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It has been well chronicled that 60% of NBA players are broke five years after retirement. Is the reason for this due to the fact that they do not save, do not plan adequately, are not advised properly, a combination of everything, or maybe that they just do not understand the numbers involved to keep up their lifestyle? No matter whether you are an NBA player or someone who has worked a 9-5 job for years, it is important to consider your retirement options, as this will hopefully help make the decision process of retiring a lot less stressful.
Let’s take a look at the numbers and see if your clients comprehend the effort it takes to support their current lifestyle.
Assume the following: A) A 23 year old, B) Current salary of $4,000,000, increasing by 3% annually until age 31, C) Saving $500,000 the first year, increasing by 4% annually, D) An inflation rate of 3%, E) An investment return of 5% as well as a post retirement investment return of 5%, F) Income replacement at retirement of only 25%, and G) A retirement age of 32. Figuring the individual would easily live a minimum of 40 more years (until age 72), the client will run out of money by age 38. Hence, the support evidencing why players are broke five years post-retirement. Planning for retirement is essential as you will want enough money to live comfortably, you can look at other devices too such as wheelchairs to help support you, having a comfortable and supportive chair will make your retirement life a lot easier and exciting. You never know what retirement might throw at you, so having your finances in order would be a great way to begin your retirement years. If you aren’t sure what your retirement plan looks like you may want to use something similar to this roth ira calculator to find out.
In order to assist players the best way possible, it is imperative to instill upon them a dose of reality. Retirement does not necessarily start when playing the sport ends…athletes must plan on doing something else if they can no longer play the game. Moreover, by placing their savings into something guaranteeing a minimum income at some point in the future, they can at least be prepared for a worst case scenario. They then would know that at least some income will be assured for the rest of their lives.
Disclosures. The information contained herein is neither an offer to sell nor a solicitation of an offer to buy any security. Past performance is not a guarantee of future results. Further, the information herein is intended solely to provide general information and does not constitute a promotion of any offerings or products. Donald J. Kushner is an independent financial advisor with Arque Capital, Ltd., and does business as DK Sports Financial. Arque Capital, Ltd., and DK Sports Financial are unrelated entities. Securities offered through Arque Capital, Ltd. 7501 E. McCormick Parkway, Suite 111 North Court, Scottsdale, AZ 85258. (602) 971-9000. Member FINRA/SIPC. Any unauthorized reproduction of this information is strictly prohibited.
