At the risk of going out on the proverbial limb, I’m going to make a bold statement: We have a serious issue emerging in sports world, and it’s called retirement preparedness. Statistics show that 60% of NBA players are broke five years after their playing days are over. So, why are athletes so unprepared? Of course, the recent market downturn is playing an enormous role. But the truth is, players could be more prepared had they a better understanding of today’s changing retirement landscape and the unprecedented challenges it poses.
With the future solvency of Social Security uncertain and traditional pensions becoming a luxury of the past, the burden of financing retirement shifts squarely to the shoulders of individuals. Adding to this burden are three financial risks that make retiring today more challenging than ever.
Challenge #1: We’re Living Longer
An athlete must realize life doesn’t end at 40, 45, or 50 years old. This means that they could be preparing for retirement that lasts at least 30 years or more. Somehow, one needs to fund this “newly extended” retirement. They’ll need an income source that can help reconcile the notion of longer life with quality of life.
Challenge #2: Rising Costs
When referring to costs of living, the old adage, “what goes up, must goes down,” is generally not a good rule of thumb. Expenses in retirement will tend to keep rising, which means an athlete will need a well-conceived retirement income plan to help account for these increases. Even at a relatively modest rate of 3%, inflation can diminish one’s purchasing power considerably over time.
Challenge #3: Market Uncertainty
The last few years have been a sobering reminder of how short-term volatility can affect retirement portfolios. Volatility poses one of the biggest threats to one’s retirement savings because a downturn just before or after retirement can be devastating to one’s portfolio. It can literally takes years to recover from losses; precious time one may not have.
It’s important to find a licensed financial professional who will work with the athlete to create an income plan that meets their needs and goals. Armed with knowledge, foresight and the guidance of a reputable advisor, the athlete can address today’s retirement challenges and work toward securing a more comfortable and rewarding future.
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.
This article originally appeared on the Sports Agent Blog.