FREE PHONE CONSULTATION
(408) 293-0344

Blog

Estate Planning Attorney Guide for Retirement

An estate planning attorney needs to counsel his professional athlete clients to protect themselves in the long-run

Financial Curve Striking Players Out After the Game Ends

It’s the ninth inning. Two outs. Bases loaded. Full count. Down by three. You’re at bat. The pitch. Hit! It could be. Going. Going… Whatever the sport, this “game-winning” scenario is played-out in the minds of millions of American youth. While most of us will never step up to the batter’s box at Fenway, for some the dream becomes reality. One of the difficulties facing an estate planning attorney for paid athletes “living the dream” results from their relatively short playing careers and long retirements that can stretch 5 decades years or more. The concepts an estate planning attorney employs for his professional athlete clientele is applicable to anyone that wants to maintain their standard of living after their career ends and protect their loved ones on death. Calling all dot-comers! You too, wealthy young entrepreneurs! You need an estate planning attorney to prepare a comprehensive estate plan that covers your health and financial interests during life and avoids probate on death.

A competent estate planning attorney counsels clients (especially pro athletes due to poor track record) to avoid risky investment deals during life, so their financial well-being is maintained after their high-paid career is over. A CPA and CFP should also be “drafted” as part of the financial team. The estate planning attorney will work side-by-side with the other financial professionals and prepare estate planning documents to ensure the athlete’s financial and health interests are covered during life in the event of incapacity and probate is avoided on death. Why is forming a team to plan ahead so important? Statistics show that a large majority of people run-out of money in the golden years. Professional athletes are especially prone to run-out of money in retirement. According to the ESPN documentary “30 for 30: Broke,” 60% of former NBA players are broke within five years of retirement, while  78% of all former NFL players have gone bankrupt or are under financial stress within 2 years. The problem isn’t limited to athletes. The numbers for us lay people is equally staggering with less than 50% of American taking steps to plan for retirement – a large amount of which are scraping the piggy bank in the elder years like athletes. If athletes with incredibly large salaries find themselves in financial stress after the game ends, how are we lay people supposed to plan for the future?

History & Current Major Sports Retirement Plans

Estate planning attorneys need to counsel clients on how to prepare financially for long retirement

In addition to the estate planning attorney retirement tips below, most employers provide pension plans. Professional sports employers are no different. The first step for any employee planning for the future is to check to see if they’re covered by the plan and understand how it works. Requesting a benefit statement is a good place to start. Let’s examine the type of retirement plans offered by three of America’s favorite sports – MLB – NFL & NBA – to see how enlisting the services of an estate planning attorney as part of the financial team can help to maintain the standard of living of a professional athlete (and anyone for that matter…) long into retirement.

Major League Baseball (MLB) – America’s Pastime

Major League Baseball (MLB) was the first U.S. sport to have a pension plan starting in 1947. Who’s covered? Until recently, pre-1980 players only received a pension after playing for 4 years. The problem? Roughly 20% of pro baseball players don’t get past a single year of play-time. Today, MLB players become eligible for the minimum pension after just 43 days of service and starting at the age 62, ball-players with at least 10 years of service accrue full “joint survivor” pension benefits of $200,000/year for life.

MLB members with four or more years of service can also continue their healthcare coverage at a cost of 60% of their chosen plan. Talk about savings. While MLB covers some of healthcare costs of its players, what’s not detailed is who will carry-out the type of healthcare the player desires or needs in the event that he or she becomes incapacitated. An estate planning attorney can prepare an advance healthcare directive to ensure the player’s lifetime healthcare needs are covered in the event of incapacity. Moreover, a qualified estate planning attorney can create a comprehensive estate plan, including a revocable living trust to avoid probate and minimize estate taxes on death.

National Football League (NFL) – Stands for “Not for Long” Career

The National Football League (NFL) instituted a pension in 1959, which credits players for each season played and vests after 3 “credited” seasons. The good thing? The average pro football career is 3.5 years, so most NFL’ers are eligible. It works like this. Each “credited” season between 1998 and 2011 equates to $470 in pension retirement funds. The total monthly pension received on retirement equals the sum of all credits. So, a player with seven credited seasons between 1998 and 2011 would receive a lifetime monthly pension at age 55 of $3,290 ($470 x 7). The NFL also provides a 401(K)-type plan called the NFL Player Second Career Savings Plan, which provides an “employer match” of up to $2 for every $1 contributed by a player with at least two credited seasons of play. The maximum match allowed is $24,000 through 2014, rising incrementally to $28.000 in 2020. If that wasn’t enough, a special program unique to NFL players is called the Player Annuity Program – in which players receive benefits after four seasons. The contribution amount per season from 2011-2013 is $65,000, increasing to $80,000 in 2014-2017, and $95,000 from 2018-2020. Players can choose to receive this benefit as early as age 35 as a monthly annuity or annual installments.

Can you say income tax implications? Enlisting a team of financial advisors that work together with an estate planning attorney will help to save money now and avoid probate on death.

National Basketball Association (NBA) – “Swish” – 3 Points

The National Basketball Association (NBA) has one of the most generous pension plans of all professional sports. Swish! Basketball players are vested into the pension plan after 3 seasons of play. The minimum benefit (3 years of play) for a player that retires at the age of 50 (average retirement age) is $19,160 per year, while a retiree with 10 years of service or more collects $63,866. Players with 3 years of play that defer collection until age 62 receive $60,000/year, where those with 10 years of service or more collect $200,000 (the max allowed by law). NBA players also have an optional right to enter into 401(K) plans whose contributions are matched by the NBA up to 140%. Like any employment-based retirement program, there is some strategy to employ here as there are dramatic benefits to deferring collection and contributing to the 401(K). .

Estate Planning Attorney Retirement Tips

Recent studies found that over 30 percent of private industry workers (higher percentages amongst athletes) did not participate in defined contribution plans  – like 401(K)’s. The average American spends 20 years or more in retirement and will need 70 percent of their pre-retirement income during those years to maintain their standard of living. It’s imperative to follow some basic estate planning attorney tips and advice on how to thrive after the lights go out.

Tips of an estate planning attorney on how to save for retirementStart Saving, Keep Saving & Stick to your Guns

  • Save. Save. Save. If you’re not, start. If you are, don’t stop. How much should you save? That’s where your team of professionals come into play. Talk to your estate planning attorney to field the right team. Remember. The sooner you save, the more your money grows and the more you’ll be able to enjoy retirement.

Contribute to Employer’s Retirement Savings Plans

  • If your employer has retirement savings plans {such as a 401(K)} – that means you, Lebron and RGIII, first figure out the details and then contribute as much as possible based on benefit. Over time, compound interest and tax deferrals make a huge difference in the amount accumulated.

Don’t Touch that Dial – Or, Your Retirement Savings Either

  • If you withdraw retirement savings now, you’ll lose principal and interest & tax benefits, and may incur withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA or your new employer’s plan.

Put Money into IRA

  • Take out an IRA and contribute the maximum allowed now ($5,500/yr) until 50 years old (at which point you can contribute $6,500/yr). There are more than just tax advantages here. Time to talk to your estate planning attorney and financial team.

Create a Comprehensive Estate Plan with Revocable Trust

About Sean Hanley

Practicing law since 2007, Sean specializes in the ever-changing laws related to real estate, business and estate planning. Embracing technology with a focus on personalized service, he understands the challenges of living and thriving in Silicon Valley. Tapping into his education in economics and business administration, Sean also serves on the non-profit Willow Glen Business Association.

Speak Your Mind

*