Another financial question from a 2L

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Anonymous User
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Another financial question from a 2L

Postby Anonymous User » Mon Nov 14, 2011 1:03 am

I am in the very fortunate positition of having an SA position locked up for next summer (at a 160 paying firm in a major market) and having no debt. Besides the obvious stuff (max out a Roth IRA in my SA year and stub year, contribute as much as I can to my 401k, etc.) what should I be doing to take full advantage of my salary in the first few years of biglaw?

Anonymous User
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Re: Another financial question from a 2L

Postby Anonymous User » Mon Nov 14, 2011 1:07 am

Anonymous User wrote:I am in the very fortunate positition of having an SA position locked up for next summer (at a 160 paying firm in a major market) and having no debt. Besides the obvious stuff (max out a Roth IRA in my SA year and stub year, contribute as much as I can to my 401k, etc.) what should I be doing to take full advantage of my salary in the first few years of biglaw?


No debt? Pump money into savings/retirement, get a pimped out apartment, and get models & bottles.

turbotong
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Re: Another financial question from a 2L

Postby turbotong » Mon Nov 14, 2011 1:21 am

Here is some very disputable, controversial advice that may or may not be good and that you will follow at your own risk, especially since I am not an expert in this area:

1. Buy a house. Prices are still relatively low. They may fall farther if Europe crashes. This may not be practical if you're in NY, but if you're in Texas or Florida, do it.
2. Invest... stocks have high returns
3. Buy gold or other securities to hedge against the possibility of Europe crashing and wiping out your stock value. Yes, #3 contradicts #2. Go read a book, read a book, read a mother-of-investing book about it if you're really interested. When you're done with that, go google songs about reading a book.
4. Don't buy an expensive car. They lose value fast and cost a lot in insurance money
5. Buy some quality stuff that will last, such as clothes and durable goods.
6. models = stds and bottles = future kidney/liver problems, both of which will cost money, so obtain these in moderation and safety
7. Find a good tax agent who knows tax AVOIDANCE, not tax EVASION, strategies

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Mroberts3
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Re: Another financial question from a 2L

Postby Mroberts3 » Mon Nov 14, 2011 2:31 am

Few random thoughts.

You probably want a traditional IRA, not Roth (this is assuming you expect future tax bracket to be less than it is at biglaw salary). Max out your 401(k) -- at a MINIMUM you should be meeting the employer contribution limit. Its free money. Invest in quality, low cost index funds. Something like a 70/30 of Vanguard Total Stock Market and Vanguard Total Bond Market. The split is up to you and depends on risk tolerance.

The advice on gold is not a good idea. Most gold investments are in gold futures/commodities, which are subject to the same problems as stocks. You are only buying paper and the value of your "gold" is only what people will pay for it, which won't necessarily be higher in the future. This is especially true if everyone keeps buying it because they think its safe then the bubble bursts. Buying actual gold bullion is only really useful if the whole fucking world collapses, and in that case you might as well stock up on guns and supplies instead of money. buy some TIPS if you are worried about future inflation risks given the debt problems of many countries.

c3pO4
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Re: Another financial question from a 2L

Postby c3pO4 » Mon Nov 14, 2011 2:39 am

Tip: don't ask a bunch of law students for financial advice. These threads always devolve into inane pissing contests with people throwing out acronyms nobody understands just to sound smart.

turbotong
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Re: Another financial question from a 2L

Postby turbotong » Mon Nov 14, 2011 3:04 am

Mroberts3 wrote:You probably want a traditional IRA, not Roth (this is assuming you expect future tax bracket to be less than it is at biglaw salary).


Here is what you consider:
1. Your retirement salary will probably be lower than your working salary. This applies to most people. Lower salary = lower tax bracket.
2. Will the government raise taxes in the future? If so, it is possible that you will be in a lower tax bracket but pay higher taxes anyway. Given the fact that all the money to pay for social security has to come from somewhere, you can probably bet on a tax increase. The only question is how much - enough to offset your lower tax bracket? Go look into a crystal ball and what it tells you is as good as anybody's guess. Just don't assume you can tell whether trad/roth is the "correct" decision right now.

Reprisal
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Re: Another financial question from a 2L

Postby Reprisal » Mon Nov 14, 2011 3:36 pm

Anonymous User wrote:I am in the very fortunate positition of having an SA position locked up for next summer (at a 160 paying firm in a major market) and having no debt. Besides the obvious stuff (max out a Roth IRA in my SA year and stub year, contribute as much as I can to my 401k, etc.) what should I be doing to take full advantage of my salary in the first few years of biglaw?



Maxing out your 401k is probably the best idea because of employer matching, however, before you do this inquire whether your firm will match 401k contributions from summer associates. Many employers do not match 401k contributions beyond a certain small percentage until an employee has been working with the organization for some time. If your firm only matches to 1 or 2% of your income, put in only that amount and then switch the rest of your retirement savings to an IRA.

The primary factor for Traditional vs Roth IRAs is not your salary rate, but rather your AGI for the year. Since you're going to make ~$33,000 next summer, a Roth IRA makes sense for you. Your gross annual earnings this year will be far lower than your future earnings, even if you're only drawing social security and a pension from your ex-firm (SS pays out based upon your pay ins...as an attorney you'll pay more in but receive more once you hit whatever the retirement age is).

Then save $6,000 for the World Cup in 2014, hell yea

imchuckbass58
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Re: Another financial question from a 2L

Postby imchuckbass58 » Mon Nov 14, 2011 4:17 pm

I have not heard of a single firm, ever, that gives 401ks (or any benefits, really) to summer associates.

But I'll echo the above advice to max out your 401k when you get there. Don't live extravagantly (by the same token, you don't have to live like a student anymore), and dump anything you can save into a diversified mix of index funds.

My person preference is 35% domestic stock index/25% int'l stock index/20% corporate bond index/20% treasury bond index. Use Vanguard funds - their fees are less than 20% of actively managed funds and the indexed beat most active fund managers. If you live in a very high-tax jurisdiction (e.g., NY or CA), you may want to consider triple-tax-free munis to replace some corporates or treasuries.

maraba
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Re: Another financial question from a 2L

Postby maraba » Tue Nov 15, 2011 1:08 am

Anonymous User wrote:I am in the very fortunate positition of having an SA position locked up for next summer (at a 160 paying firm in a major market) and having no debt. Besides the obvious stuff (max out a Roth IRA in my SA year and stub year, contribute as much as I can to my 401k, etc.) what should I be doing to take full advantage of my salary in the first few years of biglaw?

If 401k and Roth IRA are already maxed out, get a foreclosure while they are still dirty cheap.
Last edited by maraba on Fri Mar 09, 2012 5:05 pm, edited 1 time in total.

Anonymous User
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Re: Another financial question from a 2L

Postby Anonymous User » Tue Nov 15, 2011 2:21 am

imchuckbass58 wrote:I have not heard of a single firm, ever, that gives 401ks (or any benefits, really) to summer associates.

But I'll echo the above advice to max out your 401k when you get there. Don't live extravagantly (by the same token, you don't have to live like a student anymore), and dump anything you can save into a diversified mix of index funds.

My person preference is 35% domestic stock index/25% int'l stock index/20% corporate bond index/20% treasury bond index. Use Vanguard funds - their fees are less than 20% of actively managed funds and the indexed beat most active fund managers. If you live in a very high-tax jurisdiction (e.g., NY or CA), you may want to consider triple-tax-free munis to replace some corporates or treasuries.

I know that the firm I will be working at and most other large firms don't do any 401k matching.

Anonymous User
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Joined: Tue Aug 11, 2009 9:32 am

Re: Another financial question from a 2L

Postby Anonymous User » Tue Nov 15, 2011 2:23 am

Anonymous User wrote:
imchuckbass58 wrote:I have not heard of a single firm, ever, that gives 401ks (or any benefits, really) to summer associates.

But I'll echo the above advice to max out your 401k when you get there. Don't live extravagantly (by the same token, you don't have to live like a student anymore), and dump anything you can save into a diversified mix of index funds.

My person preference is 35% domestic stock index/25% int'l stock index/20% corporate bond index/20% treasury bond index. Use Vanguard funds - their fees are less than 20% of actively managed funds and the indexed beat most active fund managers. If you live in a very high-tax jurisdiction (e.g., NY or CA), you may want to consider triple-tax-free munis to replace some corporates or treasuries.

I know that the firm I will be working at and most other large firms don't do any 401k matching.

Mine does... Aww yeaaahhhh. Mid pimpin' baby.




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