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The 10-Year BIG LAW Plan Thumbnail

The 10-Year BIG LAW Plan

Attorneys
Written by Chris DeVito


As I write this, the current AM 100 pay scale sits at the numbers below, pending any salary war between Cravath and Milbank. A roughly 40% increase in first year salary from when I started working with attorneys years ago.

Now, I’m no attorney but seeing this is strongly making me reconsider Law School. In my career, I have worked with and continue to work with BigLaw attorneys ranging from First Years to Retired Partners. I’ve met many different people with many different financial backgrounds. Everyone from the young associate with no debt and $500,000 in the bank to the new partner who never finished paying off their loans and is trying to play a bit of catch-up. I’ve often thought, if I came out of school with a salary like that, what would I have done to put myself in the best financial position possible? Back then, probably nothing if I’m being honest, like most attorneys I would have been immediately under water at work, and this would have been the last thing on my mind. However, knowing what I know now, I strongly believe I could have designed a 10-Year plan to put myself in an extremely strong financial position. How might you ask? Here’s my blueprint.

Let’s work under the current assumptions and fact pattern.

  • I’m 26 years old
  • Coming out of school with $150,000 in student loans (all currently held with the gov’t at 8% interest rate)
  • I will NEVER work for the Government. 
  • I live in NY and pay roughly 42% of my income in taxes (for both Federal and State)

Forget specific goals for a second. What I want to do is the below.

  • Payoff Student loans efficiently 
  • Build as much wealth as I can over the next 10 years, so I have career options and don’t feel tied to the job
  • Enjoy my lifestyle now, but still try to minimize expenses as best I can

Here’s what I’d actually do.

  • Immediately refinance my student loans to a 10-year plan, assume a 6% interest rate which would give me a payment of about $1,700 per month. 
  • Get a roommate – try to keep my rent to around $3,000 per month (very possible even in NYC)
  • Minimize my additional expenses – Try to keep Credit Card Bills (food utilities & entertainment under $3,000 per month
  • INVEST, INVEST, INVEST
    1. Max out my Roth 401(k) – current max is $23,000 which we’ll keep the same for 10 years
    2. Max out my Backdoor Roth IRA – current max is $7,000 which we’ll keep the same for 10 years
    3. Invest every additional dollar into a Taxable Investment account using Stocks & ETFs (100% Equity Allocation)
      • ***For this calculation we’ll assume the investments grow at an average rate of return of 8%

Balance Per Account

  • Roth 401(k) - $359,846.21
  • Roth IRA - $109,518.41
  • Taxable Investment Account - $1,752,875.69

Now, obviously the world and your life won’t work out perfectly like this. But even if we’re 20-25% off in terms of the calculations, would that put you in a better financial position than you would have imagined in 10 years? Let me rephrase that, would having NO LOANS and over $2 MILLION in assets help 36-year-old you?

My biggest takeaway from going through this exercise is seeing the impact that saving/investing outside of your 401(k) can have. Most people max out their 401(k) and call it a day. In this scenario, after 10-years, over 80% of my net worth is outside of my 401(k), don’t sleep on that. 

So, while you’re responding to emails at 3am and dropping everything you’re doing to answer that partner’s phone call. Take some time to focus on you and set yourself up for financial success. 



DISCLOSURES:

Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. We have relied upon and assumed withour independent verification, the accuracy and completeness of all information available from public sources.

The investment results are neither guarantees nor projections, and actual results may differ significantly.  Any assumptions as to interest rates, rates of return, inflation, or other values are hypothetical and for illustrative purposes only.  Rates of return show are not indicative of any particular investment, and will vary over time.  Any reference to past performance is not indicative of future results and should not be taken as a guaranteed projection of actual returns from any recommended investment.

All investing involves risk including the possible loss of principal. No strategy assures success or prevents loss. 7432822RG_Dec26