Is Your Lease Dictating Your Retirement Plans?
By far, the two biggest reasons clients contact me to put together an exit plans are:
- Unexpected failing health of the lawyer or the lawyer’s spouse
- The office lease is close to expiring
The first reason is understandable and out of one’s control.
But the second?
When family and friends ask why you have chosen this very time to retire, do you really want your answer to be, “Well, my lease was up”?
Like many of the lawyers I work with, I have mixed feelings about my retirement. That said, I sure hope my answer is a more thoughtful one, more along the lines of:
- I was starting to lose the fire in my belly.
- I want to travel and experience life outside of the office.
- It’s time to start checking things off my bucket list.
- I want to visit my grandchildren more.
- I’ve realized it’s time for a new chapter in life.
Now don’t get me wrong, an expiring lease may be one of the reasons that influences your retirement, but it shouldn’t be the only or primary reason.
The Risks of Following Your Lease
Many attorneys overlook the impact their office lease can have on retirement because they are so focused on the demands of running their practice. When your lease expiration date drives your retirement date, you increase the risk of facing two undesirable outcomes.
Retiring Prematurely: Retiring too soon can lead to feelings of unfulfillment, as you may still have the energy, passion, and desire to contribute to the legal profession. Ending your career solely because of a lease deadline can cause you to miss out on additional years of professional satisfaction and financial stability.
This can lead to future regret, especially if you find yourself wishing you had taken more time to fully prepare or if the intellectual challenges of the law are still appealing to you. If the most compelling reason to stop practicing law is that your lease is up, perhaps the time may not be right for retirement.
Delaying Retirement: On the flip side, when you're ready to retire, but your lease has years left, you might feel obligated to continue practicing longer than you want to. This can weaken your motivation and passion for your work, potentially affecting the quality of your service and overall well-being.
You may find yourself in a situation where you're practicing on automatic pilot, which could be frustrating for both you and your clients. Prolonging your career due to a lease obligation could also mean missing out on valuable time with family, exploring other interests, or enjoying the retirement lifestyle you've worked so hard to achieve. If the driving force to continue practicing law is that you still have a lease, you may want to pause and reconsider.
The Right Time for Retirement? Easier Said Than Done
Deciding the right time for retirement is no easy feat, and a lack of certainty complicates the decision-making process. Let’s say you are 65, in good health, and know that you’re not ready to retire. But you aren’t completely sure when you will be ready, and your lease is expiring. Now what? Do you sign on for five more years and keep your fingers crossed?
There is no simple answer. But flexibility is the key.
One option is to negotiate a lease term for less time. Sure, you may have to pay more per month, but it will give you more options. If your landlord is resistant to a shorter lease, consider negotiating a break clause, which allows you to exit the lease early with a specified amount of notice.
Another tactic is to secure a year-to-year renewal option, which gives you the flexibility to stay or go based on your retirement readiness. Financially, the slight increase in rent from a flexible lease pales in comparison to the potential cost of being stuck in an office you no longer need. Flexibility in your lease is an investment in your freedom to retire on your own terms.
You may have to move offices to find a short-term lease. Yes, it’s a hassle. However, it’s a minor inconvenience compared to the potential challenges of being tied down by a long-term lease.
Retirement Risks Tied to Long-Term Leases
Here are two scenarios you’ll want to be aware of before you sign a long lease as you near retirement.
Health emergency: As you age, the likelihood increases that you or your spouse will have a health crisis, requiring you to reduce your working hours or retire altogether. While this might seem like a distant concern in your 40s or 50s, it becomes a more realistic scenario as you enter your 60s and 70s. Being tied to a long-term lease could complicate your ability to step back from your practice, leaving you in the difficult position of juggling a business you can no longer fully manage.
Unforeseen Business Changes: A number of events that are partly or entirely outside of your control could negatively impact your business, such as:
- The loss of a major client
- The departure of a key staff member
- The economy moves in a direction that threatens your practice area
- New legislation or a court ruling adversely impacts your practice area
In the past, your practice may have easily rebounded. But such turnarounds are usually measured in years, not months. Do you really want to expend all of that effort, just to retire as soon as you start reaping the rewards?
Financial Implications of Sticking With A Lease vs. Retiring When Ready
The decision to cling to a long-term lease instead of retiring when you’re truly ready can have significant financial consequences. If you delay retirement simply to avoid breaking a lease, you may find yourself paying for office space you no longer need, eating into your retirement savings or practice revenue. This additional overhead can reduce your personal financial flexibility, especially if your practice income starts to decline as you approach retirement age.
Moreover, delaying your retirement may impact the sale value of your practice. If you stay in the game too long, clients may notice a decline in your energy or the quality of your services, which can erode your practice’s reputation. Potential buyers are often wary of acquiring a firm that appears to be in decline, which can reduce your ability to sell at a premium price.
On the other hand, if you retire on your own terms—when your practice is thriving—you stand a much better chance of attracting buyers who are willing to pay top dollar. While the immediate costs of breaking a lease might seem steep, the long-term financial advantages of retiring when ready, both for yourself and for the value of your practice, far outweigh the risks of sticking with an unnecessary lease.
Time To Put Those Lawyering Skills to Work
At the end of the day, deciding how to handle a lease as you approach retirement is nothing more than a calculated risk assessment—something lawyers are naturally skilled at. Just as you would advise a client to carefully evaluate their options before making a critical decision, the same logic applies to your own retirement planning. Weigh the pros and cons, assess the long-term implications, and ensure that your decision aligns with your personal and professional goals.
If you neglect this crucial step, you may find yourself in a situation where your landlord, not you, is deciding when you retire. Taking control of this decision not only gives you financial peace of mind, but also ensures that your retirement happens on your terms, when you’re truly ready, rather than being dictated by an arbitrary lease expiration.
Make Sure Your Retirement Is on Your Terms, Not Your Landlord’s
From leases to financial planning, retirement has many moving parts. I’ve navigated these waters with hundreds of attorneys and can help you ensure everything is in place for a smooth transition.
If you’re interested in professional guidance, reach out to me directly at 612-524-5837 or connect with me online and together, we’ll figure out a plan that works for you—not your landlord.
