Debt Vs income vs age? Jitters or reality?

[KOMODO]

Just now, realpseudonym said:

I am! That's my bad. I don't know why I confused the two. 

No worries! 🙂

[CleanHands]

Just now, realpseudonym said:

This is key. I didn't have a tonne of work experience. But I've spent enough time in retail, agriculture, general labour, and construction to know that as a stressful as law can be, the working conditions are pretty good. I am safe. I'm not ruining my body. And if a client yells at me, I can tell them, in the politest possible terms, to get lost. 

Amen. I would rather carry around $200k in debt until I die doing what I do now with the autonomy I'm afforded to do it, than spend the rest of my working life making the same salary with no debt while doing meaningless bullshit, having to cater to whims of any lunatic off the street, and being incessantly micromanaged by some asshole with an IQ of 85. No amount of "rational" financial analysis of this could change my mind at this point. lol

[GoBigOrGoHome]

10 minutes ago, Jaggers said:

Where is this idea coming from that a few years in a big law firm means you will hate your life? 

My small-ish sample size of big-law lawyers that I have dated and/or slept with 😆

[Rusty Iron Ring]

23 minutes ago, Jaggers said:

It also depends on your current career path. Even if you just make it a financial decision, getting a job that pays you $100K when you're up to speed could make up the difference pretty quickly, depending on what you currently earn.

And after graduating, you still have 20 years of work, which is a long time. You are nowhere close to being too old for a change to be worth it, if it will make you happier in the long run.

Yeah, I have been assuming from the fact that OP didn't mention foregone salary that this isn't a major issue.  But if you have a reasonably well paying career now, it's something to keep in mind.  One of my law school buddies went in his 30's, and left a tech career with a 6 figure salary to do so.  He seemed to regret it for quite a while, though he seems much happier now. 

[hiccups]

Feel like this is only a problem because she won't consider other schools outside of downtown Toronto. 

You just can't have it all in life sometimes. Who doesn't want good school/cheap tuition/good financial payoff all in one package?

[Orbis]

By age 40 you should ideally have 500K to a million (at the bare minimum) in retirement accounts. You, however, would be past 40 with no assets and 200K in student loans. That would set you up for a horrible latter half of your life. I've seen people who had to work in their 70s because they couldn't afford to retire, it's not a fun existence.

You should do your research on career alternatives before you permanently fuck yourself over.

Edited May 27, 2022 by Orbis

[Patient0L]

16 minutes ago, Orbis said:

By age 40 you should ideally have 500K to a million (at the bare minimum) in retirement accounts

!!! ??? Are you aware how much money most people make?

[Orbis]

2 minutes ago, Patient0L said:

!!! ??? Are you aware how much money most people make?

If you're on a forum like this then you aspire to be better than "most people".

[CleanHands]

2 minutes ago, Orbis said:

If you're on a forum like this then you aspire to be better than "most people".

Really helpful commentary for an OP who is already 40 years old and doesn't have a million dollars lying around (like "most people").

Clearly instead of going to law school at this point she should aspire to go back in time so that she had a nest egg yesterday.

[Jaggers]

Yeah, there are considerations in incurring a certain amount of debt that are different at 25 vs 40, but whether or not you have a nest egg is not one of them (except to the extent it means you'd incur less debt).

[Orbis]

7 minutes ago, Jaggers said:

Yeah, there are considerations in incurring a certain amount of debt that are different at 25 vs 40, but whether or not you have a nest egg is not one of them (except to the extent it means you'd incur less debt).

It is relevant because how much of a nest egg you have by age 40 impacts how much leg work you have to do to get ready for retirement vs being able to relax a little and let compounding do its thing. 0 dollars can't compound into anything.

[Lulu_spector]

2 hours ago, KOMODO said:

I think we mostly agree. I don't mean emotional as in flighty or impulsive, I mean emotional as in coming from the heart, a non-financial decision. Totally agree that most people who go to law school don't go purely because of financial incentives.

But in response to the bolded text, I read OP's question as asking primarily about the financial implications (she asks if it "mathematically makes sense"), and secondarily about the life implications caused by financial stress (won't be able to buy a house, concerned about hours, etc.). Given her inputs (40yo mom of an infant, may want more kids, attendance will be in Toronto, already has debt and expects to graduate $200k under water, aiming to work in a lower paying field of law), from a financial point of view and based on the sacrifices she will probably need to make to service the debt, my answer to her question is that it does not make financial sense. 

I also would not personally make this choice even once non-financial matters are factored in, given the OP's inputs. It's a hard road to go through law school and start lawyering with little ones, as a mature student, and given other life pressures. But I'm not OP, and I think she will probably do it regardless, because of what the title/achievement mean to her and the people close to her. And that is totally okay too, but it doesn't change my advice. 

Just for the record I think you may be thinking of a different poster, @Glamurosa

Please don’t assume what I will do, although I’ve disclosed a lot there are far more factors pushing me not to do it. I take your suggestions very seriously and I’m not here for ego. I’m an intellectual and have worked towards this goal since 2012 (degree, volunteering etc). This isn’t something I randomly chose. I have dealt with significant injustice and I despise how there is little to no lawyers in social and criminal justice with actual lived experiences. I could go on & on. Bottom line is: I’m here for actual advice, not to just complain. I’m truly needing guidance to be confident walking away which is very likely. 

22 minutes ago, Orbis said:

It is relevant because how much of a nest egg you have by age 40 impacts how much leg work you have to do to get ready for retirement vs being able to relax a little and let compounding do its thing. 0 dollars can't compound into anything.

You get it 

[ZineZ]

3 minutes ago, Lulu_spector said:

 I despise how there is little to no lawyers in social and criminal justice with actual lived experiences.

 

While I understand where you're coming from, I'd caution you against taking broad assumptions about the profession. You'll note that your peers will come from a variety of lived experiences and from a variety of backgrounds. Many of the folks around you will be first-gen immigrants or will come from difficult socio-economic circumstances. And many joined the profession because of their lived experiences.  

1 hour ago, Orbis said:

By age 40 you should ideally have 500K to a million (at the bare minimum) in retirement accounts.

43 minutes ago, Orbis said:

If you're on a forum like this then you aspire to be better than "most people".

It's worth keeping in mind that people enter the profession for a variety of reasons and not everyone's earning a Bay Street salary. This isn't the "bare minimum" most folks in the profession are able to achieve by age 40. 

And we're on the forum because we want to be lawyers, not "better than most people". 

[KOMODO]

1 hour ago, Orbis said:

By age 40 you should ideally have 500K to a million (at the bare minimum) in retirement accounts.

...

 

I don't agree with this. First, I don't see how something can be ideal and also a range and also a bare minimum. But more importantly, I don't even think really successful people meet this standard very often these days. Maybe if they're top earners, their parents paid for school, and they don't buy property?

6 minutes ago, ZineZ said:

...

It's worth keeping in mind that people enter the profession for a variety of reasons and not everyone's earning a Bay Street salary. This isn't the "bare minimum" most folks in the profession are able to achieve by age 40. 

And we're on the forum because we want to be lawyers, not "better than most people". 

Agreed. Also I am earning a Bay Street salary and I'm still not on track for Orbis' required amount by required age - not even close. I actually went to look it up because it sounded off to me. Even with what I feel are decently healthy RRSP contributions, my RRSP provider is projecting I'll have approximately $300k in my RRSP by 40. That's what happens when you spend your 20s and early-mid 30s getting an education, paying off the debt from said education, getting married, taking parental leave and paying for daycare (sometimes repeatedly), and perhaps buying a property if your spouse also has a high income. Most people I know are planning to do the bulk of their retirement saving post-40 when some of those other major expenses are behind them and their income has increased. 

This doesn't negate the comment that OP needs to think about retirement savings, but I thought it was important to pop in and rebut the idea that it's remotely normal, even for Bay Street associates, to be on track for those numbers. 

[Lulu_spector]

37 minutes ago, ZineZ said:

While I understand where you're coming from, I'd caution you against taking broad assumptions about the profession. You'll note that your peers will come from a variety of lived experiences and from a variety of backgrounds. Many of the folks around you will be first-gen immigrants or will come from difficult socio-economic circumstances. And many joined the profession because of their lived experiences.  

It's worth keeping in mind that people enter the profession for a variety of reasons and not everyone's earning a Bay Street salary. This isn't the "bare minimum" most folks in the profession are able to achieve by age 40. 

And we're on the forum because we want to be lawyers, not "better than most people". 

You’re right, it’s just that the many lawyers I have networked with and volunteered for have told me otherwise. The many victims I have helped have told me otherwise. But absolutely there are so many lawyers with actual lived experiences making good impact! My apologies, I’ve met some amazing lawyers!!  

[Orbis]

20 minutes ago, KOMODO said:

I don't agree with this. First, I don't see how something can be ideal and also a range and also a bare minimum. But more importantly, I don't even think really successful people meet this standard very often these days. Maybe if they're top earners, their parents paid for school, and they don't buy property?

Agreed. Also I am earning a Bay Street salary and I'm still not on track for Orbis' required amount by required age - not even close. I actually went to look it up because it sounded off to me. Even with what I feel are decently healthy RRSP contributions, my RRSP provider is projecting I'll have approximately $300k in my RRSP by 40. That's what happens when you spend your 20s and early-mid 30s getting an education, paying off the debt from said education, getting married, taking parental leave and paying for daycare (sometimes repeatedly), and perhaps buying a property if your spouse also has a high income. Most people I know are planning to do the bulk of their retirement saving post-40 when some of those other major expenses are behind them and their income has increased. 

This doesn't negate the comment that OP needs to think about retirement savings, but I thought it was important to pop in and rebut the idea that it's remotely normal, even for Bay Street associates, to be on track for those numbers. 

 

Assuming a hypothetical K-JD who finished undergrad at 22, law school at 25, and started practicing after articling at 26. That's 14 years away from 40. From a starting point of $0, $25,000 invested annually at 8% would yield over $653,000 by 40. If you can hit higher returns it only goes up from there.

[Lulu_spector]

2 hours ago, hiccups said:

Feel like this is only a problem because she won't consider other schools outside of downtown Toronto. 

You just can't have it all in life sometimes. Who doesn't want good school/cheap tuition/good financial payoff all in one package?

… do you have children? Are you poor? Are you taking care of elderly parents? Are you the primary child raiser? I’m willing to bet NO. Must be nice to be able to leave and go anywhere for a cheaper school. You’d be great for tax law. 

[KOMODO]

11 minutes ago, Orbis said:

 

Assuming a hypothetical K-JD who finished undergrad at 22, law school at 25, and started practicing after articling at 26. That's 14 years away from 40. From a starting point of $0, $25,000 invested annually at 8% would yield over $653,000 by 40. If you can hit higher returns it only goes up from there.

Uh, maybe - that's not remotely normal though, and it's not really what you said above. Most lawyers who have $25k available to invest every year, starting as a first year associate and continuing forever (which basically assumes they have no student debt and can minimize other expenses) aren't K-JD. I wouldn't even expect K-JD associates to be the majority of associates, so I'm betting you're already excluding most actual people from your hypothetical with that assumption alone. Even with those crazy assumptions, you're then assuming that every year they see an 8% return, and that's not my experience either (I wish!). 

[ZineZ]

23 minutes ago, Lulu_spector said:

You’re right, it’s just that the many lawyers I have networked with and volunteered for have told me otherwise. The many victims I have helped have told me otherwise. But absolutely there are so many lawyers with actual lived experiences making good impact! My apologies, I’ve met some amazing lawyers!!  

I'd separate what you've been told from what we know about the current class profiles for most law schools. I'd take a look at Osgoode's class profile to see the number of racialized students and first-gen students in particular. https://www.osgoode.yorku.ca/admissions-survey/

22 minutes ago, Orbis said:

 

Assuming a hypothetical K-JD who finished undergrad at 22, law school at 25, and started practicing after articling at 26. That's 14 years away from 40. From a starting point of $0, $25,000 invested annually at 8% would yield over $653,000 by 40. If you can hit higher returns it only goes up from there.

This entire scenario is devoid of realities that include debt, rent (especially in Toronto and Vancouver), increased costs of living and day-to-day expenses. And as Komodo has pointed out - it's worse if you're buying property. The idea that your average 26 year old, fresh out of law school and just starting to practice, can stash away $25k into savings right away isn't realistic.  Your average public sector lawyer makes a bit under 100k on starting (in Ontario), crim and family law will often make less. And that's without going near folks who are working in the public interest or have decided to hang their own shingle. 

If you're debt-free and heavily supported by family, this *may* be possible. But that's an incredibly privileged reality. 

[123]

13 minutes ago, Orbis said:

Assuming a hypothetical K-JD who finished undergrad at 22, law school at 25, and started practicing after articling at 26. That's 14 years away from 40. From a starting point of $0, $25,000 invested annually at 8% would yield over $653,000 by 40. If you can hit higher returns it only goes up from there.

Annual earnings over a 30 - 40 year career practicing law are worth conservatively between three and five million dollars, a lot of which is earned on the backend, when you're more senior.

If you're sticking $25,000 per year into an RRSP straight out of law school, then I guess more power to you. But most lawyers can wait, if they so choose, to start doing so. As @KOMODO notes, there are lots of other things you might prioritize in your 30s. And given the earning power of most lawyers, they can defer saving for retirement until later, without risking retiring into poverty. 

[Rusty Iron Ring]

2 hours ago, Orbis said:

By age 40 you should ideally have 500K to a million (at the bare minimum) in retirement accounts.

This depends entirely on how serious a cocaine habit you expect to have in retirement. 

I assume you're trolling.  But if not, you must be planning for one absolute baller of a retirement.

[Orbis]

13 minutes ago, KOMODO said:

Even with those crazy assumptions, you're then assuming that every year they see an 8% return, and that's not my experience either (I wish!). 

I was being conservative with my 8% figure. The long-term return of the S&P since 1957 is 10.5% (per Investopedia). If you're younger than 50 you should be all equities so I'm not factoring in a 60/40 split.

[Orbis]

6 minutes ago, Orbis said:

I was being conservative with my 8% figure. The long-term return of the S&P since 1957 is 10.5% (per Investopedia). If you're younger than 50 you should be all equities so I'm not factoring in a 60/40 split.

Also, average return doesn't mean you make the average every year. You could be up 20 one year and down 10 the next year but it averages out over the long term.

[Ryn]

36 minutes ago, Orbis said:

From a starting point of $0, $25,000 invested annually at 8% would yield over $653,000 by 40.

Maybe if you had no debt. But the average law student doesn't start at $0 but at like -$50k to -$100k. That might take quite a few years to pay off, plus interest. If you have kids, as most people tend to start having in their mid to late twenties, the amount you can put away declines even further.

Some people can certainly do what you are suggesting. But many people cannot, even those of us working in biglaw, certainly not for the first several years of call.

And in the meantime, if you want to own property, that's an additional sacrifice that will take away from your $500k by 40 plan. And rents are increasing year over year, so it's not like if you forego purchasing, you'll net out much better.

Your scenario strikes me as incredibly simplistic and uninformed, and thus not applicable to huge chunk of lawyers. It certainly shouldn't factor into any decision-making that someone not even having applied to law school should make.

[Patient0L]

Forgive me if this is a stupid Q, as I’ve worked either as a freelancer or as precariously contingent faculty member my whole life. (Retirement LOL.) Do private firms contribute anything toward retirement? Matching or the like? If so, I wouldn’t take this for granted if you’re weighing financial considerations.