Target nest egg to leave? Forum

[masterherm]

Inspired by the net worth thread (viewtopic.php?f=23&t=308188), how much do you plan to save up before leaving big law, for either early retirement or a large pay cut to do something with less of an hours requirement?

[Anonymous User]

If possible, 2.5M net worth for a safe 4% withdrawal rate of 100k/yr. I'd FIRE asap at this point.

[jotarokujo]

median at this point is 1M which is surprisingly high given the complaints about biglaw. I know those complaints aren't representative of people in biglaw generally but still

[Anonymous User]

These results surprise me, too. I just did some quick math:

I plugged in Cravath-scale salary + bonus to compute taxes for a single person living in Manhattan (along with a pre-tax 401(k) contribution equal to the max) for seven years of biglaw. Assuming 60k in annual expenses for each of these 7 years, this associate would annually have this much left over:

48k
58k
80k
106k
126k
144k
160k

This isn't factoring in student loan debt (nearly $150,000 on average for graduates with JDs, which is nearly $200k over a ten year standard repayment), so for ease of use I'll assume a $175k repayment over the life of the loan, which is 7 years, so the debt will extinguish at the end of this exercise with $25k annual payments. That bumps each number down by 25k.

Assuming the entire remainder is invested in the market (on the last day of the year, so this is conservative), and assuming 10% annual return, at the end of each year this associate will have this much cash:

1st year - 23k
2nd - 58k
3rd - 119k
4th - 212k
5th - 334k
6th - 486k
7th - 670k

So on average, if these assumptions are reasonable (and I think they may even be favorable), a biglaw associate won't see even 750k net worth until year 8. And we all know that the majority of fresh-faced first years will be long gone 8 years from then.

Being a biglaw associate isn't a path to life-long wealth - being a biglaw partner is. I wonder if the responses are skewed toward partners and partners-to-be, if respondents are unusually frugal, or if people just generally have unrealistic expectations (which is what I worry about).

[jotarokujo]

Being a biglaw associate isn't a path to life-long wealth - being a biglaw partner is. I wonder if the responses are skewed toward partners and partners-to-be, if respondents are unusually frugal, or if people just generally have unrealistic expectations (which is what I worry about).

I agree. also, that would suggest a good amount of folks on here are law students rather than people currently in biglaw

[Anonymous User]

Above math is not wrong per se but there are ways to improve the situation, including
-lowering law school debt to 60-70k (if it is within one's control via choice of scholarship package)
-lowering annual expenses to 30k

To save a big nest egg in a short amount of time, one ought to be uncomfortably tight with her budget. Hard but doable.

[avenuem]

The above math doesn't consider savings accounts.

If you have at least $48,000, that's about 6.8K you can knock off of each year (for 7 years). Plus, you could just live with the rents and save on rent. If you're starting off with even more saved, kudos to you.

[umichman]

I think people are probably answering different questions. Are you talking big law to in house counsel at solid salary? or big law to mid law? or big law to solo? or big law to volunteer work/retirement or to a 9-4 65k/yr job.

[Anonymous User]

Assuming 60k in annual expenses for each of these 7 years . . .

I think you raise a good point, but even working in Manhattan it should be possible to cut this down to 40k or 30k (maybe even 25k if you're willing to commute far) and still maintain a respectable standard of living. Plus, and I know this isn't huge, but there's also 1-2 summers as a summer associate where you could have saved a reasonable chunk of money (though I'm of the opinion that money can be well-spent invested in things that will be needed for the job — dress shirts, suits, shoes, a good laptop and monitor setup at home for wfh, etc. — and maxing out a Roth IRA).

[Anonymous User]

I left with no real nest egg. I aggressively paid off all my loans, my car and my wife's car loans, and shortly afterward moved to flyover country for a stress-free 9-5 government job and bought a big house for the cost of a down payment in the major metro I left. I love my life and my job, but I regret not saving more. I quit and moved on short notice for personal reasons though, so I don't kick myself about it.

[Anonymous User]

Yea this poll is crazy but I think various people are responding differently. For example a lot of people are thinking they will leave biglaw to in-house at similar pay. I left biglaw around $400k NW for similar salaried in-house (which is still stressful). I'm willing to take a 50% paycut for a chill 9-5 though when I hit a $1mm NW amount (and that's what I put into the poll).

[Anonymous User]

Assuming 60k in annual expenses for each of these 7 years . . .

I think you raise a good point, but even working in Manhattan it should be possible to cut this down to 40k or 30k (maybe even 25k if you're willing to commute far) and still maintain a respectable standard of living. Plus, and I know this isn't huge, but there's also 1-2 summers as a summer associate where you could have saved a reasonable chunk of money (though I'm of the opinion that money can be well-spent invested in things that will be needed for the job — dress shirts, suits, shoes, a good laptop and monitor setup at home for wfh, etc. — and maxing out a Roth IRA).

???? Where in New York City do you expect to live on 25k a year in expenses? A studio apartment (at least, pre-covid) anywhere within 30 min of midtown would cost that much a year alone, not to mention other basic necessities (like, you know, food).

[Anonymous User]

Assuming 60k in annual expenses for each of these 7 years . . .

I think you raise a good point, but even working in Manhattan it should be possible to cut this down to 40k or 30k (maybe even 25k if you're willing to commute far) and still maintain a respectable standard of living. Plus, and I know this isn't huge, but there's also 1-2 summers as a summer associate where you could have saved a reasonable chunk of money (though I'm of the opinion that money can be well-spent invested in things that will be needed for the job — dress shirts, suits, shoes, a good laptop and monitor setup at home for wfh, etc. — and maxing out a Roth IRA).

???? Where in New York City do you expect to live on 25k a year in expenses? A studio apartment (at least, pre-covid) anywhere within 30 min of midtown would cost that much a year alone, not to mention other basic necessities (like, you know, food).

I live in Manhattan, attended one of NYU/Columbia Law, have a roommate, and would have anywhere from a 10-30 minute commute to most firms in midtown, depending on how close it is to my line. Rent becomes much more reasonable if you are willing to split with roommates, and the price any one person pays goes down for each roommate. Have you actually lived in Manhattan? You really don't think it's possible to live on 25k? That's less than the target Columbia Law has students budget for/expect for 2020-21. Students can live fine on this budget or under it, so no reason young associates can't either. After rent/utilities, I'd still have about $7,000 left for food; that's over $500 a month. I probably need $300 for groceries in a month, rest is discretionary spending money. It's very doable if you set reasonable expectations.

Getting a studio is dumb since you'll pay way more for less space than if you're willing to have a roommate. First year associates are glorified Microsoft Word jockies. We don't need a 1-bedroom or a studio, we need to save and pay down loans. And even now, rent is plummeting, so you could get a 1-BR or studio for a great rate.

[jotarokujo]

Yea this poll is crazy but I think various people are responding differently. For example a lot of people are thinking they will leave biglaw to in-house at similar pay. I left biglaw around $400k NW for similar salaried in-house (which is still stressful). I'm willing to take a 50% paycut for a chill 9-5 though when I hit a $1mm NW amount (and that's what I put into the poll).

but the question is what net worth will you leave biglaw at. so for you the answer is 400k

[Anonymous User]

Assuming 60k in annual expenses for each of these 7 years . . .

I think you raise a good point, but even working in Manhattan it should be possible to cut this down to 40k or 30k (maybe even 25k if you're willing to commute far) and still maintain a respectable standard of living. Plus, and I know this isn't huge, but there's also 1-2 summers as a summer associate where you could have saved a reasonable chunk of money (though I'm of the opinion that money can be well-spent invested in things that will be needed for the job — dress shirts, suits, shoes, a good laptop and monitor setup at home for wfh, etc. — and maxing out a Roth IRA).

???? Where in New York City do you expect to live on 25k a year in expenses? A studio apartment (at least, pre-covid) anywhere within 30 min of midtown would cost that much a year alone, not to mention other basic necessities (like, you know, food).

Different anon, but if you’re willing to have roommates there are definitely places in Brooklyn, Queens, Jersey City, Harlem etc where your share of a 2 or 3 bedroom would be a lot less than that. I used to pay $800 for one room in a 3BR in Park Slope and $650 for one room in a 2BR in Bay Ridge (though admittedly Bay Ridge is a significantly longer commute). If you get an unlimited subway pass, try to take Uber’s only on the firm’s dime, take advantage of expensing food at work, and limit your dining and drinking out, you can scrounge by.

[nixy]

The above math doesn't consider savings accounts.

If you have at least $48,000, that's about 6.8K you can knock off of each year (for 7 years). Plus, you could just live with the rents and save on rent. If you're starting off with even more saved, kudos to you.

Lots of people don’t have the option of living with parents. (That said, as noted already, roommates cut down on expenses.)

[Anonymous User]

Assuming 60k in annual expenses for each of these 7 years . . .

I think you raise a good point, but even working in Manhattan it should be possible to cut this down to 40k or 30k (maybe even 25k if you're willing to commute far) and still maintain a respectable standard of living. Plus, and I know this isn't huge, but there's also 1-2 summers as a summer associate where you could have saved a reasonable chunk of money (though I'm of the opinion that money can be well-spent invested in things that will be needed for the job — dress shirts, suits, shoes, a good laptop and monitor setup at home for wfh, etc. — and maxing out a Roth IRA).

???? Where in New York City do you expect to live on 25k a year in expenses? A studio apartment (at least, pre-covid) anywhere within 30 min of midtown would cost that much a year alone, not to mention other basic necessities (like, you know, food).

Different anon, but if you’re willing to have roommates there are definitely places in Brooklyn, Queens, Jersey City, Harlem etc where your share of a 2 or 3 bedroom would be a lot less than that. I used to pay $800 for one room in a 3BR in Park Slope and $650 for one room in a 2BR in Bay Ridge (though admittedly Bay Ridge is a significantly longer commute). If you get an unlimited subway pass, try to take Uber’s only on the firm’s dime, take advantage of expensing food at work, and limit your dining and drinking out, you can scrounge by.

It is possible to do this - but absolutely not typical. Most of my colleagues (and myself) live alone in luxury apartment buildings and don’t think twice about making three-figure purchases. The job allows 20- and early-30-somethings a certain desirable lifestyle, and most of them take it. I can’t think of a single colleague who chose to live with roommates in an undesirable location to save money, for example (though there are a handful who tried to get dinner on the firm almost every night pre-COVID, I’ll give you that).

So the question is, are the poll respondents unusually atypical in that they are extremely frugal or have very low student loan debt - or are they just kinda clueless about how much money most people have when they exit biglaw?

[Anonymous User]

Assuming 60k in annual expenses for each of these 7 years . . .

I think you raise a good point, but even working in Manhattan it should be possible to cut this down to 40k or 30k (maybe even 25k if you're willing to commute far) and still maintain a respectable standard of living. Plus, and I know this isn't huge, but there's also 1-2 summers as a summer associate where you could have saved a reasonable chunk of money (though I'm of the opinion that money can be well-spent invested in things that will be needed for the job — dress shirts, suits, shoes, a good laptop and monitor setup at home for wfh, etc. — and maxing out a Roth IRA).

???? Where in New York City do you expect to live on 25k a year in expenses? A studio apartment (at least, pre-covid) anywhere within 30 min of midtown would cost that much a year alone, not to mention other basic necessities (like, you know, food).

Different anon, but if you’re willing to have roommates there are definitely places in Brooklyn, Queens, Jersey City, Harlem etc where your share of a 2 or 3 bedroom would be a lot less than that. I used to pay $800 for one room in a 3BR in Park Slope and $650 for one room in a 2BR in Bay Ridge (though admittedly Bay Ridge is a significantly longer commute). If you get an unlimited subway pass, try to take Uber’s only on the firm’s dime, take advantage of expensing food at work, and limit your dining and drinking out, you can scrounge by.

It is possible to do this - but absolutely not typical. So the question is, are the poll respondents unusually atypical in that they are extremely frugal or have very low student loan debt - or are they just kinda clueless about how much money most people have when they exit biglaw?

Brooklyn anon. I agree, not typical, especially for all the non-New Yorkers moving for the first time (which makes finding a good deal way harder). NYC a damn expensive place and everyone should assume as much until told otherwise. But, folks should know frugality is possible and remember to seek ways to save once they’ve moved (instead of just staying in an overpriced Manhattan apartment until the end of time).

To your second question, my guess is it’s both.

[nixy]

Comparing this thread to the net worth thread is interesting.

[Anonymous User]

Assuming 60k in annual expenses for each of these 7 years . . .

I think you raise a good point, but even working in Manhattan it should be possible to cut this down to 40k or 30k (maybe even 25k if you're willing to commute far) and still maintain a respectable standard of living. Plus, and I know this isn't huge, but there's also 1-2 summers as a summer associate where you could have saved a reasonable chunk of money (though I'm of the opinion that money can be well-spent invested in things that will be needed for the job — dress shirts, suits, shoes, a good laptop and monitor setup at home for wfh, etc. — and maxing out a Roth IRA).

???? Where in New York City do you expect to live on 25k a year in expenses? A studio apartment (at least, pre-covid) anywhere within 30 min of midtown would cost that much a year alone, not to mention other basic necessities (like, you know, food).

Different anon, but if you’re willing to have roommates there are definitely places in Brooklyn, Queens, Jersey City, Harlem etc where your share of a 2 or 3 bedroom would be a lot less than that. I used to pay $800 for one room in a 3BR in Park Slope and $650 for one room in a 2BR in Bay Ridge (though admittedly Bay Ridge is a significantly longer commute). If you get an unlimited subway pass, try to take Uber’s only on the firm’s dime, take advantage of expensing food at work, and limit your dining and drinking out, you can scrounge by.

It is possible to do this - but absolutely not typical. Most of my colleagues (and myself) live alone in luxury apartment buildings and don’t think twice about making three-figure purchases. The job allows 20- and early-30-somethings a certain desirable lifestyle, and most of them take it. I can’t think of a single colleague who chose to live with roommates in an undesirable location to save money, for example (though there are a handful who tried to get dinner on the firm almost every night pre-COVID, I’ll give you that).

So the question is, are the poll respondents unusually atypical in that they are extremely frugal or have very low student loan debt - or are they just kinda clueless about how much money most people have when they exit biglaw?

Who is saying it's typical? It's probably the same people living in luxury buildings while in hundreds of thousands of dollars worth of debt who also don't have a solid handle on realistic financial expectations for most biglaw associates.

The point is, it is perfectly doable to live in New York City on $40k/$30k/$25k a year as a biglaw associate if you are frugal and keep a similar standard of living to frugal law students in NYC at Columbia or NYU.

[avenuem]

The above math doesn't consider savings accounts.

If you have at least $48,000, that's about 6.8K you can knock off of each year (for 7 years). Plus, you could just live with the rents and save on rent. If you're starting off with even more saved, kudos to you.

Lots of people don’t have the option of living with parents. (That said, as noted already, roommates cut down on expenses.)

That's fair. Maybe maximize your number of roommates to minimize everyone's rent contribution, to the greatest degree possible without loss of reliable wifi or ability to focus.

I also agree the comparison is interesting. Less than 12% leave biglaw with over a million/have that much, but about 70% want that much. Also, even less than 12% have that much. I voted that I had $1 million as a joke and there are probably other people who did not pick the million dollar option in earnest.

[Anonymous User]

These results surprise me, too. I just did some quick math:

Being a biglaw associate isn't a path to life-long wealth - being a biglaw partner is. I wonder if the responses are skewed toward partners and partners-to-be, if respondents are unusually frugal, or if people just generally have unrealistic expectations (which is what I worry about).

Good post. I think it's clear most people leave biglaw before they are financially happy to do so because it's just that miserable (especially as you become more senior) or time consuming. I also think many people here have rose covered glasses for investment return based on the last decade of stock market returns.

[Anonymous User]

These results surprise me, too. I just did some quick math:

I plugged in Cravath-scale salary + bonus to compute taxes for a single person living in Manhattan (along with a pre-tax 401(k) contribution equal to the max) for seven years of biglaw. Assuming 60k in annual expenses for each of these 7 years, this associate would annually have this much left over:

I believe most people include their 401k into their net worth which it doesn't appear you did. So 8 years of $19.5k invested at 10% ROR is $223k. Looks like 7th and 8th years nears $1mm with that math.

[Anonymous User]

These results surprise me, too. I just did some quick math:

I plugged in Cravath-scale salary + bonus to compute taxes for a single person living in Manhattan (along with a pre-tax 401(k) contribution equal to the max) for seven years of biglaw. Assuming 60k in annual expenses for each of these 7 years, this associate would annually have this much left over:

I believe most people include their 401k into their net worth which it doesn't appear you did. So 8 years of $19.5k invested at 10% ROR is $223k. Looks like 7th and 8th years nears $1mm with that math.

Fair enough and good point. Still, I think the point stands that if we assume the median biglaw associate breaks $1 MM net worth in year 7 - or even in year 6 - then most associates as of their first day of 1st year orientation will not hit that mark before they exit biglaw. So we still either have an unusually wealthy cohort of responders here (whether by pre-biglaw wealth, frugality, no student loans, whatever), or we have some delusional people. That's my point (I'm the anon who did the math above).

[Anonymous User]

The other thread is on how much you actually have right now, whereas this thread is on how much you want to have (or "plan to" have)--not including involuntary leaving biglaw. Reality =/= expectation, it's not surprising to me.