Pension/Retirement Plans for Lawyers

[LoganRoy]

As a soon-to-be articling student set to graduate with what feels like an insurmountable amount of debt, it's a bit nerve-wracking to observe even seasoned lawyers struggle with addressing their long and short-term financial obligations (I use the term 'struggle' loosely as it seems many of you have a multitude of investment options available but aren't sure of which route is the best to take given your particular circumstances). 

Especially considering the current state of the stock and housing markets, I am terrified of what's in store for me.

[Mountebank]

No reason for terror. You will be fine. The comments in this thread largely relate to what your future colleagues are doing with their excess cash. @Jaggers is a fancy penthouse-suite owning city slicker. @PzabbytheLawyer and I are both younger and own homes. It's a privilege of this profession that, in my 30s, as a self-employed sole breadwinner of a family of 5, my financial struggles are largely yacht-related.

All be well.

[Rusty Iron Ring]

I came out of law school with an irresponsible amount of debt (and a lot of very good memories), and I had it all paid off in about 8 years, plus a car and a (rented) house and a wife and two kids, and a fund put aside for emergencies that thankfully haven't arrived. And that's without wife's money - she had her own debts to pay. And I didn't go into biglaw or any particularly high-revenue field of law. If you avoid any especially bad or expensive habits, you'll be fine. 

[Phaedrus]

So drawing from my LOC to buy Logan Paul NFTs was a bad idea???

[Rusty Iron Ring]

1 hour ago, Phaedrus said:

So drawing from my LOC to buy Logan Paul NFTs was a bad idea???

Mine went mostly to caesars and steak sandwiches, so we are probably on par. 

[PzabbytheLawyer]

4 hours ago, Mountebank said:

No reason for terror. You will be fine. The comments in this thread largely relate to what your future colleagues are doing with their excess cash. @Jaggers is a fancy penthouse-suite owning city slicker. @PzabbytheLawyer and I are both younger and own homes. It's a privilege of this profession that, in my 30s, as a self-employed sole breadwinner of a family of 5, my financial struggles are largely yacht-related.

All be well.

I will be fine. But I am definitely not the image of being financially okay yet.

If you're not on Bay, it's hard to be financially okay as a second year while living in Toronto. That's the unfortunate truth.

The good news is, by 3-4 year, most everyone is fine.

[WhoKnows]

6 hours ago, Mountebank said:

No reason for terror. You will be fine. The comments in this thread largely relate to what your future colleagues are doing with their excess cash. @Jaggers is a fancy penthouse-suite owning city slicker. @PzabbytheLawyer and I are both younger and own homes. It's a privilege of this profession that, in my 30s, as a self-employed sole breadwinner of a family of 5, my financial struggles are largely yacht-related.

All be well.

Yea, it'll be fine. I graduated with far more debt than I should have. I'm at a biglaw firm not in Toronto, and am tracking to be debt free by 2026 ish, my 6th year of call. Me and Mrs. WhoKnows rent a nice townhome, we'll have no issue paying for our upcoming wedding, and we don't really want for anything. We will have zero financial concerns about starting a family. We're in our mid-late 20s. 

For all the talk about law school and its ROI, etc. I've still found it a path to a pretty great life, even if I do moan a bit about my comp. 

Edited January 12, 2023 by WhoKnows

[AllWellAndGood]

21 hours ago, Jaggers said:

What is the best place to park your emergency savings these days? High interest savings accounts will get you mid-3% interest and you can get your money out any time you need it. 1 year GICs will give you 5%, but you can't get it out without sacrificing the interest. A ladder of GICs will give you between 4.5 and 5%. Mal, I saw you lurking out there🙂

I don't personally invest in one, but HISA ETFs are becoming increasingly popular. Essentially it's just an ETF of HISA and GIC rates, but you get a slightly better rate of return, with a slightly higher risk (no CDIC insurance) and different tax impacts. More information on them generally: https://horizonsetfs.com/high-interest-savings-etfs/

*not an endorsement or recommendation, just giving you an area to look into that I hear about more and more for emergency funds.

14 hours ago, LoganRoy said:

As a soon-to-be articling student set to graduate with what feels like an insurmountable amount of debt, it's a bit nerve-wracking to observe even seasoned lawyers struggle with addressing their long and short-term financial obligations (I use the term 'struggle' loosely as it seems many of you have a multitude of investment options available but aren't sure of which route is the best to take given your particular circumstances). 

Especially considering the current state of the stock and housing markets, I am terrified of what's in store for me.

I think it's less about struggling and more about trying to make the right decisions when long term planning. The people that go into in a profession like law are often people that are content (or enjoy) long term plans (like 7+ years of uni) and want confidence about their plans.

8 hours ago, Phaedrus said:

So drawing from my LOC to buy Logan Paul NFTs was a bad idea???

Logan Paul NFTs? That's ridiculous, sure, but theres good options out there. I'm hopefully going to make big money on my NFT of Michelangelo from the Ninja Turtles eating pizza... its currently worth... Oh, no, what happened to TurtleBucks?

[Jaggers]

2 hours ago, AllWellAndGood said:

I don't personally invest in one, but HISA ETFs are becoming increasingly popular. Essentially it's just an ETF of HISA and GIC rates, but you get a slightly better rate of return, with a slightly higher risk (no CDIC insurance) and different tax impacts. More information on them generally: https://horizonsetfs.com/high-interest-savings-etfs/

*not an endorsement or recommendation, just giving you an area to look into that I hear about more and more for emergency funds.

I think it's less about struggling and more about trying to make the right decisions when long term planning. The people that go into in a profession like law are often people that are content (or enjoy) long term plans (like 7+ years of uni) and want confidence about their plans.

There was a Globe article recently about the HISA ETFs, but my accounts are with one of the big banks that don't let you buy them. It's annoying.

Toronto real estate prices (both owning and renting) definitely make it harder on everyone, but most people graduating with a law degree shouldn't be "terrified" in any sense of the word. Most aren't struggling with meeting their obligations 5, 10 or 15 years down the road, they're trying to figure out where to stash cash so they don't lose it to inflation and taxes every year.

[Pantalaimon]

On 1/11/2023 at 2:40 PM, Jaggers said:

Yeah, and some are dividends too, though I'm conservative so still keep some interest-bearing investments, especially now. It's probably something in between those, but maybe a bit closer to 6 than 9?

 

But I do like to take the sure thing, so a guaranteed after tax return of something approximating 5% is pretty attractive.

While I appreciate that it's nice to keep some interest-bearing investments, shouldn't those be safely tucked away in a tax sheltered account rather than your taxable? You can swap some eligible dividend payers out of the TFSA and pop the bonds/REITs/whatever in.

[Jaggers]

Yeah, for the purpose of thinking about it, I compare a mortgage prepayment to a risk free investment in a taxable account, but it's obviously more complicated than that.

[Mal]

On 1/11/2023 at 7:42 PM, Jaggers said:

What is the best place to park your emergency savings these days? High interest savings accounts will get you mid-3% interest and you can get your money out any time you need it. 1 year GICs will give you 5%, but you can't get it out without sacrificing the interest. A ladder of GICs will give you between 4.5 and 5%. Mal, I saw you lurking out there🙂

It's an emotional decision more than a financial one. I would just put it in a HISA and then limit the amount to a maximum of 6 months of expenses. The point of a emergency fund is about lightening the mental burden of finances, so laddering doesn't make sense to me. 

[Jaggers]

On 1/13/2023 at 2:08 PM, Mal said:

It's an emotional decision more than a financial one. I would just put it in a HISA and then limit the amount to a maximum of 6 months of expenses. The point of a emergency fund is about lightening the mental burden of finances, so laddering doesn't make sense to me. 

We normally have a chequing account that has 20-30,000 in it, so we're not that concerned about immediate expenses, but we have another $50K that is just kind of sitting there in case one of us was canned during our parental leaves, which didn't happen. That's what I was thinking of the ladder for.

[Jaggers]

But I will probably put all the cash to the laneway house so it likely doesn't matter any more.

[multilingualcat]

Does anyone know if any of the biglaw firms offers rrsp matching? on NALP it seems like some offices offer RRSP while others do not. For example, Fasken's Toronto office has RRSP as one of their benefits while their Montreal office doesn't. Aren't all offices of the same firm supposed to offer the same benefits?

Edited March 8, 2023 by multilingualcat

[KOMODO]

I am not aware of any of the big firms in Toronto providing RRSP matching to associates. I had heard years ago that Lenczner Slaght provided RRSP matches to its associates, but that was unique and I'm not sure whether it's still the case or whether that was even accurate at the time. 

Some firms will say they offer RRSP programs, but you should really ask the person hiring you (student director/talent director/recruiter/etc.) because some of them say that but then the RRSP programs are actually only offered to support staff and not associates. Where the RRSP programs are available for associates, they just tend to be group mutual fund contribution models where the associate picks a fund and an amount to contribute. In general I would say associates are basically on their own for retirement planning.

[PzabbytheLawyer]

Some firms definitely have RRSP matching.

Some firms (though I don't know about full service bay) are even buying into defined benefit pension schemes for their associates.

[hiccups]

Hello everyone! I've reviewed everyone's advice on here over the past year and really re-examined my own financial situation. Here are some things I noticed from the perspective of a junior associate (living downtown): 

Re. Paying off debt: Initially I was inclined to pay off all my student loans. Then suddenly there was a new policy implemented by the government of canada where all interest on student loans were waived. On my lockstep salary, the lowest amount that I was required to pay was around $200 per month, so I decided to keep paying the lowest amount possible, for as long as possible. Apparently I need to keep doing this for another 10 years, but frankly I don't even notice it. I thought about paying off the whole thing ($30k - $40k) in a lump sum, but it would take me a whole year to save $30k, which would put me further and further away from ever buying a condo on my own. 

Re. Buying home: After I decided to keep my student loan payments to a minimum, I countinued to save money towards my TFSA for a down payment. Rent is expensive ($2600) and it takes up a significant portion of my after tax income. This made me decide to get my own codo.  Since work hours are long, I decided to get a small 2bedroom condo downtown. To have 20% down payment, we needed $150k. My partner and I had around 2/3 of that, but we just couldn't save enough for the last 1/3 for the life of us!  We realized it would take us another 2 years to save another $50k, but prices of condos keep going up in the meantime! After speculating for a while, we decided to get CHMC insurance. That way, we only needed to pay a 5% down payment. The insurance premium costed around $20k, which we decided to pay upfront. We figured it was better than paying another 5 months of rent!

After Buying a home: We qualified for much less mortgage than we thought we could, but finally managed to get a place!  After I bought the condo, we spend around $5k every month in mortgage payments and condo maintenance fees. I got a raise, which made things a bit easier. My partner went through a health issue and couldn't work for a few months, which made me even more grateful that we didn't buy a condo above our means.  We have no extra income to save towards TFSA or RRSP though, so any thoughts about investments seem pointless at this stage. Hopefully things slowly improve financially and we have some extra income to save. But we also want to start a family, so maybe putting it towards TFSA is a better option. It makes me nervous that I'm in my early 30s and have not saved ANYTHING towards retirement, but I feel like I already tried to make the best financial decisions I can.

Note: I spoke with some law school friends about financial decisions to get different prespectives. Some of them asked their family to act as guarantors to be able to qualify for a bigger mortgage sooner. Others were able to get a family loan or gift. Some lived at home until they bought a place.  There are others who were already homeowners prior to law school. Some friends gave up on home ownership, others moved out of downtown and was willing to commute. None of their situation were all that analogous, so there wasn't too much I could I learn from their experiences. 

 

 

Edited March 22, 2023 by hiccups

[Abarmot]

On 3/22/2023 at 1:31 PM, hiccups said:

Hello everyone! I've reviewed everyone's advice on here over the past year and really re-examined my own financial situation. Here are some things I noticed from the perspective of a junior associate (living downtown): 

Re. Paying off debt: Initially I was inclined to pay off all my student loans. Then suddenly there was a new policy implemented by the government of canada where all interest on student loans were waived. On my lockstep salary, the lowest amount that I was required to pay was around $200 per month, so I decided to keep paying the lowest amount possible, for as long as possible. Apparently I need to keep doing this for another 10 years, but frankly I don't even notice it. I thought about paying off the whole thing ($30k - $40k) in a lump sum, but it would take me a whole year to save $30k, which would put me further and further away from ever buying a condo on my own. 

Re. Buying home: After I decided to keep my student loan payments to a minimum, I countinued to save money towards my TFSA for a down payment. Rent is expensive ($2600) and it takes up a significant portion of my after tax income. This made me decide to get my own codo.  Since work hours are long, I decided to get a small 2bedroom condo downtown. To have 20% down payment, we needed $150k. My partner and I had around 2/3 of that, but we just couldn't save enough for the last 1/3 for the life of us!  We realized it would take us another 2 years to save another $50k, but prices of condos keep going up in the meantime! After speculating for a while, we decided to get CHMC insurance. That way, we only needed to pay a 5% down payment. The insurance premium costed around $20k, which we decided to pay upfront. We figured it was better than paying another 5 months of rent!

After Buying a home: We qualified for much less mortgage than we thought we could, but finally managed to get a place!  After I bought the condo, we spend around $5k every month in mortgage payments and condo maintenance fees. I got a raise, which made things a bit easier. My partner went through a health issue and couldn't work for a few months, which made me even more grateful that we didn't buy a condo above our means.  We have no extra income to save towards TFSA or RRSP though, so any thoughts about investments seem pointless at this stage. Hopefully things slowly improve financially and we have some extra income to save. But we also want to start a family, so maybe putting it towards TFSA is a better option. It makes me nervous that I'm in my early 30s and have not saved ANYTHING towards retirement, but I feel like I already tried to make the best financial decisions I can.

Note: I spoke with some law school friends about financial decisions to get different prespectives. Some of them asked their family to act as guarantors to be able to qualify for a bigger mortgage sooner. Others were able to get a family loan or gift. Some lived at home until they bought a place.  There are others who were already homeowners prior to law school. Some friends gave up on home ownership, others moved out of downtown and was willing to commute. None of their situation were all that analogous, so there wasn't too much I could I learn from their experiences. 

 

 

 

Wow, after reading this thread I was surprised to see that it doesn't have a "happy ending". 

As someone from Toronto who is just entering law school @hiccups' story resonates with me - I am horrified predicting what home ownership would look like for me in 5-10 years time.

 

On 1/12/2023 at 6:15 AM, Mountebank said:

No reason for terror. You will be fine. The comments in this thread largely relate to what your future colleagues are doing with their excess cash. @Jaggers is a fancy penthouse-suite owning city slicker. @PzabbytheLawyer and I are both younger and own homes. It's a privilege of this profession that, in my 30s, as a self-employed sole breadwinner of a family of 5, my financial struggles are largely yacht-related.

All be well.

 

@Mountebank Unfortunately, I think there is cause for terror.

I think that @hiccups' financial struggles are indicative of most relatively new lawyers in high cost of living areas.

I don't think that "It's a privilege of this profession that, in my 30s, as a self-employed sole breadwinner of a family of 5, my financial struggles are largely yacht-related.", I think that it's a privilege of your generation.

[BlockedQuebecois]

@Abarmot if purchasing a two bedroom condo in downtown Toronto within a year of articling and while earning well over 100k per year (all while having the government subsidize your student loans to the tune of thousands of dollars of unpaid interest) doesn’t sound like a happy ending, you’re delusional.

Hiccups isn’t struggling financially. They’re one of the most financially fortunate people in the country. 

[hiccups]

10 minutes ago, BlockedQuebecois said:

@Abarmot if purchasing a two bedroom condo in downtown Toronto within a year of articling and while earning well over 100k per year (all while having the government subsidize your student loans to the tune of thousands of dollars of unpaid interest) doesn’t sound like a happy ending, you’re delusional.

Hiccups isn’t struggling financially. They’re one of the most financially fortunate people in the country. 

I don't think that's a fair way to characterize my situation. Is a two bedroom a luxury now? My partner was working their ass off for 4 years while I studied and articled.  After all that, we are almost living paycheuqe to paycheque. 

Call it privilege if you want. But even in the past few years, cost of living has drastically increased, and it is a struggle for new grads. $100k doesn't get you that far when rent is $2600 (and going up!)

For anyone interested in my story: New plot twist. My condo just had a special levy. Each unit is required to pay an additional $8700 to cover cost of a new roof. I don't know what to do! After paying mortgage, I am already not saving a lot. We are trying to build up an emergency fund, but now it's all going into this. After that I fractured my leg in a small accident, I had to take two weeks off.  Feeling stressed about falling behind in meeting the billable target.  

There's a part of me that feels like I can't keep working at this intensity for too long. But I also feel like I'm 'roped in' and can't really afford to switch jobs.  

Edited May 3, 2023 by hiccups

[QueensDenning]

20 minutes ago, hiccups said:

I don't think that's a fair way to characterize my situation. Is a two bedroom a luxury now? My partner was working their ass off for 4 years while I studied and articled.  After all that, we are almost living paycheuqe to paycheque. 

Call it privilege if you want. But even in the past few years, cost of living has drastically increased, and it is a struggle for new grads. $100k doesn't get you that far when rent is $2600 (and going up!)
 

Yeah, I don't think it's a stretch to say that buying a 2 bedroom condo in downtown Toronto a year out of articling is a luxury these days. 

Also, rent isn't $2600. Rent for a luxury 1 bedroom apartment downtown might be $2600, but you can live for well under $1500 if you have roommates or venture out of the downtown core. 

[BlockedQuebecois]

36 minutes ago, hiccups said:

My partner was working their ass off for 4 years while I studied and articled.  After all that, we are almost living paycheuqe to paycheque.

Yes, you’ve made some very questionable financial decisions that have undeniably meant you are living at the very edge of your means, but that doesn’t mean you’re not financially fortunate.

Your questionable decisions would have bankrupt at least 80% of Canadians! 

[Mountebank]

A 2 bedroom condo in downtown Toronto is, it seems to me, self-evidently a luxury.

But I completely get the financial concern/anxiety/stress that new grads/articling students are going through. I went through it too (and I expect a lot of lawyers of prior generations did too). You are making the least money you ever will in your career and are likely carrying the highest debt load you ever will. But, in a few years, it's very likely that you're going to be just fine. Until then, just keep your head down, make some money, and of course always be knowledgeable about your means and live within them.

[hiccups]

40 minutes ago, BlockedQuebecois said:

Yes, you’ve made some very questionable financial decisions that have undeniably meant you are living at the very edge of your means, but that doesn’t mean you’re not financially fortunate.

Your questionable decisions would have bankrupt at least 80% of Canadians! 

Can you elaborate on what you mean by questionable financial decisions? If you're referring to trying to live close to work while articling, I'm going to have to disagree with you.