NYC law partner w/ kids: "$850K gross is not enough to live on"

[Anonymous]

Anonymous wrote:

Anonymous wrote:I get it. I am NYC, HHI is $1-1.2mm, two kids. After taxes (50%+), private school, our mortgage and savings for retirement and college, we have about $100k left for discretionary spending or extra savings. NYC is very expensive.

You just like to exaggerate a bit. Your effective tax rate in NYC is less than 50, more likely 40-45, which leaves you with 550-650k. Do you have a 5 million mortgage that you don’t have much left?

It’s close to 50% because thanks to Trump we can no longer deduct our state and local taxes from federal. I meant mortgage + fixed expenses such as car and parking, food, insurance, kids activities & camps, charity… Kids are expensive anywhere, but the costs are crazy high in NYC. Eg, orthodontics for one of my DCs is $10k, and he is not done.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:She should have bought a small condo in Manhattan or Brooklyn before becoming partner or having kids. If she's a second year partner at a top firm (I'm a little thrown by her saying it's "Vault 50" -- I thought only law students cared about Vault rankings? Partners look at AmLaw which ranks by revenues and profits per partner), she's likely about 12 years into her legal career. What has she been doing? Especially if she's married, they could have bought a one bedroom years ago, and since it's NYC, it would have appreciated. Plus they'd have the equity. Then they'd be in the position to rent it out or sell it to move up the ladder.

She also should understand that early partnerhood can be a weirdly cash poor (very relatively) existence. Why is this a surprise to her? I never understand when young partners are surprised or frustrated by this. It's true for everyone except those with family money or other revenue streams (like rental income from the condo you bought as a fifth year associate).

And yes, the fact that they are on their third kid before sorting this out is monumentally stupid. Most NYC lawyers I know have one or two kids, max, because that's what keeps private school a manageable option and allows you to live in smaller but nicer homes, closer in. The ones a know with more kids moved to the suburbs years ago and mostly have SAHPs or family nearby.

A couple of things wrong with this.

I doubt she had the ability to buy a place --- probably student loans and the like.

I would not attack people for their choices on kids. Who knows if it was even a choice.

It’s most certainly a choice. She’s got two others, it’s not exactly a surprise.

The third is a surprise almost always.

[Anonymous]

Anonymous wrote:Ok her “draw” is 21 / month but she gets huge lump sums throughout the year. Couldn’t she budget those lump sums out to make her monthly take home closer to 30k ish? If you “make” 850 a year - regardless of how it is paid out - it’s up to you to financially plan how to spread that out. Are we saying people in sales / living off sales commissions aren’t able to own homes?

I’m not saying it’s not a lot of money but if she’s a new partner she may have to pay into her capital account (and unfortunately you also have to pay taxes on that money you can’t use). And she has to pay all benefits. Here in DC, my health insurance for my family of 5 is 40K a year (carefirst PPO on the dc aca exchange). The self employment taxes really are significant. In at a tiny firm so my income is much lower but I’m always astounded when I see my K1 because I only see a small fraction of what’s listed as my partner share for the year.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:She should have bought a small condo in Manhattan or Brooklyn before becoming partner or having kids. If she's a second year partner at a top firm (I'm a little thrown by her saying it's "Vault 50" -- I thought only law students cared about Vault rankings? Partners look at AmLaw which ranks by revenues and profits per partner), she's likely about 12 years into her legal career. What has she been doing? Especially if she's married, they could have bought a one bedroom years ago, and since it's NYC, it would have appreciated. Plus they'd have the equity. Then they'd be in the position to rent it out or sell it to move up the ladder.

She also should understand that early partnerhood can be a weirdly cash poor (very relatively) existence. Why is this a surprise to her? I never understand when young partners are surprised or frustrated by this. It's true for everyone except those with family money or other revenue streams (like rental income from the condo you bought as a fifth year associate).

And yes, the fact that they are on their third kid before sorting this out is monumentally stupid. Most NYC lawyers I know have one or two kids, max, because that's what keeps private school a manageable option and allows you to live in smaller but nicer homes, closer in. The ones a know with more kids moved to the suburbs years ago and mostly have SAHPs or family nearby.

A couple of things wrong with this.

I doubt she had the ability to buy a place --- probably student loans and the like.

I would not attack people for their choices on kids. Who knows if it was even a choice.

It’s most certainly a choice. She’s got two others, it’s not exactly a surprise.

The third is a surprise almost always.

Well that is on the couple....it is definately something that does NOT have to be a surprise if you plan accordingly

[Anonymous]

She needed to buy a small place back in 2019 when she was still an associate and interest rates were low. She is right that NYC is crazy expensive now. We have a friend who used to work for the government in DC and now makes more than a million a year in nyc and his standard of living is essentially the same.

That said I think the Reddit poster could get a nice house in Westport for about $1.5M although property taxes will be $$$. If she only has to go into the office three days a week, that could work.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Ok her “draw” is 21 / month but she gets huge lump sums throughout the year. Couldn’t she budget those lump sums out to make her monthly take home closer to 30k ish? If you “make” 850 a year - regardless of how it is paid out - it’s up to you to financially plan how to spread that out. Are we saying people in sales / living off sales commissions aren’t able to own homes?

I’m not saying it’s not a lot of money but if she’s a new partner she may have to pay into her capital account (and unfortunately you also have to pay taxes on that money you can’t use). And she has to pay all benefits. Here in DC, my health insurance for my family of 5 is 40K a year (carefirst PPO on the dc aca exchange). The self employment taxes really are significant. In at a tiny firm so my income is much lower but I’m always astounded when I see my K1 because I only see a small fraction of what’s listed as my partner share for the year.

I'm a consultant with my own firm. I pay my own (and family) healthcare, retirement, and the full boat on everything I have to pay in SSI, unemployment, etc. PLUS what a W2 employer would pay on my behalf. There is just less to live on. It takes time to build up the reserves in order to have reliable monthly income.

[Anonymous]

TLDR but three kids in Manhattan has always been a luxury. I totally agree with OP that $850K wouldn't be enough. We have three in DC-area and half that is pushing it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The whole post by the NYC lawyer makes no sense to me. She basically claims that her $850k per year translates into just $21k per month take home pay. Even with self funded retirement it should be close to $40k per month after tax. The poster is either dishonest or dumb.

She didn't say that her her take-home pay was limited to $21k per month, she said her take home draw was $21k per month. A significant portion (depending on the firm, the majority of her compensation) is made through partner distributions, which may be paid in sums throughout the year, or, in some cases, entirely in the following calendar year.

I'm not saying she's right - it's tough to sympathize with someone making close to $900k each year. But when you call someone "dishonest or dumb" without either reading carefully or understanding the compensation schedule and structure she's talking about, you out yourself as being the dumb one.

tl;dr - you're an idiot.

PP here- I understand the distinction, now that it's explained. But I am not a partner at a law firm, and didn't understand the distinction between the original stated "$21k/month draw" and "$21k/month take home pay", because it wasn't further explained in the original post. I think it's pretty reasonable for someone not in that world to read "$21k draw" and think that means "$21k/month take home pay". I don't think many people understand the nuances of how law firm partnership finances works, unless they are in that world, and it's a pretty big leap to think an average person would be able to distinguish between "draw" and "take home pay" that clearly.

As stated above, for many law firm partners more than half of their comp comes much later. So maybe starting in August for the prior year. At my old firm the payment say for 2024 would start in August 2025 and continue to February 2026. All you get in the meantime is your monthly draw. From your draw is medical (which is the employer and the employee payments so aboyt 4k a month; 401k; other retirement; interest on capital loan; buy in. So 21k draw could be 11k.

For the PP that said you do not have to put retirement in -- that is dumb. But in any event at many firms a portion is not a choice. You are required to contribute to the defined benefit plan -- no opt out.

Once you have been a partner for a while you do have that extra money coming in from August to February. But that amount can vary widely. At the same level at my firm (same number of shares) I have collected as little as 150k in those payments and as much as 700k. Also your shares can be cut so the next year could be less and the draw less (could go up as well).

No one should cry for biglaw partners. But it is hard to plan for and in bad years is a mess. It works out in the end by the journey can be rough. Part of what you get all the money for.

so the OP is dumb or what? In short order she will have much more than $21k/month to spend. she has a short-term cash flow issue yet she wants to whine about being poor.

well is sounds like she needs to budget for $21K/month to spend, and plan extras out of the "other payouts" that could be $0 or could be $$$$. A smart person would assume the $21K and use the rest for vacations, and use it the next year, not before you receive it.

I think you don’t get it. She gets much more than $21k a month, annualized. She wants to pretend a huge chunk of income doesn’t exist just because it’s not part of her monthly draw.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Ok her “draw” is 21 / month but she gets huge lump sums throughout the year. Couldn’t she budget those lump sums out to make her monthly take home closer to 30k ish? If you “make” 850 a year - regardless of how it is paid out - it’s up to you to financially plan how to spread that out. Are we saying people in sales / living off sales commissions aren’t able to own homes?

Of course she can! However, I'd suggest she try to "be able to live off of $21K" and use the rest to supplement, because in "down years" you might not get $300-400K more, you might only get $50-100K or less. Hard to live on a commission if you don't actually get paid the commission

“Only” 100k.

[Anonymous]

Anonymous wrote:She needed to buy a small place back in 2019 when she was still an associate and interest rates were low. She is right that NYC is crazy expensive now. We have a friend who used to work for the government in DC and now makes more than a million a year in nyc and his standard of living is essentially the same.

That said I think the Reddit poster could get a nice house in Westport for about $1.5M although property taxes will be $$$. If she only has to go into the office three days a week, that could work.

If your standard of living is the same in NYC on $1mil as in DC on a GS-14 salary you have only yourself to blame … you must be making some weird judgment based on the square footage of her Manhattan apartment.

[Anonymous]

Anonymous wrote:She says her monthly take home is 21k, how is that possible???

Student loans maybe? It seems low for the salary.

I mean, it seems like a ton of money, but a low monthly take home for someone making over $800k annually.

[Anonymous]

Reminds me of "Fleishman is in Trouble" when it's clear that where else in the world would $300K as a doctor’s salary, even in a rarefied specialty like hepatology at a prestigious Manhattan hospital, won’t cut it. It’s not going to pay the tuition at the elite private schools that his wife intends their future children to attend so that they befriend other children born into privilege and pursue higher education at elite institutions, from which they can graduate into elite professions.

[Anonymous]

I'm sorry. I'm new to how lawyers get paid. They don't create anything. Why are new lawyers getting paid $850,000 a year and complaining about it? I don't feel like they're creating anything of value. These kind of salaries seem like a tax on the people that actually do things and create things. This entire discussion reads like a bunch of parasites discussing their next victim. A completely BS profession.

[Anonymous]

Anonymous wrote:Reminds me of "Fleishman is in Trouble" when it's clear that where else in the world would $300K as a doctor’s salary, even in a rarefied specialty like hepatology at a prestigious Manhattan hospital, won’t cut it. It’s not going to pay the tuition at the elite private schools that his wife intends their future children to attend so that they befriend other children born into privilege and pursue higher education at elite institutions, from which they can graduate into elite professions.

Except she earns 3x that amount

[Anonymous]

Anonymous wrote:I'm sorry. I'm new to how lawyers get paid. They don't create anything. Why are new lawyers getting paid $850,000 a year and complaining about it? I don't feel like they're creating anything of value. These kind of salaries seem like a tax on the people that actually do things and create things. This entire discussion reads like a bunch of parasites discussing their next victim. A completely BS profession.

Are you 12 or just dumb? Ever heard of rule of law? You need lawyers for that to happen.