Higher pay (and higher stress) or lower pay (and better quality of life)? Forum

[AVBucks4239]

But if you don't, the money isn't worth it because the per diem (the money) actually sucks. When you break it down, and assuming you aren't a contract PD, you probably make more hourly as a public defender than your actual hourly rate in big law.

Uh, no.

I make $60 an hour on court appointed work. My AGI generally comes in at the 12% bracket due to all the deductions I'm able to take/pre-tax contributions, and I don't pay any state or local tax because I'm self-employed.

So $60 an hour (x) 12% tax rate equals $53.20 an hour in take home pay. Throw in the self-employment tax and it's about $48.00 an hour.

Conversely, a NYC Big Law associate makes $190,000 per year. Assume she maxes 401k. Federal, state, and local tax brings take-home pay to $111,607. Add back in the 401k and the total earned is $129,607.

This is a guesstimate, because it might be more or less, but let's assume this person works an average of 70 hours per week, fifty weeks a year.

$129,607 divided by 3,500 hours is $37.03 an hour in take home pay. Sure, maybe I'm missing a $20,000 bonus, but after that's also taxed, we're still talking about $43.00 an hour.

Now, if you drop it down to an average of 60 hours per week (which I don't think is realistic, but whatever), it's probably close to a wash.

I think what gets lost in a lot of this is that the tax advantages of being self-employed are pretty amazing. Twenty percent federal deduction for all self-employed income, usually no state income tax (unless you're in a laughably high tax state like NY/CA), far higher contributions for retirement accounts, deducting items you pay for anyway (cell phone, drycleaning), etc.

So yes, I am making more per hour defending some lady who didn't pay the Holiday Inn than an NYC big law associate working on the country's biggest litigation.

[Elston Gunn]

1. You appear to be comparing hours billed (at court appointed work) to hours worked (in Biglaw). Since nobody bills 70 hours a week.

2. That 190k first year gets a 15k bonus.

3. That associate gets an immediate 20k (+10k bonus raise) after 1.3 years on the job, and then further steep raises every year after that.

4. I assume there’s some undesirable variability to how many hours are available for you to work at PD work—whereas BL is a salary you just get every two weeks—but perhaps I’m wrong.

5. 60 hours a week for 49 weeks (people take 3 weeks of vacation, especially if you include long weekends for weddings, sick days etc) is a much more realistic guess for the average BL associate, though obviously at some places that would be low.

None of which is to say you shouldn’t be very happy with your current gig, and likely much happier than the average BL associate.

[AVBucks4239]

1. You appear to be comparing hours billed (at court appointed work) to hours worked (in Biglaw). Since nobody bills 70 hours a week.

2. That 190k first year gets a 15k bonus.

3. That associate gets an immediate 20k (+10k bonus raise) after 1.3 years on the job, and then further steep raises every year after that.

4. I assume there’s some undesirable variability to how many hours are available for you to work at PD work—whereas BL is a salary you just get every two weeks—but perhaps I’m wrong.

5. 60 hours a week for 49 weeks (people take 3 weeks of vacation, especially if you include long weekends for weddings, sick days etc) is a much more realistic guess for the average BL associate, though obviously at some places that would be low.

None of which is to say you shouldn’t be very happy with your current gig, and likely much happier than the average BL associate.

1. I'm talking total hours worked. My other hourly rates, and other non-billable stuff (doing Quickbooks, updating website, etc.), I'm guessing my average hourly rate for my total hours is higher than the PD rate I mentioned.***

2. Added in the bonus.

3. This is still only a couple more bucks an hour due to the amount of hours worked.

4. It ebbs and flows. My worst month was about $3,000, my best month was $30,000. And to be clear, PD work is about 10-15% of my practice. I charge $200 an hour on my civil litigation stuff (which, when you're billing against a retainer, will REALLY make you question the economics of a firm). I'll probably do a big write-up on being solo like I did for personal finance some day.

5. I'm basing it off the posts I see around here. 60 hours seems low if we're including all hours at the office, checking stuff late at night, etc.

And yes, I enjoy my career as a solo. I probably am annoying to some on this board but there hasn't really been a voice for that here in a few years, so I'm trying to fill that void.

***Edit: I just did the math on this and, after taxes and expenses and everything last year, I earned about $76 an hour.

[ClubberLang]

But if you don't, the money isn't worth it because the per diem (the money) actually sucks. When you break it down, and assuming you aren't a contract PD, you probably make more hourly as a public defender than your actual hourly rate in big law.

Uh, no.

I make $60 an hour on court appointed work. My AGI generally comes in at the 12% bracket due to all the deductions I'm able to take/pre-tax contributions, and I don't pay any state or local tax because I'm self-employed.

So $60 an hour (x) 12% tax rate equals $53.20 an hour in take home pay. Throw in the self-employment tax and it's about $48.00 an hour.

Conversely, a NYC Big Law associate makes $190,000 per year. Assume she maxes 401k. Federal, state, and local tax brings take-home pay to $111,607. Add back in the 401k and the total earned is $129,607.

This is a guesstimate, because it might be more or less, but let's assume this person works an average of 70 hours per week, fifty weeks a year.

$129,607 divided by 3,500 hours is $37.03 an hour in take home pay. Sure, maybe I'm missing a $20,000 bonus, but after that's also taxed, we're still talking about $43.00 an hour.

Now, if you drop it down to an average of 60 hours per week (which I don't think is realistic, but whatever), it's probably close to a wash.

I think what gets lost in a lot of this is that the tax advantages of being self-employed are pretty amazing. Twenty percent federal deduction for all self-employed income, usually no state income tax (unless you're in a laughably high tax state like NY/CA), far higher contributions for retirement accounts, deducting items you pay for anyway (cell phone, drycleaning), etc.

So yes, I am making more per hour defending some lady who didn't pay the Holiday Inn than an NYC big law associate working on the country's biggest litigation.

First, the average biglaw associate does not work 3500 hours per year. That's insane.

Second, if your marginal tax rate is 12%, as a single filer your AGI would be less than or equal to 38,700. That's hardly biglaw money.

Third, as you know, a solo practitioner has costs that biglaw associates don't. That comes out of the $60/hr you make from appointment work.

Fourth, as you know, you've only considered a first year biglaw salary and no bonus.

Fifth, as you know, solos don't get paid for admin work or downtime.

Sixth, as far as perks go, being able to write off dry cleaning is not all that great.

And, if one were so inclined, would there even be 2000 hours of $60/hr appointment work available every year?

[ClubberLang]

***Edit: I just did the math on this and, after taxes and expenses and everything last year, I earned about $76 an hour.

You'll have to put together a post on how you earn $76/hr but manage to stay in the 12% tax bracket.

[AVBucks4239]

First, the average biglaw associate does not work 3500 hours per year. That's insane.

Even when it's 60 hours per week (I'm including total time here), it's about $43.00 an hour in take home pay.

Second, if your marginal tax rate is 12%, as a single filer your AGI would be less than or equal to 38,700. That's hardly biglaw money.

.
Married. You're forgetting 20% self-employment income deduction, being able to contribute $53,000 to a retirement plan, $6,900 HSA, $18,500 to my wife's 401k, etc. Gross income can be quite high and still be in the 12% bracket.

Third, as you know, a solo practitioner has costs that biglaw associates don't. That comes out of the $60/hr you make from appointment work.

Fair enough. I just calculated that my take-home hourly rate last year was $76/hour when including both taxes and costs. It's quite difficult for me to compare *just* my PD time (10-15% of my practice) and isolate and calculate that. I was only trying to be illustrative.

Fourth, as you know, you've only considered a first year biglaw salary and no bonus.

I added in the bonus. And honestly, since you certainly know more than I do about big law, an hourly estimate calculation on your end would be beneficial to the discussion (hours worked, bonuses, raises, etc.).

Fifth, as you know, solos don't get paid for admin work or downtime.

The downtime is very, very, very minimal. Maybe, *maybe* two hours per week. Technology has streamlined much of the bullshit.

Sixth, as far as perks go, being able to write off dry cleaning is not all that great.

Being able to write off drycleaning is perk number 542 of being solo. Higher up the list is going to get Chick-Fil-A and then going home for the day because I feel like it.

And, if one were so inclined, would there even be 2000 hours of $60/hr appointment work available every year?

Maybe. There's a guy here in my area (NE Ohio) who does appointment work full time and makes about $140,000. Dude has an amazing life.


We can really get in the weeds here, but I was only trying to prove a point. When your salary gets that high, you are usually working significantly more hours and your taxes absolutely suck. So your actual take home pay isn't that great when you look at it on an hourly basis. That's all I was trying to say.

[AVBucks4239]

***Edit: I just did the math on this and, after taxes and expenses and everything last year, I earned about $76 an hour.

You'll have to put together a post on how you earn $76/hr but manage to stay in the 12% tax bracket.

Like I said, I'll put this together in a detailed post some day. But the gist of it is tons of pre-tax contributions (which are extremely favorable when you're self-employed), some deductions, and I work about 35 hours a week (total).

Pulling this out of my ass, but even with a $200,000 gross income with my spouse (I'm not there yet), we could get there.

-$24,000 standard deduction
-$30,000 self-employment income deduction (assumes $150,000 of gross income was self-employment income)
-$40,000 solo 401k deduction
-$10,000 spouse 401k deduction
-$7,000 HSA deduction
-$12,000 office expense deductions

That's in the 12% bracket without even doing some other stuff to lower taxes even more (e.g., spouse's 401k, even more to the solo 401k, home office deduction, etc).

My total hours worked this year will probably increase this year because I'm trying to gross $175,000 with my practice, but that's just a lofty goal that depends on a couple settlements coming in, so we'll see how it goes.

[ClubberLang]

I don't doubt that a successful solo can make the same hourly after tax rate as a first year NYC biglaw associate.

What you originally said is that "you probably make more as a public defender than your actual hourly rate in big law." That's patently false. Another problem with your calculation is that you seem to be considering 401k contributions in your hourly rate, but are not accounting for them being taxed in retirement. Anyhow, back of the envelope, as a third year I make about 72/hr post tax (75/hr if, like you, I assume that the 401k contribution will never be taxed). I'd be surprised if any public defender tops that.

[AVBucks4239]

I don't doubt that a successful solo can make the same hourly after tax rate as a first year NYC biglaw associate.

What you originally said is that "you probably make more as a public defender than your actual hourly rate in big law." That's patently false. Another problem with your calculation is that you seem to be considering 401k contributions in your hourly rate, but are not accounting for them being taxed in retirement. Anyhow, back of the envelope, as a third year I make about 72/hr post tax (75/hr if, like you, I assume that the 401k contribution will never be taxed). I'd be surprised if any public defender tops that.

For the third time, and to try and get back to the purpose of this thread (lower pay for lower stress), I was just trying to be illustrative and make a point. The OP in this thread is someone who is burned out in big law. I'm a nobody solo attorney in suburban Ohio (southeast of Cleveland) that's worked at 100 lawyer firms, 25 lawyer firms, 2 lawyer firms (me included), and as a solo. I'm just trying to offer a paradigm shift that, while a NYC big law salary is high, the hours worked and significant taxes make the hourly rate not that great as compared to other jobs.

To illustrate this, I used what many on this board deem as the bottom rung example, a public defender. But they make $50-60 an hour, and probably more in other states. We get so caught up in big law salaries and bonuses that we forget that probably 85% of the country would scrunch into a pretzel and kiss their own ass to make $50-60 an hour. And, my point was, the hourly rate as an Ohio public defender is not *that* far off from a first year big law associate in NYC, and it might be more.

Sorry if I'm not articulating myself well (which is often the case), but what I'm ultimately trying to do is make someone, OP or anyone reading, answer the original inquiry in this thread by taking a step back and calculating their real, actual, take-home hourly wage, and then decide if their job is worth it. Your Money or Your Life is a great, great book on this. And isn't that what this thread is about? Lower pay for less stress? I'm getting at the point that your real hourly rate at a lower *salary* job might not have that much of an impact on your *real hourly rate.* And if you have more you time, is that tradeoff worth it? That's what this thread is about, and I was using an extreme example to drive my point home.

To bow out of this thread (too much downtime!), I'll leave my post from earlier in this thread about big law attorneys in litigation, which pretty well foreshadowed my experience with you in this thread:

But, as a litigator, I've generally found that lawyers from the Top 14 generally have their head so far up their ass that they have no idea or concern about the practical consequences of their decisions. Its churn, churn, churn with no regard for the client or realization that the battle they are fighting is a completely worthless hill to die on.

I just have to laugh when big firms from New York and even Cleveland get involved in my county. The judge, magistrate, and even secretaries just roll their eyes before the inevitably irrelevant and excessive discovery are served and, consequently, the worthless motions to compel are filed. The righteous indignation at these compel hearings is always pretty comical.

You might be technically correct as applied to your anecdotal experience, but you're missing the broader point of why I'm posting in this thread. Live it up man.

[Halp]

Stupid question, but what am I missing on that 401(k) deduction? I thought the max you could put was 18.5 (plus any applicable catchup after a certain age)?

[AVBucks4239]

Stupid question, but what am I missing on that 401(k) deduction? I thought the max you could put was 18.5 (plus any applicable catchup after a certain age)?

A self-employed person gets to contribute as both the employee ($19,000 in 2019) and as the employer (25% of net profit up to a total contribution of $53,000).

[Halp]

Stupid question, but what am I missing on that 401(k) deduction? I thought the max you could put was 18.5 (plus any applicable catchup after a certain age)?

A self-employed person gets to contribute as both the employee ($19,000 in 2019) and as the employer (25% of net profit up to a total contribution of $53,000).

Wow, had no idea. I know almost nothing about the tax implications of being self-employed. That’s pretty sweet.