Accumulating your desired retirement fund balance relies mostly on the amount that you have saved. But investing your savings is also an important aspect of achieving your retirement goals. To understand the importance of your savings habits, see this Sept. 11, 2024, article in the ABA Journal: “Getting ready for retirement is easier than you think.”

Before investing, you should assess, honestly, your investment knowledge. According to a recent survey from Voya Financial, 37% of people across a range of ages identified themselves as either a beginning investor or not an investor at all. So are you a novice, or do you have experience investing? Are you successful at investing, or do you have investment regrets when you lose your hard-earned money?

Deciding what to invest in depends on many factors. You have to consider how much risk you are willing to take on, your retirement goals and how you will execute your plan.

Choosing your investments starts with an understanding of the most common investment types.

Breaking it down

Investments, whether in or outside a 401(k) plan, can be divided into three categories: stocks, bonds, and cash and cash equivalents.

   • Stocks represent an ownership interest in a company, so when you invest in a stock fund, you’re investing in shares of several companies.

   • Bonds are investments issued by governments and corporations when they want to raise money. When you invest in a bond, you’re giving the bond issuer a loan, which they agree to pay back over a defined period of time, with interest.

   • Cash and cash equivalents include investments that can be easily liquidated, like money market funds, which invest in short-term, low-risk bonds, and cash and cash equivalents.

Stable value funds, a hybrid security only available in your 401(k), are alternative investments with a similar objective to money market funds. While it may be difficult to understand all the nuances of the investment, the bottom line is that it is a capital preservation investment vehicle. While no losses have been experienced industrywide, when investing in these funds, you should expect to withdraw the amount that you contributed plus interest, which is added to your account on a daily basis.

You can invest by buying individual securities or a fund. While the ownership structure for mutual funds and collective investment funds (typically found in 401(k) plans) are different, the end result is the same: Each invests in a pool of securities with similar characteristics. For example, there are funds that invest strictly in small company stocks or in government bonds.

Investing in individual securities is riskier than investing in a fund. Because a fund invests in many securities, the manager of the fund is not reliant on picking the right “one” security or a small handful of securities to generate your return. Many funds have hundreds of securities, so the manager of the fund doesn’t have to get it right 100% of the time for you to get a good return.

Risk and return

Risk and return go hand in hand. The riskier your investments, the more return that you should expect. So stocks are riskier than bonds, which are riskier than cash equivalents. The question becomes: How much risk are you willing to take? Your investment risk profile is dictated by a number of factors: How long until you retire? How much have you saved? Are you willing to give up some return to lower the risk of loss in your accounts? How much of your account are you willing to lose in the short term to midterm?

The acceptable level of risk for your investment portfolio is based on your answers to these and other questions regarding your specific financial situation. There is not one right answer that would satisfy each investor’s retirement goal.

For example, if you have many years until retirement, you have a longer period of time to recover from losses that you experience in your accounts, and therefore, you may feel more comfortable taking on more risk, like investing more in stocks to generate your return over the long term. While stock prices are more volatile, historically investments in stocks have been shown to generate higher returns than some other investments.

As your retirement approaches, again, depending on your circumstances, you may wish to reduce the risk associated with your investments because the time to recover your losses shrinks. For example, you may decrease your investments in stocks and increase your investments in bonds and maybe even cash equivalents.
 

Retirement goals

Behavioral studies have shown that when the stock markets experience a downturn, some investors get jittery, sell their stocks and invest their proceeds in money market funds. This behavior typically leads to returns that are less favorable than continuing to hold the investments. Experienced professionals have many tools and models to predict the up and down markets. They aren’t always successful.

The chart below, a J.P. Morgan Asset Management analysis using data from Bloomberg, illustrates that historically investing for the long term generates better results.

By establishing your retirement goals, you can avoid “buying high and selling low.” Will you spend your time in retirement fishing or becoming a world traveler? Once you have a plan or part of a plan, stick with it until you change your goals, perhaps because of a change of circumstance, like having a child, marriage or divorce.

Those investors with many years before they retire typically can’t conceive what they will want their retirement life to look like. If you are in this camp, assume that you’ll need the most that you can accumulate, which would mean that you would save as much as possible and be willing to take on more risk to increase the opportunity to earn a higher return. In all likelihood, you would invest more in stocks than in bonds or cash.

Executing your plan: Delegate, or do it yourself?

Your investing personality might just come down to the level of interest and time that you want to spend learning and gathering investment knowledge. After all, attorneys lead busy work lives, and as you grow in your career, your family, financial and other personal obligations will probably grow and change significantly.

If you are invested in a 401(k) plan, your plan probably offers lots of ways to get help. Most plans offer professional investment management for a fee, where you delegate your investment decisions to a financial adviser. In 401(k) plans, the financial adviser is restricted to investing your money only in those options offered by the plan. Many plans also offer holistic financial planning, which includes developing plans for retirement, budgeting and even assisting with managing school debt.

Another option you may want to investigate includes hiring a financial planner who manages your investments, also for a fee, and has the discretion to select from the whole universe of investments. But many planners require that you have a minimum account balance before they are willing to accept you as a client.

Even though you may pay for assistance with your investments, you should spend time to better understand your investing options. Your 401(k) provider is a good source of information.

Your 401(k) plan

ABA members have the opportunity for their law firms to take advantage of the retirement plans offered by the ABA Retirement Funds Program. This ABA member benefit helps law firms of all sizes, including solo practitioners, establish a 401(k) plan and has been helping legal professionals save for retirement for over 60 years. The program is committed to providing the tools necessary to help all legal professionals pursue their retirement goals.

The program’s investment fund menu offers a diverse selection of investment options to cover the broad spectrum of investors using three investment paths. You can select “Make it easier for me (diversified investment funds),” “I’m saving for retirement (do it yourself or get help to build a custom investment portfolio),” and “I’m retired or almost there (investment options that match your investing objective).”

Learn more about this ABA member benefit at ABARetirement.com.

The bottom line

There are thousands of investments that are available to you, some of which are more sophisticated, which require advanced investing experience and knowledge. If you don’t understand an investment’s potential for gain, and more importantly loss, it is not a worthwhile investment for you, regardless of whether you are using an investment adviser. While investment advisers are helpful with managing your retirement account, it’s your money and results matter. Remember: If something sounds too good to be true, it probably is.

---

This column reflects the opinions of the author and not necessarily the views of the ABA Journal—or the American Bar Association.

1. Home
2. Daily News
3. Federal judge will no longer tolerate lawyers’…

Trials & Litigation

Federal judge will no longer tolerate lawyers’ barbed briefs and ‘expletive-laden phone calls’

By Debra Cassens Weiss

December 12, 2024, 9:00 am CST

A federal judge in Seattle is fed up with “hyperbole and bluster” in a lawsuit alleging that State Farm failed to pay full policy benefits to homeowners after a house fire.

Lawyers “traded barbs in their briefs and during oral argument” about lack of professionalism and motives, offering competing accounts about who is to blame for a breakdown in communications, said U.S. District Judge Jamal N. Whitehead of the Western District of Washington in a Dec. 4. order. Whitehead was appointed by President Joe Biden.

Law360 has the story.

No matter which story is to be believed, the lawyers’ actions fell short of the required collegiality standard, Whitehead said.

“Expletive-laden phone calls, hang-ups, backing out of prior agreements without explanation, and misleading emails purporting to ‘memorialize’ phone calls demean the integrity of the legal process and show disrespect to all concerned, including the court in having to resolve petty disputes,” Whitehead said in his order.

“Let it be clear: The court will not tolerate such conduct moving forward.”

Whitehead scolded the lawyers before ruling on the plaintiffs’ requests for financial information from State Farm. The plaintiffs hope to learn whether the insurer incentivized claim handlers to place their personal financial gain over the interests of policyholders.

“Setting aside the parties’ hyperbole and bluster,” the communications submitted into evidence show that the parties are at an impasse, Whitehead said. The judge allowed discovery on the incentives program but narrowed the documents that should be produced.

Law360 listed the lawyers for the plaintiffs as Heather N. Derenski of Cedar View Law and Karl E. Malling. The lawyer for State Farm is James D. Hicks of Sinars Slowikowski Tomaska.

None of the lawyers immediately responded to ABA Journal emails seeking comment. Nor did they respond to messages left in voicemails or with law firm personnel.

1. Home
2. Daily News
3. Judge cuts Quinn Emanuel’s $185M fee, an…

Law Firms

Judge cuts Quinn Emanuel’s $185M fee, an amount deemed ‘astronomical’ by objectors

By Debra Cassens Weiss

October 14, 2024, 1:12 pm CDT

A federal judge has slashed a $185 million fee that she initially awarded to Quinn Emanuel Urquhart & Sullivan, an amount that translated to about $18,500 per hour for its work in an insurance class action lawsuit.

U.S. Court of Federal Claims Judge Kathryn C. Davis had initially awarded Quinn Emanuel 5% of a $3.7 billion judgment for about 10,000 hours of work. In an Oct. 10 opinion, she reduced the law firm’s claimed hours by 15% and reduced the award to 2.5% of the recovery, amounting to $92.4 million.

Davis reduced the award after the U.S. Court of Appeals for the Federal Circuit said she failed to properly conduct a “lodestar cross-check.” The cross-check considers hours worked, billing rates and a risk multiplier to compensate for the risk of no or reduced recovery.

Reuters and Law360 have stories.

Quinn Emanuel sought the attorney fee for suing on behalf of two classes of health insurers in litigation under the Affordable Care Act. The insurers said the federal government did not abide by its promise to pay them for losses incurred for the first three years of participation in the law’s insurance marketplace.

Health insurers who opposed the fee amount said it was “astronomical,” according to Reuters. They said Davis should award between $11.77 million and $23.14 million.

Davis said the amount requested by objecting insurers was “so low as to disincentivize attorneys from pursuing class actions.” She said Quinn Emanuel “pioneered” a “novel, winning legal theory” based on “an untested argument.”

After Quinn Emanuel sued, copycat suits followed. They led the U.S. Supreme Court to affirm Quinn Emanuel’s theory, Davis said. The novelty and complexity of Quinn Emanuel’s claim, along with the risk of nonpayment if the litigation didn’t succeed, justify a multiplier of 9.56, Davis said.

The multiplier is calculated by multiplying a firm’s hours by their rates. Davis used the reduced hours and Quinn Emanuel’s 2020 rates to calculate the multiplier.

Quinn Emanuel had obtained “judgment preservation insurance” on nearly $167 million of the $185 million fee award, Bloomberg Law reported in March. Typically, judgment preservation insurance is used to preserve a portion of large awards from being overturned on appeal.

The case is Health Republic Insurance Co. v. United States.

Most people start thinking about and saving for their retirement in their 50s, timing they invariably regret. In my career, I have conducted well over 100 retirement seminars. I can attest that at the end of every seminar, attendees undoubtedly say, “I wish I had taken this course sooner” and “Why didn’t I start to plan for my retirement earlier?”

The early years

For those early in their legal careers, it’s too daunting to think 30 or even 40 years into the future. You’ve just completed law school—your priorities are likely student loan payments and establishing yourself as a lawyer. You just started; why even think about retirement at this point? At this stage, don’t think about actually planning your retirement—it’s all about saving as much as possible.

Savings in a retirement plan, commonly a 401(k), can make a significant difference in your bottom line. Since pretax 401(k) contributions are allowable as a deduction on your income tax return, you are growing your account balance not only with your contributions but also with some of the income taxes you would have otherwise paid.

Saving any amount, even $10 per week, sooner rather than later will add up. For example, saving $10 per week at age 30 vs. age 50 through age 65 could have generated $47,231* more:

•     Age 30-65: $59,701
•     Age 50-65: $12,470
•     Difference: $47,231

(*This assumes a $10 contribution made at the beginning of each week, with a 6% annual return compounded weekly. This illustration is hypothetical, is not guaranteed and is not intended to reflect the performance of any specific investment.)

Additionally, your firm may be “giving” you money by matching some of the dollars you are saving in your 401(k) plan—take the “free” dollars! While there are annual limits to how much you can contribute to your 401(k) plan ($23,000 for 2024), I recommend contributing at least the percentage amount that your firm will match and increasing your contributions when you can.

Where do I invest my contributions?

As you start making contributions, you’ll need to decide where to invest your money. Your 401(k) will offer a variety of investment fund options, many with investment holdings like stocks, bonds and cash.

For a beginner or someone without the time or experience, you can use a “prebuilt” investment fund so you don’t need to decide how much to allocate to each single investment type.

Some of the most common prebuilt investment options are target date or retirement date funds—you just choose the fund that’s named for the approximate year you plan to retire (e.g., 2050, 2055, 2060 … ). The underlying investments in these change over time; they become more conservative as you approach your fund-identified retirement year. You’ll notice that investments in these later-dated funds like the 2060 fund, which have a high percentage invested in stocks, will create greater fluctuations in your account than, say, those funds that are invested strictly in bonds.

Remember, your investment selections don’t have to be a forever choice. Most retirement plans offer a large menu of additional fund types, so you can always change your investments to match the level of fluctuations you can tolerate in your account and your financial goals.

The journey

While saving is the goal, at some point you will want to understand how much you may need in retirement. An important consideration as you deliberate what your target balance should be requires you to decide what you want your lifestyle to look like. Where will you live? How will you occupy your time once you retire? Work part time? Volunteer? Garden? Travel the world? Look after children or grandchildren? Or spend more time on your hobbies or engage in a new hobby? These decisions typically evolve over time, so don’t wait for the “perfect” retirement design before you start your planning. (Experience several lawyers’ retirement journeys: “Resting Your Cases: Thinking about retirement? Lawyers give advice about money, goals and happiness”)

To help you with your savings targets, you will need to calculate the dollars you will need to translate your plans into reality.

A straightforward way to calculate how much you may need in retirement requires that you estimate how many years you will be retired. If you plan to retire at age 67 and believe your life expectancy is 82 years, you will need to fund your retirement for 15 years. If you decide you need $80,000 per year to live with today’s spending power, you will need to have a savings target of $1.2 million, available from all income sources, which assumes that you will need to keep up with the rate of inflation. This amount is lower than what Americans believe they need to save for retirement, which is an average $1.8 million, according to an online Schwab survey of 1,000 U.S. 401(k) plan participants between April 19 and May 2, 2023.

As your 401(k) balance grows, you may want help with selecting your investments. Most plans offer professional management for your account through a financial adviser for an extra fee. The investment decisions implemented by the adviser incorporate your other financial holdings, like your investments outside of your plan account.

Nearing retirement

It’s not unusual to start retirement savings until later in life since most people have other obligations in their early career years, like buying a house and raising children and paying for their education.

But even for mid- and late-career professionals, savings continue to be very impactful to your bottom line. As your salary increases, so should your contributions to your 401(k) account and outside accounts. Once you reach age 50, you are able to make additional annual “catch-up” contributions to your plan ($7,500 in 2024).

Your 401(k) plan

ABA members have the opportunity to take advantage of the retirement plans offered by the ABA Retirement Funds Program. This ABA Member Benefit helps law firms of all sizes establish a 401(k) plan and has been helping legal professionals save for retirement for over 60 years. The program is committed to providing the tools necessary to help all legal professionals pursue retirement security.

Historically, program participants have higher average account balances than other 401(k) participants in general. I attribute this to higher savings rates by those in the legal community, which benefit both from earning interest on contributions plus on the interest that accumulates over time. Learn more about this ABA Member Benefit at ABARetirement.com.

The bottom line

The key point to remember is that it is never too late to start planning and saving for retirement. While you may not know what your lifestyle will look like in retirement or how much you need to sustain that desired lifestyle, the key to a successful retirement is all about maximizing your savings.

---

This column reflects the opinions of the author and not necessarily the views of the ABA Journal—or the American Bar Association.

1. Home
2. Daily News
3. Quinn Emanuel disclosure order highlights…

Law Firms

Quinn Emanuel disclosure order highlights relatively new product: judgment preservation insurance

By Debra Cassens Weiss

January 31, 2024, 3:39 pm CST

Quinn Emanuel Urquhart & Sullivan must disclose terms of judgment preservation insurance that it allegedly bought before distributing a $185 million fee award to partners, according to a U.S. Court of Federal Claims judge.

In a Jan. 30 opinion, U.S. Federal Claims Judge Kathryn C. Davis ordered Quinn Emanuel to disclose the policy document but denied a request for an accounting and safekeeping of the funds, report Reuters and Bloomberg Law.

A group of health insurers that objected to the legal fee had sought the information.

Davis ruled after the U.S. Court of Appeals for the Federal Circuit vacated the $185 million award because she failed to properly conduct a “lodestar cross-check” that considers hours worked, billing rates and a risk multiplier to compensate for the risk of no or reduced recovery. The appeals court said the fee award had an implicit multiplier that was “outside the mainstream” and ordered Davis to reassess the amount.

The award translated to an hourly fee of about $18,500, according to previous coverage of the case.

Bloomberg Law called judgment preservation insurance “a relatively new area of litigation finance” that is becoming more popular. Typically, it is used to preserve some portion of large awards from being overturned on appeal, but details of such polices are mostly under wraps.

A Bloomberg Law article written by an outside contributor described judgment preservation insurance, known as JPL, as “appellate risk insurance.” The insurance can be obtained by a party or a litigation funder, and it kicks in after a judgment is final with no further possibility for appeal.

“It may insure all of the judgment, or it may be targeted at a specific legal issue that is challenged on appeal, such as attorneys’ fees or statutory damages,” the contributed article reports.

Davis said she was ordering the policy disclosure in the interest of transparency. She also said the policy terms would be relevant on remand “if the policy provisions are inconsistent with the court’s objective ‘to ensure an overall fee that is fair for counsel and equitable within the class.’”

Quinn Emanuel received the $185 million fee award in its representation of two classes of health plan insurers in litigation under the Affordable Care Act. The insurers said the federal government did not abide by its promise to pay them for losses incurred for the first three years of participation in the law’s insurance marketplace. The litigation settled for $3.7 billion, and the $185 million represented 5% of the award.

The case is Health Republic Insurance Co. v. United States.

1. Home
2. Daily News
3. Former FDIC lawyer who once worked in BigLaw…

Criminal Justice

Former FDIC lawyer who once worked in BigLaw pleads guilty in child-exploitation case

By Debra Cassens Weiss

January 25, 2024, 1:21 pm CST

A lawyer who worked in the general counsel’s office at the Federal Deposit Insurance Corp. pleaded guilty Tuesday in connection with his participation in two online groups that exploited prepubescent girls.

Mark Black, 50, of Arlington, Virginia, pleaded guilty to one count of conspiracy to produce child pornography and one count of coercion and enticement, according to a Jan. 23 press release from the U.S. Department of Justice. The mandatory minimum sentence is 15 years in prison.

Black participated in online groups that tried to find prepubescent girls online and to persuade them to livestream themselves engaging in sexually explicit conduct, according to the press release. Members of the online groups would secretly record the girls and share the videos with each other.

Publications covering the guilty plea included Law.com, Law360, the Wall Street Journal and CNBC.

Black was an employee with the FDIC since 2013, according to Law.com. Most recently, he was a special counsel in the office of the general counsel, his LinkedIn profile said. Before that, he was an attorney at Steptoe for 12 years. He is also a former president of the Arlington Aquatic Club.

The FDIC said in a statement it was “deeply disturbed and shocked to learn of the allegations.” The alleged conduct was “not related to the FDIC and didn’t involve FDIC devices and systems,” the statement said.

A court filing said Black voluntarily began counseling with a sex-offender treatment provider after a June 6 raid on his home, according to CNBC. The provider said Black was “an excellent candidate for continued outpatient treatment.”