Why Judge Sotomayor Should Save More

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When it's time to retire, a great career in any field means little if you didn't save enough.

So when it comes to savings, even legal eagle Sonia Sotomayor is not free from judgment.

After President Obama nominated the U.S. Court of Appeals judge to the Supreme Court her saving habits became the center of intense speculation.

As The Washington Post reported last week:

Sotomayor, an avid Yankees fan, lives modestly, reporting virtually no assets despite her $179,500 yearly salary. On her financial disclosure report for 2007, she said her only financial holdings were a Citibank checking and savings account, worth $50,000 to $115,000 combined.  During the previous four years, the money in the accounts at some points was listed as low as $30,000.  When asked recently how she managed to file such streamlined reports, Sotomayor, according to a source, replied, "When you don't have money, it's easy. There isn't anything there to report."

The above news nugget led to blog attacks on Sotomayor. The sharpest crticism came from Harvard economics professor Greg Mankiw, who declared Sotomayor is a "spender" who "lives paycheck to paycheck" and who would have "shocked and appalled" Mankiw's dear old grandmother because the Supreme Court nominee apparently saves so little.

But it's possible Sotomayor already has six figures or more squirreled away in her Thrift Savings Plan. Money in that account, which is a version of the 401(k) for federal employees, does not need to be publicy reported, as Mankiw eventually acknowledged.  (You can check out the last few of her financial disclosures here.)

Another econ professor, J. Bradford DeLong from U.C. Berkeley, retorted that Sotomayor's finances are fine. DeLong says she has about $1 million in equity in her Manhattan condo and her pension is worth $2.5 million, though he doesn’t source either of those figures.

For fun, let’s assume for the moment that the Post’s unattributed Sotomayor quote is true, and she has no real savings.

At almost $180,000 a year, it would be ridiculous for someone not to put any money away. It flies in the face of everything we preach here at MainStreet.  Given she doesn’t have children, $180K is a lot of money, even in pricey New York City. We're kind of fantasizing about her saving habits coming up during confirmation hearings.

If Judge Sotomayor isn't saving, it may have something to do with the fact that, as a federal judge, she can keep her job for as long as she wants. And when she does retire, she is, in fact, guaranteed a nice pension for life. So why save?

Well, when it comes to saving, we at MainStreet advocate a more conservative approach. Here's what we would tell the high court nominee:

Remember, Your Honor, ideally your pension is just one of three legs of your retirement funding strategy. The other two are Social Security (which will hopefully be around when you retire) and your savings.

Consider this: You’ve been on the federal bench for about 11 years, which means your total income over that period has probably been just under $2 million. If you had put away just 10% of that, you’d have banked $200,000, and that’s not counting all that delicious compound interest.

Now, if you land the Supreme Court gig, you’ll get a nice little raise. You’ll make $208,500. (Beyond that, you’d be moving from New York to Washington, D.C.. If you live in the city proper, you’ll have about $70,000 more in disposable income including your raise, according Salary.com’s Cost of Living Wizard.)

We think it would be wise, and we hope you’ll agree, to start saving more. With federal budgets being what they are, you never know what could happen to your pension. So, assuming you get the new job, why don’t you start putting away the difference between your current salary and what you’ll make at the high court? That’s $19,000 a year. If you could swing that, all of our savings objections would be overruled.

 

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