Retirement

As a result of a stroke or heart attack, or in response to decreasing effectiveness due to age-related problems, most older professionals will eventually need to think about retirement or some reduction of duties at work. This is a difficult topic to approach, particularly if the older person does not see the need to make adjustments. This section will explore areas that professionals in the field have found to be problematic about retirement, and offer possible solutions and/or ideas to consider in dealing with these issues.

Planning Through the Firm

The best way to smooth the transition is for a firm to have a plan in place before death, disability or retirement become issues. Partners should consider what they would do if one of them were to die or become disabled, and how they would like to handle retirement. ". . . the need to plan for the future security of firm members is a growing concern among young and old alike. In structuring a program, a firm must deal with the sensitive issues of determining the age of retirement; whether retirement should occur through a gradual phasing-out period or as a strict cutoff; the amount of retirement benefits; and what, if any, perquisites should be made available to the retiring partner." (Maskaleris, Stephen N., "Survey of Retirement, Death, Withdrawal, and Disability Partnership Agreement Clauses of Twenty Major United States Law Firms", The Lawyers Guide to Retirement, ed. David A. Bridewell, p. 82.)

What the plan will entail must be determined by the specific firm, but making a plan is essential for the good of the firm and the individual. Some methods that firms have used to structure retirement polices include:

Voluntary retirement - usually starting at age sixty with a requirement that the partner has been with the firm for a set number of years.

Mandatory retirement - usually imposed on partners by their seventieth birthday, unless they are given permission to continue as active partners by a vote from the remaining partners.

Gradual reduction of duties leading to full retirement - for example, a four-step phasing out period starting at age sixty-five and continuing over a three year time span. During the three years the person's partnership interest would be decreased as well as his or her workload.

The firm should set up funding for their retirement plan and provide for death and disability benefits as well. (Maskaleris, p. 82-83). An insurance professional can help in setting up group or individual life and/or disability insurance plans, and many insurance brokers can also help set up retirement plans as part of their employee benefits services.
 

Planning as an Individual

Whether a partner in a firm or a solo practitioner, each person needs to make realistic plans for his or her retirement as an individual, apart from any provisions made in the workplace. This planning involves addressing personal, as well as financial issues that affect the individual and (if applicable) his or her spouse.

The following information, reproduced from the brochure, Planning for Financial Independence in Later Life: Staying Independent, produced by the American Express Consumer Affairs Office, offers some useful questions and answers on retirement planning. If the individual has considered all these issues and consulted with insurance and/or financial planning professional, this information may not be needed. However, for those who have been putting off thinking about retirement, this information can help provide a place to start.

Taking Stock

As retirement approaches, it is important for every household to assess its financial identity (assess its finances). Waiting too long might mean missing one or more opportunities to preserve maximum financial independence in the future. To help get started, ask the individual if he or she can say "Yes" to the following statements (which apply to the individual and his or her spouse).

 

• We talk regularly and frankly about finances and agree on our goals and the lifestyle we will prefer as we get older.
• We know our sources of income after retirement, how much to expect from each, and when.
• We save according to a plan and are shifting from growth producing to safe income-producing investments.
• We know where our health insurance will come from after retirement and what it will cover.
• We have reviewed our life insurance and considered options such as converting to cash or investments.
• We each have our own credit history.
• We each have a current will or living trust.
• We know where we plan to live in retirement.
• We have anticipated the tax consequences of our retirement plans and of passing assets on to our heirs.
• Our children or other responsible relations know where our important documents are and whom to contact if there are questions.
• We have executed legal documents, such as a living will or power of attorney, specifying our instructions in case of death or incapacitating illness.

The Key is Planning

Looking ahead to the future is the key to financial planning at any age, but especially in the decade or so before retirement. For many households, retirement is a time to fulfill dreams and delayed ambitions. It also can be a time of anxiety if an individual postpones thinking realistically about the ways financial identity will change - income, savings, investments, credit, insurance, job benefits, and perhaps living arrangements. Meeting the challenge of financial management will help remove uncertainty and increase available options. Both partners need to be involved in retirement planning and may wish to discuss their plans with adult children.

Many people neglect planning. Some prefer to leave financial decisions to the other partner, while others simply find it too difficult to talk about money. Whatever the reason, if the individual has not yet begun planning, he or she may want to seek pre-retirement planning advice from a professional or a community service organization.