Warsaw attorney Thomas Earhart opened the conversation by asserting he began thinking about retiring the very first day he started practicing 41 years ago.
Then he confessed, “Just kidding.”
The Reed Earhart Lennox & Barrett LLC attorney actually started planning his retirement at the beginning of 2015 and will step away from practice at the end of December. In the ensuing months, he has been notifying clients, closing out cases and transferring the unfinished cases to the other lawyers in his firm.
Many of Earhart’s clients were surprised when he announced his impending retirement. They thought he would continue working forever.
For Earhart, the decision was easy. “I didn’t want to be that attorney who says ‘just one more year,’ and then they find me slumped over my desk. I wanted to get out while the getting was good,” he explained.
Attorneys practicing past the age of 65 are common. Few continue to work until the undertaker arrives but, Jeff Nickloy pointed out, that may be the result of today’s extended life expectancy.
Nickloy, partner at Nickloy & Higdon in Noblesville, has studied how attorneys retire for the past 10 years. He has presented in continuing legal education classes on the subject, speaking mainly to lawyers in small and solo firms.
Retiring is difficult for attorneys since they have the duty to make sure their clients are taken care of. When they step away, they have to get the appropriate files to the appropriate client or to the client’s new attorney. Also, they have to distribute any funds that may be left in a trust account.
Some attorneys will retire with boxes of client documents and paperwork stored in their garages and basements. And problems may arise when a client calls wanting a file and the attorney can’t find it.
“It’s something you need to think about and plan for because there are not easy solutions,” Nickloy said. “It’s not like retiring from the factory.”
Transitioning to retirement
Retirement impacts more than the attorney calling it quits.
Thirty-eighty percent of the respondents to the Indiana Lawyer’s 2015 Practicing Law in Indiana survey listed transition or succession planning as the greatest challenge to their organization’s viability. Only the issue of managing costs while protecting quality of service topped this concern, which 42 percent found to be the greatest challenge.
When Robert Weddle’s firm Tabbert Hahn Earnest & Weddle merged with Bose McKinney & Evans LLP in 2010, he found himself in a good position to begin transitioning to retirement. Over the next three years, he was able to introduce his associates to his clients and shift more of the medical malpractice defense practice to the younger lawyers.
Weddle occasionally gets calls these days from lawyers wanting advice on how to retire. The most common questions cover the financial – how do they know if they can afford to quit working – and the emotional – what are they going to do if they don’t practice law.
A runner, Weddle’s plan for retirement was to spend more time at his sporting goods store, the Athletic Annex. Nonetheless, leaving the law was traumatic. Leading to his final day, he entered a period of parties and well wishes from clients and other attorneys. It put him on a kind of high but then, suddenly, he was retired and slowly the invitations to lunch and social gatherings subsided.
Weddle’s route of joining a bigger firm and transitioning to retirement is similar to a trend Nickloy has noticed. Lawyers are moving their individual practices to other firms and taking of counsel positions. The firms get the relationship and good will with the clients while the attorneys get a place to put the trust funds and boxes of clients’ files.
Lawyers who try to retire by closing their office completely or selling their practices are often surprised by the difficulty. Particularly with selling, Nickloy noted, attorneys have a hard time valuing their business, believing a higher price tag is merited because of the sweat equity they put into the practice. They are often reluctant to take a lower price.
For 10 years, Christine Wells tried to convince her late husband James to retire, but he resisted until he was forced to quit after a stroke. Wells and her husband practiced together in Fulton County.
“He absolutely loved it,” Wells said, explaining her husband’s devotion to his work. “He loved practicing law. He loved the research. He loved a fight.”
She could not find anyone to buy their practice so she set about closing the firm by sending an estimated 3,000 letters and making nearly 1,000 phone calls to notify clients. Wells also tried to place cases with other attorneys, but a complicating factor was that she and her husband “represented everybody in Fulton County who didn’t have any money,” so some lawyers were hesitant to take the clients.
Yet, looking back, Wells said closing the practice “went like clockwork” even though she admits she cannot explain why.
“I wouldn’t do anything different,” she said. “It worked.”
Pushed out of practice
Within law firms, retirements make room for younger attorneys. The IL survey found that 32 percent of respondents listed succession planning and mentoring future leadership as the topic that most often leads to differences of opinion between senior lawyers and their junior counterparts.
At the same time, an overwhelming majority – 85 percent – said the “Up or Out” staffing model of new hires having to leave if they don’t make partner after a certain number of years no longer makes economic sense.
Timothy Riffle, partner at Barnes & Thornburg LLP, sees an unintended consequence of moving away from the traditional partnership or bust model, namely it doesn’t cause the necessary turnover. Associates who do not meet the criteria to become an equity partner are no longer under pressure to leave the firm. They are allowed to stay, creating fewer openings for new hires.
“It worked very, very well for a lot of people for a long time and it provided a lot of opportunity for people,” he said of “Up or Out.” “We’re not seeing those opportunities today.”
Riffle speculated money may be at the root. Firms, knowing that associates do not generate the business to cover their salaries until they have five to seven years of experience, may have decided to keep the attorneys who bill at a higher rate in favor of bringing on recent law school graduates.
The result has been a bunch of attorneys who are not equity partners but “lifetime employee lawyers,” Riffle said. They are serving clients but they have not created a book of business adequate enough to feed themselves and others.
Riffle conceded moving an attorney to some other role is easier than telling that individual he or she has no future in the firm.
Still, older attorneys may find themselves pushed out of practice by the young professionals hired into other businesses. Weddle said lawyers who hang on will see their clients retire, and the younger workers who become the new clients will likely shift the legal work to an attorney or firm they know.
Then the lawyers will start losing clients, their compensation will drop and the pressure to retire will build. Weddle’s advice to attorneys: Leave on your own terms before realizing the consequences of staying too long.•