By Joshua Holt, Esq., Guest Writer
The White Coat Investor became a millionaire by the age of 38, about seven years out of residency with an average annual income of less than $180K. The parallels between this and the legal partnership track at the country’s largest law firms is pretty close to spot on, although you’ll make a little more money on average than WCI (good) but you’ll be doing it in a much higher cost-of-living locale (bad).
So where are all the millionaire legal associates? I’m not sure, but maybe a few will send me an email after reading this article. What I do know is that it’s perfectly possible to accumulate more than a million dollars before you’re up for partnership at your firm. Here’s the back-of-the-envelope way to get that done.
Legal Compensation
First, if you’re not familiar with legal compensation at the nation’s largest law firms (“Biglaw”), it’s amazingly transparent. All associates are paid along a standard Biglaw salary scale based on seniority. The Biglaw salary scale moves around from time-to-time. The latest shift in the industry occurred in the middle of 2016. We’re likely to see the same salary structure for the foreseeable future, which breaks down like this:
- 1st year – $180,000 + $15,000 (bonus)
- 2nd year – $190,000 + $25,000 (bonus)
- 3rd year – $210,000 + $50,000 (bonus)
- 4th year – $235,000 + $65,000 (bonus)
- 5th year – $260,000 + $80,000 (bonus)
- 6th year – $280,000 + $90,000 (bonus)
- 7th year – $300,000 + $100,000 (bonus)
- 8th year – $315,000 + $100,000 (bonus)
The good thing about transparent salaries is that it makes it very easy to discuss strategies such as budgeting and saving among lawyers working in Biglaw. Unfortunately, only a sliver of lawyers end up with “Biglaw” compensation. The vast majority of the legal workforce— including those that are busy prosecuting criminals—earn much less. This quirk in the industry is reflected in what’s called the bimodal salary distribution curve, a phenomenon where starting salaries are clustered around two mountain peaks.
Getting to $1 Million as a Lawyer
If you’re making $180,000 as your starting salary in law, chances are good that you’re living in a high cost-of-living city like NYC or San Francisco. That will make it tougher—but not impossible—to accumulate over $1 million before you become eligible for partnership, typically during your 8th year as an associate.
As I’ve written about previously, a modest first-year associate budget allows for almost $69K in savings your first year. That’s even accounting for punishing NY state and city taxes and the reality that you’ll be spending a lot of your time unwinding at bars and restaurants. A frugal lawyer could do much better. Heck, I’ve even accounted for a $2,500 monthly rent. If you split a place with roommates much closer to work, you can save another $12K and probably be happier for it thanks to the companionship of living with people.
The key, of course, is starting your career on the best foot possible by hitting that $69K target in your first year. After that, if you can hold your lifestyle inflation in check during the associate years, you’ll have nearly $1.3 million after your 8th year. My calculations assume a nominal 7% investment growth each year.
Of course that’s napkin math and I assume there will be a few people who think saving so much isn’t possible (although probably not a lot of readers of this site).
Objection!
Let me address some of the criticisms to get them out of the way:
#1 You Aren’t Accounting for Any Lifestyle Inflation
True. I’m presenting the numbers and it’s up to readers to decide if the lifestyle inflation trade-off is worth it. If you’re interested in saving over $1 million, you could start off living more frugally (i.e., living with roommates) and eventually move into your own place after 3 years. You could also allow for some modest lifestyle inflation and end up with closer to $1 million. The point is to be conscious about the decision.
#2 What About Getting Married? Kids? This Would Never Work Once “Real Life” Starts Happening
There aren’t too many stay-at-home spouses in NYC. If you get married, you’ll likely have an even higher income plus the benefit of a permanent roommate, thus allowing you to save even more. Once kids enter the picture, it might be tough to save so much. But, if you’re a “straight through” lawyer, you might start working at a firm at 26. It’s not unreasonable to think you might not have kids until your early 30s, at which point you’ll have done the bulk of the savings anyway. If you do have kids, I’m told they are expensive and not much good for your taxes at a certain point. Adjust these calculations downward accordingly.
#3 Your Tax Calculations Are Wrong
These are my calculations and are based fairly closely on my actual taxable numbers. Your situation will be different, so run your own numbers and see. When you put the numbers in the calculator, make sure you’re backing out things like 401(k) and HSA contributions as well as accounting for large itemized deductions thanks to a hefty state and city tax bill.
#4 A 7% Nominal Growth Rate Is Outrageous
Fine. Run the calculations with your own numbers.
#5 People in Biglaw Burn Out in 2–3 years, So This Won’t Work
Burnout is common in the industry and many people leave after 2–3 years. From my own anecdotal experience, after 5 years barely anyone from my class year was still around. However, if you’re going to walk down a path, it might as well be this path until such time as you exit the path.
#6 I Have Student Loans
This is the biggest impediment to having the full million dollars before you become partner, but it won’t stop you from saving $1 million even if your net worth ends up being a little lower than $1 million. The White Coat Investor has been telling us for years to get a lower interest rate on your student loan. After refinancing, I’d first fill up the tax-advantaged retirement accounts and then go “nuclear” on the loans. You should be able to pay them off pretty quickly, especially if you decide to take a more frugal approach to your first three years in Biglaw.
The Benefits of Early Millionaire Status
Now that we’ve discussed and, I hope, answered why this plan wouldn’t work, let me tell you a few of the benefits.
The first is obviously that you’ll end up with $1+ million before you ever become partner. It makes the annual reviews a lot easier (the time when you could be told that “it’s not working out”) when you’re not relying on the paycheck.
Second, even if you exit Biglaw and step off this 8-year path, you’ll be in a great position to do so. The third year is a critical time for most associates. Do you want to be the associate in the nice 1 bedroom that still owes $100K on his loans or do you want to be the associate with no debt, a little savings and a low-overhead lifestyle? The first associate feels stressed and obligated to push themselves through the next couple of years. The second associate laterals to go work for Spotify. Give yourself the option to go work for Spotify, even if you never take it.
Third, as every WCI reader should know, it’s really not that hard to “live as a law student” for the first few years out of law school. You’re already used to being poor and living with roommates. You won’t be able to control the fact that your peers are now spending time at fancy restaurants and bars, but you can control whether you’re spending a lot on rent and cars. Take care of those big ticket items and a lot of other little things will fall into place.
If you’re a millionaire associate or on the path to millionaire status, let's hear from you!
What do you think? Do you think it's reasonable for a Big Law attorney to be a millionaire before making partner? Why or why not? Comment below!
[Editor's Note: I've been begging for more guest posts from attorneys for years, but rarely get them. This one is from attorney and blogger Joshua Holt (now best known as The BigLaw Investor). For the attorneys (and even the doctors) who are reading this, be sure to check out Josh's blog too. This article was submitted and approved according to our Guest Post Policy. We have no financial relationship.]
Totally agree and doable. I did it in a low housing cost city in corporate America with a starting salary of 70K. Took me about 12 years to go from 5K to 1M but, we had two kids.
That’s amazing! I think that geo-arbitrage can definitively play a big role here.
Glad to see you on the pages of WCI, Josh.
Those raises and bonuses are pretty sweet for those that stick it out. And I’m sure Year 9 looks really, really good.
I’ve seen that bimodal salary distribution on your site before, and it seems to be missing something. The data may be a few years old, accounting for the peak at $160K instead of $180K, but where are the Year 2 through 8 and partner salaries on that graph? There are tens of thousands of lawyers earning beyond that second peak, no?
Best,
-PoF
The latest data is from 2015 which is before the market shifted to the $180K starting salary in mid-2016. All I think the data will do is shift the peak a little to the right, although what will be interesting is seeing what type of peak we’ll still have at $160K as many “biglaw” firms couldn’t keep up with the salary increase and decided not to raise salaries. It’s quite possible that we’ll have a tri-modal salary distribution when the 2017 data is released.
As for the missing information, I think you’re just thinking of average salaries vs starting salaries. I’m not as familiar with data sources showing average salaries in Biglaw (partner compensation is a bit more of a black box, although there are plenty of partnership compensation surveys as well). The famous bimodal salary distribution chart is only looking at starting salaries, so it’s Year 1 fixed in time whether you’re starting in Biglaw, government, solo practitioner, etc.
I did not realize that was only showing starting salaries. Makes more sense now.
I think that Salary Distribution Curve is only showing the starting salaries, not year 2 through 8.
Thanks for the post. It is interesting to see the parallels between the two very different career paths. This is also a reminder to the doctors out there about how fortunate we are to be in medicine. Even the not-very-good doctors tend to start with large six figure incomes. The 25th percentile of comp in almost every medical field is six figures. It isn’t that way in law. And definitely isn’t that way in business or entrepreneurship. Those fields have unlimited upside potential but the average or a little below average worker doesn’t do extraordinarily well. On the other hand, the business men and lawyers I know seem to be better negotiators when buying and contracting. They are also less likely to need a Mercedes, McMansion, and country club dues. Lower expenses can mean more assets eventually.
I have been enjoying your blog too!
Thanks for the kind words about the blog!
Yeah, it is interesting to see the parallels between the two different career paths. Biglaw is such an “up or out” type place that I guess there’s some benefit to knowing that you’re in a fixed period of your life that may not last AND that everyone else is being paid the same. It seems like it would lend itself to making sure you’re hitting certain target savings goals after year 1, year 2, etc. Unfortunately, from my vantage point, it doesn’t really look like that is happening. Hopefully this post will serve as a roadmap.
So how much does a partner makes in BigLaw? (I have a feeling you are not going to answer this part in numbers)
Are their tiers of partnership or everyone is equal?
8 years to partnership is a long track too. If some one already has few years of associate experience at another big law firm does that count towards the 8 years or everyone has to start from scratch?
What does the bonus depend upon?
What are average working hours for the first 8 years and average working hours afterwards?
Is the first year associate hired right out of college or you need experience to even get to that level?
What are the chances that after 8 years Big Law fires you?
The partnership tier in Biglaw has basically been divided into two ranks: non-equity and equity. On the far extremes, a few firms will “automatically” promote you to non-equity partner around years 6-8. On the other end of the spectrum, there are a few firms that have maintained an “equity only” structure. But the bulk of firms are now in a dual system. A non-equity partner, as the name implies, is really just a salaried employee with some type of contractual relationship that might include bonuses based on billable hours and a percentage of any work you bring into the firm. The non-equity partners make $500 – $800K, although that’s based on my anecdotal understanding and not on hard data. Even though associate compensation is lockstep, partnership compensation can vary greatly by firm. On the equity side, $800K+ through multiple millions. It’s largely based on an “eat what you kill” model, so if you’re responsible for originating a lot of work you’re going to have a much higher compensation than an equity partner that isn’t bringing in a lot of clients.
If you switch firms (as I did), you’ll often take a step back on the 8 year track. Depending in how big of a switch it is, you may end up taking more than a year step back (e.g. if you are a securities lawyer and you switch to doing finance work, the new firm will likely put you back several years).
Bonus is completely based on hours. Most firms have a billable hour requirement in the 1900-2100 range. Different firms count different hours (e.g. pro-bono, firm development, etc.). A few firms are still lockstep with bonuses, meaning every associate in good standing will receive the market bonus regardless of hours. In those firms it’d be highly unusual for you not to have 2000+ hours.
Lawyers work a ton and are always on call. It’d be hard to say what I think the average working hours are since a lot will depend on the specialty but it’s certainly rough your first 3 years while you’re learning how to be a lawyer. From my perspective, your hours are worse after you make junior partner. The junior partner level seems to be the most intense because on one hand in you’re in charge of running deals and generally act as the “face” with the client but you also have the added pressure of trying to generate your own clients so that you can become an equity partner.
First year associates are hired straight out of law school. In fact, the recruitment cycle is such that most law students that end up in Biglaw will work as a summer associate for the firm during the summer between their second and third year of law school. If things go well that summer, the firm will extend you a permanent offer to start after you graduate. If you don’t end up as a summer associate during that summer it can be difficult (but definitely not impossible) to get into Biglaw.
After 8 years? Very high. There aren’t a lot of “12th year associates”.
Out of curiosity, how is the senior associate expected to “originate a lot of work”? . The likes of Dr Dahle and me are sitting in the ED ( well, figuratively speaking …) and minding our own business before “work” comes to us by bus/car/EMS or police.
Welcome to the world outside of medicine pipeline. You’ve got to go out there and convince people to hire you to do the work. The partners are generally those who bring the work into the firm.
– BigLaw partners often make more than $1 million per year. Even at lower-tier BigLaw firms it will very frequently be in the high six figures at least. It varies a good deal by firm, practice area, level of seniority of the partner, how much client business the partner is seen as bringing in, and similar factors.
– In BigLaw firms, partnership is almost always tiered in some fashion. In some more “egalitarian” firms, the differences between partners are relatively modest and often depend on seniority / experience, but some “superstars” can basically earn seniority early. Probably more common is a form of “eat what you kill” compensation model, where take-home depends highly on ability to generate business and billings. Many firms will have “contract” or “service” partners, who are on basically fixed salaries that are higher than associates but lower than the take home earnings of the true equity partners, which as noted also vary from one another. Often those are junior partners who have the skills to run matters and manage junior lawyers on their own, but are still trying to build up their client relationships.
– Eight years is kind of a minimum these days. Can go up to ten. Lateral associates are generally hired at more or less the level of seniority that they reached at their prior firm. Sometimes they might bump up or down a year (occasionally more) if they are switching practice areas substantially.
– Bonus depends on showing up and remaining employed past the bonus cut-off date (usually around Christmas). Sometimes also depends on billing a minimum number of hours over the year (e.g. 1,800 or 1,900).
– Working hours are long, unpredictable and tortuous. Medical residents in the good old days probably had it no worse; medical residents these days certainly have it better. Working hours get a bit better with seniority and the ability to foresee what’s coming and to delegate, but they are never good.
– Associates are very frequently hired right out of law school, which is an additional three years of schooling after the traditional four years of undergrad.
I have a number of relatives who have been BigLaw partners and think I have a pretty good informant base on these points.
Definitely sending this to my sister. She just graduated from law school (taking the bar today actually!) and took an associate job, though I’m not sure whether she’s getting the “biglaw” salary. Great advice! Similar to many things WCI has recommended for docs
Awesome, thanks LizOB! Congratulations are in order to your sister. Taking the bar is towards the end of all the hoops you have to jump through to become a lawyer (probably less than being a doctor but still quite a lot of paperwork nonetheless). Glad to hear your sister has a job secured! WCI has been a huge influence on me for years.
I have watched both family and friends join big law. There take on it was to earn a lot of money early on and pay off their debts. After that, about 4-5 years for both, they moved onto a lesser paying position as a lawyer (not for profits and teaching in these cases).
I also have a friend who was a assistant district attorney in a major city for years. He may such little money that he has lived with roommates most of his life and still is in debt. He aspires to be a writer and I am sure if he could finance his own time (with a million dollars for instance) he would.
It is interesting to see how that choice early on, to join a big law firm or not, can have such impacts on lives 5 and 10 years down the road.
Nice post Josh!
Thanks EJ! Yes, it’s a STARK difference in paths, although thankfully PSLF should be of huge value to my public interest friends. My wife is a former assistant district attorney, so we feel that we have both of those career paths covered (she recently left and is now making more money, although still working for the government). The smart ones in Biglaw plan how to handle the salary and do make progress during those 4-5 years. It’s quite common for many people to leave during years 3-6 for other pastures (in-house at companies or banks), so it’s hard not to see the writing on the wall if you’re a 1st year associate.
BigLaw Investor, thanks for the article. If you do make partner, is there a buy in associated with it?
Probably sweat for 8 years, wonder if there are diff tiers of partners. But what about buy out, if you decide to move as a partner, can you get some money out?
Nonequity partners generally don’t have a buy-in (as far as I’m aware) but yes, in the equity tiers you’ll be buying into the firm’s partnership.
If you don’t have equity, are you truly a partner, or an employee with profit sharing?
I am a junior partner at an AmLaw 100 firm. I don’t have equity, in that I didn’t make a capital contribution. I did sign the partnership agreement, have x% of my comp (both up and down) based on overall firm profits and my own and my team’s profitability, and am considered a “partner” for federal and state tax purposes. I would, and do, call myself a “non-equity partner,” though. Lines are blurring and the practice of law is shifting away – necessarily – from prior hierarchies, comp practices, etc. So it is all across the map as far as comp levels, comp philosophies and promotion practices go, from firm to firm. One truism that holds, I believe, across all firms is that there are more people who can DO the work than there are people who can convince others to HIRE them for the work. Put another way, rainmakers are rarer, and therefore more valuable, and therefore will be better compensated, than worker bees. And that is fair and as it should be, in my view.
Thanks for the data point. Agreed that the rainmakers are the truly valuable creatures in law. Many non-lawyers are surprised to learn that the highly compensated lawyers aren’t the ones that are the most technically proficient. Instead, it’s the ones that spend most of their time outside the office making friends with clients. When the work comes in, the deal work is then handled by a junior partner “lieutenant” that is usually a very good technical lawyer.
Great analysis! If such a person as you’ve modeled here held their savings dollars equal to their eighth year with no increases of any kind, in twelve more years the attorney would have $6.3 million. Granted, that’s not adjusted for inflation, but it’s still very likely to be enough to enable this attorney to be very comfortably financially independent, especially if s/he then moved to a lower cost of living area.
Not sure it was entirely clear here, but staying in the pipeline is far less guaranteed for attorneys as for docs. While it seems that just hanging around gets you to the big money, big law firms are actually thinning the herd pretty well by year 4 as I understand it.
Junior partner at a big law firm here. In my experience, the “herd” primarily thins itself the first three years with voluntary departures, as the practice is not for most. At year four, folks generally fall into two camps: (1) folks who really want to practice law and be a partner and (2) folks who are sorta surprised they’re still there, but can’t walk away from the money and won’t on their own. Camp (2) gets sorted out fairly orderly and quickly. Camp (1) is much tougher because most still won’t make it even though they want to and folks on the other side of the fence are rooting for them, but can’t do it for them.
Your last sentence is a very important point that I’ve seen as well. Sometimes a senior associate will have plenty of support within the junior partner ranks but that won’t translate into the support you need to cross into the partnership ranks.
@Doc William – Back to your original point, it’s not like biglaw is the be all and end all of legal compensation. I know plenty of peers that have left and found in-house positions with major banks or corporations where their compensation is in excess of $200K, so if you do make it past year 3 in biglaw and then transition to an in-house role, you can certainly keep building wealth. It’s not necessarily a cliff where you fall from biglaw into the starting salaries on the left side of the chart.
Any tips for those interested in the public sector rather than Big law? SO is in law school and leaning public, but she does worry about the low compensation.
The public sector does have pretty low compensation but has great benefits and quality of life. If you’re a doc, your combined income would still be pretty high, so I suspect you’ll be able to save a lot. Is she going to graduate with a lot of debt and have you figured out how to repay it? As mentioned in a comment above, my wife works for the government. We’ve been able to make it work. If I were a doc, we probably wouldn’t live in NYC since docs seem to be free to move about the country – so that would certainly help if you aren’t living in a HCOL!
I’m working in “biglaw”–15 years in. Ha, making nowhere near that money pointed out in the article, I’m more like a 2nd year in compensation, but I’m an “of counsel” in a midwest city. I just recently read from a blog on what makes a lawyer a good candidate for a lateral move to biglaw is a lawyer with a huge, expensive lifestyle. The blog author (a recruiter) actually spelled out in great detail how the associate with a Mercedes, stay at home spouse, big house and country club membership made a GREAT candidate because they would work like a dog because they wanted to keep that lifestyle. I was left pondering how crappy a lateral candidate I was, and continue to be! I drive a paid off car with 190K miles and am within 2 years of completely paying off our home, and have three rental properties–two completely paid off–in our midwest (college town) city.
After 15 years of working in law (10 year career prior to that as a biotech scientist), and always being relatively frugal, I had my “Dave Ramsey” moment about 3+ years ago and have gone full-bore since then towards FI. It is doable. In this 3 years, I’ve taken our mortgage balance from $390K to about $160K and paid off a $60K home equity loan (used to buy one of our rental properties). This is while we still prioritized vacationing as a family (been to France, Bahamas, and Alaska cruise in that time). Plus we spend money every year doing fixes and improvements to our rental property. BTW I think this is one of the things nobody talks about with rental property–if you’re going to do it right, you’ve got to be continuously spending money on fixing and upgrading things like decks, painting, re-tiling, new carpets, upgrading kitchens, bathrooms, painting, etc.–adds up.)
Law is difficult because in a law firm setting at least, they are basically always trying to squeeze you out. It’s particularly brutal at the associate level, where they specifically and deliberately set in motion a Darwinian process where most associates will be driven out, all to keep the “rockstars” for the partner ranks. I’m just lucky that my graduate degree in chemistry and focus on patent law makes it so that it’s not quite so easy to replace me with any of thousands of new law graduates.
I agree with the point that a law firm is just not a fun place to be, and if you are there, make the hay ASAP as the sun is shining.
I think you want to be a crappy lateral candidate to a recruiter – they’ll be less likely to call you constantly! And it makes sense that a heavily indebted associate spending up to his or her eyeballs would be a great candidate for a recruiter, particularly since it’s not uncommon for associates to move around a lot during the first five years (if it’s not working out at your current firm, you can easily switch firms and you’ll buy yourself another 1-2 years until perhaps you switch again).
Make hay while the sun is shining! That’s definitely the takeaway.
Ahhhhh biglaw.
All you docs reading this, just rest assured that most attorneys you speak to might make anywhere from $50k to $150k. “Biglaw” is a very small sliver of the attorney population, sort of like neurosurgeons.
Totally. Not sure if you saw the chart above but only about 16% of the starting class lands in Biglaw. I don’t know if that’s comparable to neurosurgeons, but I’ll take it!
Absolutely. I often represent truck drivers who make comments about how I must be rolling in the dough…while they make $20-30k more than me. And I am by no means low paid for our area!
Interestingly my brother is chief counsel at a university. He was telling me recently that he is interviewing candidates from Ivy league schools with lots of litigation experience because people are fed up with private practice law.
Depression and addiction are a huge problem in the industry. See the NY Times magazine feature story from two weeks ago:
https://www.nytimes.com/2017/07/15/business/lawyers-addiction-mental-health.html
Very depressing!
Nice post. I’m an associate at a small firm after putting in my time at a big firm, and I passed $1m in NW recently after 8 years. It is very doable. I chose a lesser ranked school to avoid loans, then I saved and invested 50% and in some years more of my salary and bonus. I wouldn’t go back to big law for anything, but admit there is a little sting from reading the salary and bonus structure compared to where I’m now at.
That’s what I hear when I talk to people that are now in house or at smaller firms. They recognize how much better their quality of life is but get a twinge when reading that year’s market bonus (for those that don’t know, Biglaw bonuses are usually set around late November/early December when one firm – usually Cravath – announces the bonus numbers for its associates. Most firms quickly follow suit with the same bonus numbers after Cravath announces).
@thatsme, I’d love to talk to you more if you’d be open for exchanging a few emails.
http://www.biglawinvestor.com/contact/
Yes, totally doable. I’m a seventh year in biglaw. Graduated with $200k in debt, paid it off in 36 months, and will hit $1m sometime before the end of this year. Living in D.C., and did get married in there to someone who makes a lot less than me and came in with comparatively smaller savings (about $100k). We are both frugal, obviously. Honestly, paying off the debt was much much much harder/more stressful than accumulating the nest egg has been.
Great story! I agree with you whole-heartedly that paying off the debt was much more stressful than accumulating assets. I’m still amazed at how sharp that turn is when you go from zero debt to $100K. It felt like it took forever to pay off $200K (I took longer than you — roughly 5 years to get net worth zero and then another year to pay off the debt) but I went so quickly from $0 to $100K that I barely remember ever being in between those amounts.
As above I mentioned above, if you’re open to trading a few emails, I’d love to talk to you some more!
Great post, Josh! It’s always bothered me that so many fellow lawyers would do their stint in biglaw and end up leaving with six figures worth of student loans remaining. Some lawyers are 25 years old when they start working! They should be rolling in cash by the time they hit 30!
Lifestyle inflation is what crushes lawyer wealth. And I think I can see why lifestyle inflation happens so much for lawyers. There’s an idea about what lawyers are supposed to look like. We have to wear suits to work, we appear in front of clients, we have to network to get clients, etc. When you’re walking around all fancy all the time, you can’t help but fancy up the rest of your life.
Arguably, doctors and dentists might not necessarily have to hold themselves out a certain way. My wife, for example, a dentist, wears scrubs every day. You have a different mindset with luxury when you’re wearing scrubs vs. wearing a suit.
Did you ever read this article: http://www.law.com/sites/almstaff/2017/02/21/when-leaving-big-law-the-financial-struggle-is-real/?slreturn=20170626135814.
Pretty much shows how these lawyers left big law with nothing – completely wasted their time in it.
Thanks Kevin! Agreed that lifestyle inflation is a problem, although I wonder if it’s more of a problem in the Midwest? I’ve been told that if I moved to somewhere like Dallas that people would “respect me much more” (one recruiter told me that I’d actually be considered a bigshot). You don’t have to worry as much about being a flashy lawyer in NYC. We know our place here and it isn’t at the top. Not only do you have the usual suspects of doctors but there’s a growing tech crowd and then you have the real people with money – the investment bankers. You can make so much money in IB that legal fees often feel like a rounding error. I imagine the pressure to be flashy is intense for them. It’s not as critical for us.
And yes, I did see that article. I reached out to the author and it turned into this (behind a pay wall):
http://www.americanlawyer.com/id=1202781434868/Its-a-Bird-Its-a-Plane-Its-Biglaw-Investor-to-Associates-Rescue
Josh, if you’re responding to comments, love to get your take on this …
A while back, I was out for a long dinner with an office managing partner and then another partner from a big law firm. And the managing partner (who I’ve known for years) commented that he didn’t see law as that attractive a career option anymore.
His logic was you could only pay back your school loans if you got into a big law firm… and you only got into a big law firm if you attended a top 14 school.
This idea (which I’ve probably half garbled at least) sort of seems to jive with the line chart you show above… can you share any additional insight or comment?
I would say that it is entirely dependent on where you practice, and your debt load, but it is definitely doable for most, IF you are willing to commit to it; granted a lot of my law school classmates went the Income Based Repayment route which is going to give them a very large tax bill in 20 years. For instance, one of my best friends and I graduated with roughly the same amount of debt ($70,000), he graduated 2009 and me 2010 so not a great time to graduate law school. He went to a top firm in NYC making the top salary and I’m at a small practice in the Midwest making, until the last couple years, in the bottom range of the bi-modal graph; neither of us went to T14 schools but both did well (he top 10, me top 15%). The difference is that he was able to knock out his liability in about a year, it took me just over 5 years to knock out mine.
The biggest problem is that people have an idea of the lifestyle a lawyer should live and all that does is put them in the poorhouse (see Millionaire Next Door).
Stephen Nelson: I agree with this assessment totally. At least a significant proportion, if not most, law students are going to have a financial struggle on their hands. There are many depressing tales of people taking out large loans for law school at a second or third tier school, and then basically completely striking out on the job front, or taking a $40K a year job with no real prospects of making more money than that. Biglaw is super picky who they hire, and only pick up the top tier; they don’t even recruit (or maybe hire the #2 or #2 person) at a second/third tier school. In many respects, particularly after the early 2000s, the whole law school thing turned into an almost pyramid-scheme style sham, with many, many students going unhired after graduation or having to take very low level type jobs. Like your dinner companions said, unless you go to a top school it’s quite hard to get into biglaw. Another avenue is having an undergrad or grad degree that provides you with more to offer than your standard English- or poly sci-major law, such as finance or accounting, or STEM. I have an advanced degree in science and am a patent attorney–but even with that, there was a giant squeeze during the recession and chem people were a dime a dozen. Currently it’s the electrical engineering/computer science types that have an easy time getting jobs.
My sister attended a top 10 school, and her campus was crawling with big firms to hire everyone for those summer associate jobs. She turned down what was almost a full ride for a lower-tier school to basically guarantee she would get a good job at the end. Probably worth it, as long as she keeps lifestyle inflation in check to pay off the loans
Stephen, your comment is the story of the legal profession over the past 10 years. It started with the Great Recession and the resulting lack of jobs for thousands of lawyers (graduating 2008-2010 was pretty brutal). There were a lot of angry lawyers that felt the law schools were goosing the employment numbers to improve their US News and World Report rankings (very important in the legal world for determining the “best” law schools). Some schools engaged in practices of hiring their unemployed graduates so they could report higher percentages of graduates that were employed within 9 months of graduating law school. This led to the “law school scamblog” movement (Google it) and to the creation of groups like Law School Transparency. I’m not sure if they solved the problem, but you had to be living under a rock if you were considering law school in the early 2010s and weren’t aware of the really poor chances of ending up with a high-paying job. Law school applications plummeted.
This has led to a lot of people thinking that you basically need to be at a T14 (Top 14 – according to US News) law school and then to be in the top of the class to get into biglaw. As LizOB said in a comment above, if that is you, you will almost certainly get multiple biglaw job offers. The firms recruit heavily on campus during the fall semester of your second year and if you are in that elite group, you won’t walk away empty handed.
However, I still think it’s quite possible to get a job in biglaw if you’re outside of the T14 and even outside of the top percentage of your class. You just might not end up at one of the 50 biggest firms and it might not happen as quickly as showing up for a 30 minute on-campus interview. I see plenty of candidates that get offers because they hustled their way into the firm, leaning on their alumni network to find connections at firms and then turning those connections into initial interviews. It’s certainly not easy or guaranteed but to throw your hands up if you’re outside of T14 and top 10% of your class is definitely a mistake.
Anyway, getting back to your two main points: (1) law as an attractive career option and (2) ability to pay back your loans, I’d agree that it’s not very attractive these days. You’re statistically much more likely to end up with substantial debt and a mediocre starting salary. That said, over the past year that I’ve been blogging I’ve started meeting many successful solo and small firm lawyers that take an entrepreneurial approach to practicing law (virtual firms, focusing on niche practice areas). I’ve also met others that have transferred their law degree into other fields (as much as I hate to bring out the whole “a law degree is a versatile degree” BS – it’s not. A law degree is really only good for practicing law).
How much does it cost to become an equity partner at BigLaw?
1 lawyer for every 250 in NJ
Times article a few yrs ago-law schools pumping out lawyers to keep those hi paying professors in the workforce and duping students into the profession with very poor chances of finding good employment
What’s strange about this analysis to me is if you don’t get pushed out/ push yourself out after 8 years there is a good chance you’ll make partner and your salary will make what you saved as an associate irrelevant. Difficult career to plan for the future.
Bigger issue I have with this article is that law associates have no business investing in a portfolio that has an expected return of 7% a year. You already have a very highly economically correlated career. See layoffs in the great recession. By investing so heavily in equities you are doubling down economic risk. Lawyers should have a much more conservative portfolio than physicians until they are in a comparably stable role ie partner or un-fireable public section worker.
Disagree. Biglaw associates are generally in their mid-to-late 20s through early 30s. They have several years of working and investing ahead of them, even if they leave biglaw. Most will still make six figures in-house or in government, which are stable jobs (especially the latter). Given that stable income and the ability to just keep working to cover any retirement money shortfalls, investing the biglaw pile aggressively makes sense.
As a recently-retired BigLaw partner who has guest-posted on this site, this subject is fascinating to me. I will reach out separately to the author. It seems to me that, while arguments can be made about the rewards of working BigLaw as an associate without serious partnership hopes, the prospects for partnership in BigLaw really are such a crap-shoot. The financial rewards if one achieves that status (particularly at certain firms) can be amazing, but the odds of achieving those rewards are not great when starting out as an associate, and the sacrifices are pretty significant even if one is lucky enough to make partner. I was at the right place at the right time and was so fortunate. Even so, I had no interest in sticking it out past my early 50’s.
Hi! I just posted some questions to the general article but not sure if the author will see it since the article is a few years old. If you wouldn’t mind looking over and responding to some of these questions, I would really appreciate it!! …:
I’m a third year pre-med undergrad who’s seriously considering going to law school. Just to clarify … As a BigLaw associate that laterals over to an in-house job for better hours/less demands, where is the line between those that voluntarily choose to leave and those who are pushed out? If you stick out at the first 3-4 years and are sufficiently competent, hardworking, and want to stay should you still expect to be pushed out by year 8? What % of those that stick out the first few years make it to year 8 and then junior partner?
When you lateral out from BigLaw (for whatever reason) what would the expected starting income and then growth in compensation over the following 10-20 years be?
To get to the very top firms who would typically match the new pay-scales, pay the big bonuses, and have the prestige/name-recognition to help get a better in-house job after leaving BigLaw: would all T-10 schools be a good jumping point, or does it matter even further? To get a job at a firm like Cravath in a major market city like D.C. would Michigan/Virginia be enough or is U-Chicago/Columbia necessary?
How does the degree of competency and ability to bring in work required of an associate to make senior associate, junior partner, equity partner vary within the top Am100? Since more senior associates at the biggest/best firms can make more than the PPP at firms even within the AmLaw200, than could an associate that sticks out it but can’t make partner at a top-earning firm hope to lateral over and in time make partner at a smaller firm (where the PPP might still be an additional several hundred thousand dollars but not in the multiple millions?) … refer to: https://www.law.com/americanlawyer/2018/11/21/partners-at-these-am-law-200-firms-make-less-than-cravath-associates/?slreturn=20181128145728
Interesting post. But a bit theoretical and I’m not sure how representative it is of the typical Biglaw associate experience, especially the part with law school debt. And I’m saying this as someone with very similar numbers and trajectory to your chart above. Josh, have you considered doing a post with your own actual numbers (sorry if you have and I missed it) to give an actual data point?
A little off-topic, but since the topic of law firm partnership repeatedly came up in the post and the comments, I’d just like to hear some viewpoints on the value of it.
Personally, I find little value in a law firm partnership. You will not be made a partner unless you have something to offer in the way of continuing business that can be exploited; otherwise, your partnership serves only to devalue the partnership for the other partners. Similarly, if you stop producing new business, your partnership ends. So basically, your partnership is like a set of golden handcuffs, forcing you to continue the practice of law at an unusually demanding level or else forfeit your income entirely. You cannot sell the partnership interest for a profit, you cannot trade it on an open market, you cannot passively sit by and let the cash roll in (for very long, anyway). You eat what you kill, even as a partner. Oh, and on top of your regular crushing billable hours, you have ownership tasks to tend to – you’ve suddenly become a businessman as well as a lawyer. Sounds like a lot of effort when you could just bill as an associate for a while, save your income, and choose your own path.
I appreciate that this post is directed toward some BigLaw associates in San Fran/NYC, but these numbers are just not true for BigLaw associates outside of certain bubbles. Most starting salaries are closer to $115k – $130k. Further, many BigLaw firms don’t follow those lockstep raises and bonus structures. It appears when you are discussing BigLaw you’re really only discussing a handful of elite NYC firms, as opposed to BigLaw in general. If we’re going with one definition of “BigLaw”, where every full-service firm over 100 attorneys with billing requirements 1900+ counts as BigLaw, then those starting salaries are likely going to drop even further.
Interesting post. Nice to learn more how Big Law works. I work in a support position for in house counsel. Attorneys here don’t become millionaires in 8 years. But interested attorneys and support staff all become millionaires with time.
Reading this one year on….
I think if you like the practice of law then Biglaw can definitely be the way to go – good financial rewards for your entire career. If you just want to make money I think there are many more efficient and pleasant ways of doing so.
Also – the Biglaw discussion is a bit of a US quirk / oddity. In the UK, for example, lawyer wages are on average far lower (unless one has the good fortune, aka common sense, to go and work for a US firm in London).
HH