Those winning gold not always assured of a golden future

With the Olympic Games in full swing, many of us will look on with envy at the glamorous lives that the world’s top athletes and sport stars appear to lead. And while many of them do indeed amass fame and fortune during their careers, a significant number

This situation is highlighted by the fact that in the US, sixty percent of NBA players become financially insolvent within five years of leaving the league, a statistic which has recently resulted in the NBA deciding to allocate $34 million, or 1 percent of basketball-related income from last season, for investment in an annuity for players’ retirements. In the next NBA season, 5% to 10% of players’ salaries will be put toward their financial security after they leave the league.

According to Olabode Olajumoke, Health Actuary at Aon Hewitt South Africa, one of the biggest challenges facing many professional sportsmen is that they often reach their peak earning power at a very young age, a time when they are unlikely to be thinking of planning for their golden years.

“As sports people have relatively short careers, it is conceivable that the thought of funding for retirement has not yet crossed their minds. The mid-term thinking is what they would do after retirement from sports, which is usually a good 20 years before normal retirement age.”

Olajumoke says another difficulty facing sportsmen is not understanding for how long they will be able to fund a retirement benefit, or how much they can contribute to it. “Unlike most people, who can be fairly certain about the duration of their careers, very few sports stars can predict when their glory days will come to an end. Very often, this end comes prematurely due to either injury or loss of form, leaving many without the skills or experience to successfully earn an income in another field.”

As a result, says Olajumoke, they should be saving a significantly higher proportion of their earnings than people who are fairly certain that they will be able to continue working in their respective careers for several decades.

He says it is critical that professional sportsmen ensure they put in place a sound financial plan early in their careers. “This could involve contributing to a retirement annuity or, as in the case of the NBA, ensuring that their respective association is contributing to a retirement fund on their behalf.”

Since sports people are generally in the very high income bracket, the need for financial advice is magnified as they may need to look beyond just traditional post-retirement investment options. “For example, it might be worth including income generating investments like bonds and real estate which help supplement any retirement income from an annuity or other investments.”

He adds that sporting associations should also take it upon themselves to embark on a contributory programme for their sports men and women, as well as ensure they are equipped with the necessary knowledge to maintain a sound financial position well after they leave the field, for example, by providing their athletes with financial advisers at their disposal. In the case of amateur Olympic athletes, the need for the sports association to assist in financial planning is more immediate.