, who were planning to retire from 2005 onwards, are putting back their plans until their pension funds have been restored. They want to live to 95, playing golf and visiting the Algarve regularly, with a bit in reserve for the nursing home.
But perhaps you are expecting to get a big boost from your partners in return for your early departure. Aren’t you entitled to a reward for the years devoted to the cause, working long days and late nights, attending Rotary Club bashes and kirk session meetings, extending the client base of the firm?
Not unless it’s printed in the partnership agreement, you’re not. Your partners are no more bound to make a generous farewell payment to you than they are to join the Law Society Council or fly to the moon. And they are not much likelier to either, if it isn’t down in black and blue.
Of course, you are entitled to withdraw the sums in your capital account, subject to the rules in the partnership agreement.
But, simply because you feel you are entitled to an additional farewell payment, it does not follow that your partners will feel the same way.
So, if you are thinking about retiring, have a look at the partnership agreement, and, if you haven’t got one, start preparing one. Be honest about your plans and you are more likely to get the right response from your partners. Trifle with the truth, and you may get what you deserve.
It is better for everyone if your retirement can proceed in a well-planned, orderly manner. Your partners may be afraid that you plan never to retire, but to hang around the corridors like an unpleasant odour, doing less and less work in return for a constant share of the profits.
They may be so pleased to hear that you do actually plan to retire that they will agree to give you an additional capital payment in return for your commitment to a particular date (and your share of the goodwill of the firm).
However, any such “goodwill” payment is unlikely to be large enough to finance your bad habits for the indefinite future. Meanwhile, you are going to have to keep dumping money into your pension plan. And here is some good news. If you are aged between 56 and 60, you are entitled to pay up to 35% of your earned income into your pension fund and claim tax relief on the whole amount.
Your partners may be prepared to employ you as a consultant for a while, and they may even be prepared to pay you a salary in return for whatever services you can provide. But, if you want to make a clean break, and avoid being the Ghost of Partners’ Meetings Past, you will want to look elsewhere for your extra income.
Writing is a natural outlet – it’s what lawyers do, after all. Property ownership is another favourite.
Radio is a natural outlet for those who can speak clearly and interestingly, although television requires a degree of pulchritude as well. Teaching/lecturing may work for those with something to teach.
But perhaps you’ve just had enough and want to spend more time with your family (now that most of them have left the house), your money or your dog. Perhaps you just can’t stand the early mornings, the late nights and the awkward clients any more.
If so, then go for it. Don’t wait around until you become a curmudgeon, miserable with your work and miserable to your clients, your staff and your partners. There are too many lawyers as it is, so pack it in and get on with whatever it is you really want to do, whether that is painting, travelling, writing your memoirs or just digging the garden. Don’t leave it so late that you haven’t got the energy or health to do what you want to.
Sometimes it’s not a question of whether you can afford to retire, it’s a question of whether you can afford not to.Brian D Allingham founded Allingham & Co in 1982 and, retired as a partner recently, aged 51. He is a regular lecturer on management subjects, author of two books and a management consultant to many law firms. e: firstname.lastname@example.org