Does this sound familiar? Another late night at the office. It’s 9 p.m. and you’re staring at another stack of briefs. Your phone buzzes with a text from your spouse asking when you’ll be home. Again.
The thought crosses your mind: When can I actually retire from all this?
If you’re like most lawyers I talk with, that question feels overwhelming. Between law school debt, lifestyle creep, and the constant pressure to keep up with your colleagues’ big houses and shiny cars, retirement planning gets pushed to the back burner. So you may not feel prepared.
Then there’s the question: How much will my retirement cost anyways?
But understanding your retirement costs isn’t just important. It’s your biggest lever for making retirement actually work. It’s the number that drives all the rest and can give you clarity with your purpose beyond the law.
Why This Math Actually Matters
I’m going to be brutally honest with you. The difference between understanding your expenses and taking a wild guess could cost you years of retirement funding.
Let me show you what I mean with a simple example. Take a hypothetical example of a $1,000,000 portfolio growing at 7% annually. If you withdraw $7,000 monthly, your money lasts 27 years. Bump that up to just $8,000 monthly? You’re looking at only 20 years.
That’s right—$1,000 per month makes a seven-year difference in the depletion rate of your portfolio throughout your retirement.
This is why getting super clear on your expenses isn’t just helpful financial planning. It’s the difference between a comfortable retirement and running out of money when you’re 85.
Step One: Know What You’re Actually Spending Today
Before you can figure out what retirement will cost, you need to know what you’re spending right now. And no, looking at your bank account balance and shrugging doesn’t count.
You’ve got two approaches here, and I’ll walk you through both.
The Top-Down Approach (My Personal Favorite)
This is perfect for busy attorneys who want answers without drowning in spreadsheets. Here’s how it works:
Grab your tax return and your 401(k) statements. That’s it. (Well, maybe your IRAs, brokerage accounts, or anywhere else you save).
Take your gross income, subtract what you paid in taxes, then subtract what you put into retirement accounts and/or savings. What’s left? That’s your actual lifestyle spending.
For example, let’s say you earned $300,000 last year. You paid $90,000 in taxes and saved $60,000 for retirement. Your lifestyle spending was $150,000.
Is this method perfect? No. But it’s quick, and it gives you a solid starting point without getting bogged down in the weeds.
The Bottom-Up Approach (For the Detail-Oriented)
Some attorneys prefer tracking every expense category. You know who you are—the ones who color-code your case files and have perfectly organized desk drawers.
This approach means listing everything: mortgage, groceries, insurance, that expensive coffee habit, your kid’s soccer cleats. Everything.
The upside? You get a detailed picture of where your money goes. The downside? It’s tedious, and people often forget important costs anyway. You’ll remember your property taxes but might overlook home maintenance. You’ll include health insurance but miss out-of-pocket medical costs.
If you go this route, track your spending for at least three months first. There are even apps that can help with the heavy lifting here–You link your accounts and watch the breakdown of your spending habits appear. But don’t get hung up on tech as a spreadsheet will do just fine if getting into the weeds is your thing.
Step Two: Factor in Inflation
Once you know your current spending, you need to account for inflation between now and retirement.
Let’s say you’re spending $150,000 today and plan to retire in five years. With 3% annual inflation, that same lifestyle will cost about $173,000 in five years.
How Your Expenses Change in Retirement
Good news: Your expenses probably won’t stay the same when you retire. In fact, they’ll likely drop more than you think assuming a similar lifestyle.
Your Tax Bill May Shrink
You’ll need to add taxes back into your overall need for retirement. But taxes might look a bit different.
First, you wave goodbye to FICA taxes—that’s 7.65% of your paycheck right off the top. If you own your practice, you’re currently paying double that amount!
Social Security benefits get better tax treatment than your salary does. Depending on your other income, only 0% to 85% of your benefits might be taxable.
Many states also cut retirees a break with special tax treatment for retirement account withdrawals as well.
Work Expenses May Vanish
Think about all the costs that simply disappear when you retire: malpractice insurance, bar dues, continuing education, professional clothes, daily commuting, business lunches. These expenses often add up to $10,000 or more every year for many attorneys.
The Mortgage Factor
Some lawyers reach retirement with their home either paid off or close to it. Since housing usually takes up about a third of your expenses, eliminating your mortgage payment makes a huge difference in how much you need each month.
What if you still have a mortgage? Perhaps you’re one of the lucky ones still holding on to a 3% mortgage. Assuming your investments are positioned to earn a higher rate of return, it could make sense to maintain the mortgage. Just account for the eventual drop in expenses when that mortgage is fully paid off.
No More Saving for Retirement
This one surprises people. Those big chunks of money you’ve been putting into retirement accounts? That cash was never part of your spending money anyway. Many attorneys in their peak earning years have the capacity to put away $50,000 to $70,000 annually for retirement.
Once you retire, you can stop saving for retirement (obviously!), which means you need less income to maintain the same lifestyle.
Putting It All Together: Your Retirement Portfolio Target
Now comes the fun part—figuring out exactly how much you need saved to make this whole retirement thing work.
Let’s walk through this step by step with a real example. Say you’ve determined you’ll need $180,000 annually to maintain your lifestyle in retirement (after accounting for inflation).
Step One: Subtract Your Guaranteed Income
First, you subtract any guaranteed income sources. For most lawyers, this means Social Security and possibly a pension if you worked in government or academia early in your career. Don’t forget to include your spouse’s resources here as well.
Let’s say Social Security will provide $48,000 annually for you and your spouse combined. Your annual income gap becomes $180,000 – $48,000 = $132,000.
This is the amount your investment portfolio needs to generate each year.
Step Two: Calculate Your Portfolio Target
Here’s where that famous 4% rule comes in handy as a starting point. If you need $132,000 annually and plan to withdraw 4% of your portfolio each year, you’d need $132,000 ÷ 0.04 = $3,300,000 in total savings.
Yikes, right? But before you panic, remember what we talked about earlier—your expenses will likely be lower than you think, and the 4% rule isn’t the only game in town.
A More Realistic Example
Let’s get super clear with numbers that reflect what I actually see with most attorneys. Continuing with our example, this is the step where we begin adjusting different variables to help solve for the retirement goal.
After learning more and discussing a dynamic withdrawal strategy (as opposed to a static 4% withdrawal rate), the couple may decide they’re comfortable with an initial withdrawal rate of 5%. To generate $132,000 per year, they would need $2,640,000 saved ($132,000 ÷ 0.05).
Still a big number, but suddenly more achievable than $3.3 million.
As a safeguard to the higher withdrawal rate, they’ve identified key portfolio values that would trigger either a small spending decrease or increase depending on the performance of their retirement accounts–Income guardrails.
The Income Gap Reality Check
This exercise often reveals something important: the gap between what you have and what you need might be smaller than you thought. Or it might highlight that working a few extra years could make a dramatic difference. Either way, it provides actionable direction for what needs to happen next with your retirement plan.
Need to save more? Better to know 5-10 years out from retirement than at retirement.
Realized you spend more than you thought? Not a bad thing–just something to plan around. Money is meant to be spent after all.
In better shape for retirement than you realized? Great! Now you can shift your mindset towards your purpose in retirement.
The Dynamic Spending Strategy
At this point, hopefully you can see the impact that expenses have on your retirement. However, you may also feel a little bit uneasy since everything feels so precise.
But this next part may help you breathe a bit–You don’t have to get this calculation perfect if you’re willing to make adjustments throughout retirement.
Research shows that most retirees don’t increase their spending with inflation every year anyway. Instead, spending follows more of a “smile” pattern: higher in early active years, lower in the middle period, then rising again with healthcare costs in later years.
I find this true in practice. Even with the last few years of high inflation, most of my retirees have taken inflationary bumps to their withdrawals, but much lower than the actual rate of inflation.
A flexible spending strategy means adjusting your withdrawals based on how your investments perform. Being willing to reduce spending by just 5-10% during major market downturns can let you start with a higher withdrawal rate and still make your money last. For attorneys used to unpredictable income, this flexibility comes naturally.
Bottom Line
Understanding your retirement costs isn’t about creating a perfect budget that you’ll follow for 30 years. It’s about getting clear on what you actually need so you can make informed decisions about when and how to retire–and when to adjust along the way.
The math might seem daunting at first, but remember that small changes in your expenses can add years to how long your money lasts. And with some strategic planning around taxes, work expenses, and flexible spending, you might find that retirement is closer than you think.
Start with the top-down approach—grab your tax return and retirement statements. Figure out what you’re really spending today. Then we can worry about fine-tuning the details.
After all, the goal isn’t perfection. It’s confidence that you can maintain your lifestyle without the pressure of billable hours and court deadlines.
David Hunter, CFP® is a CERTIFIED FINANCIAL PLANNER™ and owner of First Light Wealth, LLC (Opens in a new window), a financial planning & wealth management firm with a unique focus on serving attorneys nationwide. David has over a decade of experience helping clients build financial plans and has been featured in publications such as Attorney at Work, ThinkAdvisor, MarketWatch, Financial Planning, and InvestmentNews. David also writes weekly to attorneys in his popular Money Meets Law (Opens in a new window) newsletter. For more about David, visit firstlightwealth.com/lawyers (Opens in a new window) or connect with him on LinkedIn (Opens in a new window).