Yes, tiny violin - did anyone else struggle first years of law partnership?

[Anonymous]

Anonymous wrote:

Anonymous wrote:DH was in a very similar position except that while he was a mid-level associate, a young partner clued in DH. Basically, we saved a ton to try to stay ahead of the buyin, capital calls, deferred comp, quarterly taxes, etc. Sounds like OP started spending money and expanding lifestyle/expenses without calculating the future financial situation. Just how most others do it too. Still, a problem of your own making.

Oh, massive eye roll, lady. We bought a house. And sent a kid to school. Get over giving yourself gold stars for handling your husbands income so well.

Yea this comment (especially from the spouse not making the money) isn’t helpful. And in all fairness, OP did say they came over from the govt so they weren’t in the position to be “clued in.”

[Anonymous]

Anonymous wrote:

Anonymous wrote:[img]

Anonymous wrote:I’m the previous “confused” poster. When I first read OP’s post I assumed that by overhead she meant capital contribution. If you switch those words in her OP then, yea, that’s exactly how most equity partners are compensated in Biglaw. The difference is that the capital contribution refunded to you when you retired or leave the firm. So it’s almost like a forced savings. You pay taxes on it the year you make the contribution, but when you get it back you don’t.

Example: I was an equity partner in a big DC firm for about a decade, retiring early quite a while ago. I was paid almost exactly what OP’s spouse is now. But it was an honest $800k with the capital contribution taken out - none of this “overhead” BS. Then when I left the firm the money was returned to me. It was about $700k from what I can remember, and because I had already paid taxes on all of it before it wasn’t taxed again. A nice chunk of cash to ease the path to early retirement.

So how was your pay structured? Did you get a monthly payment and what was it?

I can’t remember the exact numbers and of course they fluctuated by year, but I seem to recall that the firm would estimate what the partner’s compensation would be for the upcoming year, divide that by around 2, then divide that by 12 to come up with a monthly draw. So for 800 you divide by 2 to 400, then divide that by 12 for a monthly draw of 33k. Health insurance premiums, social security, etc would then be deducted from the monthly draw. Then you’d get a couple of extra draws for estimated taxes around estimated tax time.

At the end of the year you’d basically get a statement that says ok, here’s your actual pay for the year. We’ve already paid you X, so you’re still owed Y. From Y we are now deducting your capital contribution and taxes that are paid on behalf of all partners, etc, which leave you with Z.

On rare occasions there was a deficit, but usually I’d end up with a check in five to (very low) six figures at the end of the year - just in time for another tax bill.

Got it. So did you ever get to keep money from that end of the year check? I guess I thought we would but it seems like until you move beyond the 800k mark, the answer is no, correct?

[Anonymous]

Anonymous wrote:DH was in a very similar position except that while he was a mid-level associate, a young partner clued in DH. Basically, we saved a ton to try to stay ahead of the buyin, capital calls, deferred comp, quarterly taxes, etc. Sounds like OP started spending money and expanding lifestyle/expenses without calculating the future financial situation. Just how most others do it too. Still, a problem of your own making. [/quote
Too bad you can’t make money of being a smug as$hole because you’d be a gazillionaire.

[Anonymous]

Yes, the pool of gold coins doesn't get deep enough to dive into until about 10 years of partnership unfortunately. Hold off on the diving board as it won't impress the nephews in the first couple of years

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:[img]

Anonymous wrote:I’m the previous “confused” poster. When I first read OP’s post I assumed that by overhead she meant capital contribution. If you switch those words in her OP then, yea, that’s exactly how most equity partners are compensated in Biglaw. The difference is that the capital contribution refunded to you when you retired or leave the firm. So it’s almost like a forced savings. You pay taxes on it the year you make the contribution, but when you get it back you don’t.

Example: I was an equity partner in a big DC firm for about a decade, retiring early quite a while ago. I was paid almost exactly what OP’s spouse is now. But it was an honest $800k with the capital contribution taken out - none of this “overhead” BS. Then when I left the firm the money was returned to me. It was about $700k from what I can remember, and because I had already paid taxes on all of it before it wasn’t taxed again. A nice chunk of cash to ease the path to early retirement.

So how was your pay structured? Did you get a monthly payment and what was it?

I can’t remember the exact numbers and of course they fluctuated by year, but I seem to recall that the firm would estimate what the partner’s compensation would be for the upcoming year, divide that by around 2, then divide that by 12 to come up with a monthly draw. So for 800 you divide by 2 to 400, then divide that by 12 for a monthly draw of 33k. Health insurance premiums, social security, etc would then be deducted from the monthly draw. Then you’d get a couple of extra draws for estimated taxes around estimated tax time.

At the end of the year you’d basically get a statement that says ok, here’s your actual pay for the year. We’ve already paid you X, so you’re still owed Y. From Y we are now deducting your capital contribution and taxes that are paid on behalf of all partners, etc, which leave you with Z.

On rare occasions there was a deficit, but usually I’d end up with a check in five to (very low) six figures at the end of the year - just in time for another tax bill.

Got it. So did you ever get to keep money from that end of the year check? I guess I thought we would but it seems like until you move beyond the 800k mark, the answer is no, correct?

Yes I was able to keep some. Not a lot, but some. I remember being able to open a brokerage account outside of my 401k for the first time as a young partner with that leftover money. That’s something else that ultimately allowed me to retire early.

But again I never really worried because between the massive retirement contributions that the firm required and the capital contributions that I knew I’d get back I never worried about savings. I knew I was saving plenty.

Honestly, the “overhead” thing is bullshit. If it really is what you think it is (ask your spouse), then you need to resign yourself to the fact that spouse is pulling in 670 - not 800.

[Anonymous]

The way we did it was taking a year or two, really cutting back on spending and increasing saving, and getting ahead of it. There are lots of possible permutations based on comp structure, but unfortunately, they all come down to this. It stinks for that year, OP, but it's a lot less stressful once you do it.

[Anonymous]

Anonymous wrote:The way we did it was taking a year or two, really cutting back on spending and increasing saving, and getting ahead of it. There are lots of possible permutations based on comp structure, but unfortunately, they all come down to this. It stinks for that year, OP, but it's a lot less stressful once you do it.

Yes, but as I said in my earlier posts, that’s not an option as the expenses are fixed. They cannot be altered.

[Anonymous]

Seems like the smart thing to do is be a high level associate or non equity partner forever.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is an equity partnership at top 50. All partners start at $800k. Retirement is around $70k, overhead around $130k. Monthly payout is around $20k. Draws about 55k, three times a year. Then end payout. Tax bills for quarterly payments about $80k, fed and state. That’s the gist of it.

So you can’t live on 280k/yr? Sounds like a you problem.

Well, categorically, yes. It is. We have set expenses of schools plus mortgage that make it tough. And it’s not 280 - it’s 240.

800 - 70 (savings) - 130 (overhead/capital) - (4x80+150) (taxes) = 130

240 (payout)
165 (draws)
Are those income or deductions/expenses?


Anyway, $240K as mentioned, covers a $100K mansion mortgage plus $50K school plus $7K/month utilities and incidental "expenses".

How many kids do you have in private school?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is an equity partnership at top 50. All partners start at $800k. Retirement is around $70k, overhead around $130k. Monthly payout is around $20k. Draws about 55k, three times a year. Then end payout. Tax bills for quarterly payments about $80k, fed and state. That’s the gist of it.

So you can’t live on 280k/yr? Sounds like a you problem.

Well, categorically, yes. It is. We have set expenses of schools plus mortgage that make it tough. And it’s not 280 - it’s 240.

800 - 70 (savings) - 130 (overhead/capital) - (4x80+150) (taxes) = 130

240 (payout)
165 (draws)
Are those income or deductions/expenses?


Anyway, $240K as mentioned, covers a $100K mansion mortgage plus $50K school plus $7K/month utilities and incidental "expenses".

How many kids do you have in private school?

2 and one in daycare. This is the issue. Spouse went part time recently.

[Anonymous]

Anonymous wrote:

Anonymous wrote:DH was in a very similar position except that while he was a mid-level associate, a young partner clued in DH. Basically, we saved a ton to try to stay ahead of the buyin, capital calls, deferred comp, quarterly taxes, etc. Sounds like OP started spending money and expanding lifestyle/expenses without calculating the future financial situation. Just how most others do it too. Still, a problem of your own making.

Oh, massive eye roll, lady. We bought a house. And sent a kid to school. Get over giving yourself gold stars for handling your husbands income so well.

You're the one who can't figure out how to survive on $240K/yr after taxes?
And you are rolling your eyes?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:DH was in a very similar position except that while he was a mid-level associate, a young partner clued in DH. Basically, we saved a ton to try to stay ahead of the buyin, capital calls, deferred comp, quarterly taxes, etc. Sounds like OP started spending money and expanding lifestyle/expenses without calculating the future financial situation. Just how most others do it too. Still, a problem of your own making.

Oh, massive eye roll, lady. We bought a house. And sent a kid to school. Get over giving yourself gold stars for handling your husbands income so well.

You're the one who can't figure out how to survive on $240K/yr after taxes?
And you are rolling your eyes?

Yes, it’s a lot of money. It’s also less than we made previously. That’s the issue. Thank you for taking the time out of your busy day feeling morally superior and managing your husbands income to look down upon me.

[Anonymous]

Anonymous wrote:Seems like the smart thing to do is be a high level associate or non equity partner forever.

Nope - you're expensive labor. And expensive labor gets cut in lean times.

[Anonymous]

OP it sounds like you’re spending more than you earn and didn’t ask any detailed questions about compensation in your new job.

What do you want? We can surmise that the house is an expensive house in a good school district. Send one or both kids to public school for a few years. Or refinance your house. Or apply for financial aid. Whatever.

[Anonymous]

I'm sorry OP. The PPs are being harsh. I think there's a lot of lack of transparency around partner pay and it sucks you didn't know what you were walking into.

Thanks for sharing b/c it is helpful for others to do better due diligence.

Hopefully it will just be a couple years of struggle for you to make ends meet and then you will be rolling in it!