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Publications : Bar Bulletin

Editor: W. Patrick Tandy

March, 2004


The Solo/Small Firm Financial Challenge

By Gregory S. Neal

Attorneys are all affluent professionals who retire financially secure, right? Well, it’s not that easy, especially for attorneys in solo or small practices.

The unique demands of solo and small firm practices require a different approach to retirement savings. Here’s why and what you can do about it.

Attorneys in large firms often enjoy tax-deferred 401(k) plans with generous employer matched contributions. They also benefit from prescreened mutual funds, automatic payroll deductions and a full-time administrator to handle all of the details.

For many small or solo firms, these benefits aren’t available. Sure, you might have a basic tax-deferred retirement savings account, but you’re unlikely to have much help choosing investments, making contributions or tracking your progress. If you work in a small firm, you’re probably more pressed for time because you are responsible for a greater variety of administrative matters. As a result, you may put off figuring out how much to save, forget to make regular contributions or choose investments without adequate research.

Fortunately, solutions exist to help solo and small firm attorneys meet these challenges. Here are five ideas to consider.

First, determine how much you need to save. This sounds obvious but few people have actually done it. One source of help is the “Ball Park Estimate,” an online calculator available at The calculator is maintained by the American Savings Education Council (ASEC). ASEC is a non-profit organization whose purpose is to raise public awareness about retirement savings needs.

Second, once you estimate how much to save, find a way to save that amount in a tax-efficient account. Choosing among various types of tax-deferred accounts can be complex. However, help is available. A good summary of IRAs available for small business can be found at

However, understand that retirement account types and rules undergo constant change. There are federal proposals to simplify the rules and consolidate account types. For the latest proposals, visit

Third, keep your investments simple. One way to do this is to use diversified, low-cost index funds (funds designed to track broad market indicators). This is a prudent solution for many people. While never popular among brokers, significant academic research supports the claim that, over time, index funds perform at least as well as the more celebrated “hot performing” funds. You can set up virtually any type of retirement account at a major fund family and use their own in-house index funds or add other types of funds if you wish.

Fourth, after deciding which investments you wish to hold, determine the proportion in which you should hold them. Allocating your savings among different asset classes such as cash, bonds or stocks is one of the best ways to reduce investment risk. Asset allocation is as much an art as a science. Yet many fund company websites can be helpful, with most now offering online tools specifically designed for this purpose.

Fifth, to insure that you will actually save regularly, try to make the process automatic. If you are paid a salary, direct a portion of it to your retirement savings account each pay period. Solo and small firm attorneys without regular salaries can take advantage of automatic investment plans offered by most mutual fund companies. These plans automatically transfer money from your checking account to your investment account at specified intervals. At the very least, mark your calendar each month as a reminder to make regular contributions. 

Finally, if you find that you simply don’t have the time or interest in these tasks, by all means seek professional assistance. Today, reputable financial planners are available on an hourly-fee basis. You can get objective help without having to buy investments. Thus, there’s really no excuse not to get your financial house in order.

Starting and maintaining a well-conceived savings strategy is the key to financial security, especially for attorneys in small or solo practices. Consider the guidelines above and get assistance as needed. You can achieve the same level of retirement security as attorneys in large firms. But get started. When it comes to saving for retirement, you can’t rewind the clock. 

Gregory S. Neal is the managing principal of The Retirement Office in Towson, a provider of retirement income and investment planning services.



Publications : Bar Bulletin: March, 2004

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