Oklahoma Bar Journal

Life Is a Zero-Sum Game - Have you Solved Your Save-Spend Balance?

By Christine Hotwagner

A zero-sum game is a situation in which one person’s gain is equivalent to another’s loss, so the net change in wealth or benefit is zero. For example, let’s look at your typical poker game. The first round of poker begins with each player placing a specific amount of money into the center of the table (the pot) based on how competitive they think their hand is compared with the other players. The game continues around the table until all players have either placed money into the center or folded. Once all money is placed, the players’ hands are revealed and the player with the winning hand takes the pot. That player’s gain is therefore equivalent to all other contributing players’ losses and the net gain for the group is zero.

Unlike the name would suggest, zero-sum games are actually very real. As human beings, there are limitations on our time, money and energy. We do not get an endless supply of these things every day. When deciding how much of something — your time, your money, your energy — to use or give out, you are making the decision to take from one area of your life and give to another. You are continually evaluating how compromises may play out, hoping the ultimate outcome will strike a balance that gives you comfort and reward.

When we think about the term “work-life balance,” aren’t we basically talking about a zero-sum game? Every day we have to make the decision between how much time and energy we put toward our work and our careers and how much time and energy we dedicate to our “life” — whether that be our health, our families, our homes, our pets or our sports and hobbies. When we make that decision in favor of our career, we are essentially taking away from our personal life, and vice versa. It’s a delicate balance and one that is different for everyone, depending on careers, ambitions, expectations, characters, stages of life, etc.

This search for balance is no different for lawyers and legal professionals, and in fact some may argue that achieving this balance is even more difficult for these professionals. Traditionally, legal professionals tend to be very committed to their careers. They spend long hours in the office during the week and often work nights and weekends as well. Since they can essentially do their work anywhere and at any time, traditional office hours don’t apply. The essence of the zero-sum game for lawyers likely manifests itself in the number and complexity of work and life obligations while bound by the irrevocable fact there are only 24 hours in each day. Since the speed of the earth’s rotation onto its axis isn’t likely to change anytime soon, the work and life trade-off becomes more difficult to manage when there is more work to get done and just as many personal matters to attend to.

We can draw many parallels between achieving work-life balance and achieving financial balance, where saving and spending are at odds. In each case, there is a finite amount available — time in the case of work-life balance and money in the case of save-spend balance.

In effect, saving for retirement is also a zero-sum game. Every dollar we choose to save now is a dollar we choose not to spend on the latest cellphone, a new outfit or a night out on the town. The save-spend balance is further complicated by the fact that the rewards are not necessarily delivered under the same time table. Typically, spending comes with instant gratification. In the case of saving however, the reward is typically delivered at some point later. And when saving for retirement, the reward may not come for several decades.

It’s no secret that we humans have a tendency to value short-term rewards over longer-term rewards, even when mathematically they are worth the same. The further away the reward, the more we tend to discount it. This is the concept of hyperbolic discounting.

How does it work? Assume someone has the choice between $20 now and $100 tomorrow. Most will wait a day and collect the $100 reward. But what if I were to offer you $20 now or $100 a year from now? Turns out many people will opt for the $20 now, discounting the value of a larger reward because it is so far into the future. Expressed another way, hyperbolic discounting is a person’s desire for an immediate reward rather than a higher-value reward at some point later.

You don’t have to be a lawyer to understand this concept, because it affects everyone the same. That’s why legal professionals, just like the rest of us living in today’s society, struggle to plan ahead and save adequately for retirement. So what can you do now to help ensure you’ll have what you need tomorrow? The short answer is take action today!

Planning for retirement also falls into the zero-sum game concept. What can you do to help plan for your retirement? Consider establishing a retirement plan. As a solo practitioner or small firm owner, you need to understand your responsibilities as the plan sponsor if you establish a retirement plan for your firm. There are eligible employees you need to factor into the equation, as well as saving for your own retirement.

The “spend now or save now” decision is not the only challenge we face when it comes to planning and saving for retirement. One of the biggest challenges is whether or not we have access to a retirement savings plan to begin with. Statistics have shown that people are much more likely to save for retirement if a 401(k) plan is available to them through the workplace. However, access to such plans has been a difficult hurdle to overcome when it comes to smaller employers, who typically choose not to sponsor a plan. Of all small employers — those with 10 or fewer workers — only 16.5 percent sponsor a retirement plan, according to an Employee Benefit Research Institute estimate. This is especially noteworthy in light of the fact that, according to the latest statistical report by the American Bar Foundation, nine in 10 lawyers work for firms that have fewer than 10 attorneys. The propensity for law firms to be small means most law professionals do not have access to a workplace retirement plan.

If you’re like most working Americans, you see your 401(k) plan as the cornerstone to your retirement savings. But if you’re not, and you believe you’ll never retire from practicing law, consider this: one in five retirees does not retire on the planned-for date because of illness or health issues. One of life’s realities is that with old age comes a variety of health concerns which may impact your ability and willingness to practice law. Often law professionals are forced into retirement owing to ailments or health conditions. The uncertainty about what your health has in store for you down the road is cause for planning. So, whether you plan to retire or not, consider just a few simple tips that can help you be ready to retire with the dignity and financial security you expect and deserve.

Tip #1: Participate in Your Retirement Plan

If you haven’t yet enrolled in your 401(k) plan, make it a point to do so now. People are living longer now than ever before. According to a report by the U.S. Census Bureau, the United States is projected to have 9 million people above the age of 90 by 2050 – up from 1.9 million in 2010 and only 720,000 in 1980. These statistics illustrate that our nation’s 90-and-older population has nearly tripled over the past three decades … and is projected to quadruple over the next four decades. These longer life spans coupled with rocketing health care costs, the uncertain future of Social Security and the decline of public pensions means individuals are increasingly responsible for finding their own path to retirement income adequacy.

Contributing to a 401(k) plan can put you on the right track to be able to fund your retirement years. The money you contribute is tax-deferred from both federal and state income taxes, which means you don’t pay taxes on the contributions until you withdraw the funds, typically at retirement age. Furthermore, contributions to the plan are deducted automatically from your paycheck, making the process seamless for you.

For law professionals, this tip is especially important. The law profession is characterized by busy, time-consuming schedules with little time for planning outside of work. As a result, law professionals compulsively push off the decision to start saving. As inertia sets in, many people are left feeling as if their bank account is a ticking clock and too few years remain until retirement.

If you’re unsure about how to get started, take advantage of the many helpful online interactive experiences and resources available to you, such as Voya’s myOrangeMoney retirement calculator available at voya.com. These tools offer an easy way for you to determine how much you need to save to reach your retirement goals, how different contribution rates may impact your retirement savings and when you can afford to retire.

Tip #2: Take Advantage of Matching Contributions

If your retirement plan offers a company match, take advantage of it! This valuable benefit requires that your employer match your contributions – typically capped at a percentage of your pay. For example, a company may offer a dollar-for-dollar match up to 3 percent of pay or a 50 percent match up to 6 percent of pay. Find out what your employer will match and, at the very least, contribute enough to take advantage of the match.

Many law firms will offer generous matches and sometimes profit sharing plans where the employer has discretion to determine when and how much the company pays into the plan. The amount allocated to each individual account is usually based on the salary level of the employee.

Tip #3: Make Catch-Up Contributions

If you are age 50 or older (or will be by the end of the calendar year) and your retirement plan allows, take advantage of the “catch-up” provision. Legislation has made it easier for you to save more for your retirement with the “catch-up” provision outlined in the Pension Protection Act of 2006. In addition to the general deferral limit of $18,000 for 2016, you can contribute an additional $6,000 for a total of $24,000. This means if you are 50 years old this year and haven’t started saving for retirement, you can contribute nearly as much as $250,000 over the next 10 years — tax-deferred — to your 401(k) plan. When you consider the potential of compound earnings, this can add up to significant savings.

Tip #4: Keep Your Savings Working for You

Even if the plan allows you to borrow from your plan, think twice before doing so. Although it may sound appealing, borrowing from your 401(k) reduces the benefit of tax-free compounding that is the key to building up savings. Before you make the decision to take a loan, there are a few considerations to take into account:

  • You will pay interest on the loan with after-tax dollars, thereby losing the tax advantage.
  • You will pay taxes a second time when you eventually withdraw the money in retirement.
  • Interest on the loan is not tax-deductible, even if funds are used for a home purchase.
  • Most loans must be paid back within five years, but if you leave your job, the loan must be paid back in full immediately or the amount becomes a taxable withdrawal.
Tip #5: Invest for the Long Term

Once you set your investment allocations, be patient. Predicting the market is not like predicting the weather. There are no high-tech gadgets or radar systems to predict the highs and lows that may lie ahead. It’s critical to remember that what is important is time in the market, not timing the market. Discipline yourself to maintain your allocation through down markets as well as up markets. Having a properly diversified portfolio will help make any market swing easier to digest. Conduct an annual review of your plan to confirm your allocations still align with your life stage and economic circumstances.

Tip #6: Spend Time With a Financial Professional

According to Voya research, those who spend time with a financial professional save more than their peers and have greater investment knowledge and confidence in their ability to enjoy retirement. If you have never received help from a financial professional before, this assistance is something to consider pursuing.


We’ve discussed two of life’s zero-sum games — work-life balance and save-spend balance. Both are similar in that they require you to make compromises. To what degree you are willing to compromise is up to you. When it comes to saving for retirement it’s important to understand how spending today may negatively impact your ability to retire comfortably in the future. You don’t have to put away half of your income every month, but you do have to make sure that what you are putting away will adequately cover your needs once you reach retirement age. Do you want to live in financial security in retirement? Travel? Live in the home you want? Have enough to pay for health expenses? If so, then you need to value your save-spend balance as much as you do your work-life balance.

Christine Hotwagner is program operations director for ABA Retirement Funds, an affiliate of the ABA, dedicated to helping lawyers with their retirement by providing fully bundled retirement solutions for law firms of all sizes. Established in 1963, the organization has more than 3,800 law firm retirement plans, 38,000 participants and over $5 billion in assets in the ABA Retirement Funds Program.

Originally published in the Oklahoma Bar Journal -- OBJ 88 pg. 449 (March 11, 2017)