I had more money on paper than ever before, yet I had more nerves than ever before. Yeah, that was me right after retiring from an 11-year MLB career.
You see I had set out to avoid being one of the statistics we all see in the news, "Athlete loses everything".
What I missed in my crusade to not become "that guy" was that retirement planning for professional athletes entails far more than just being smart with money.
Wealth management for professional athletes is part art (emotional side) and part math (numbers side). Combine those two things with planning strategies specifically for professional athletes and you have a recipe for success.
Everyone sees the big numbers you can earn as a professional athlete...what do I see?
The decades of life you have left after closing the chapter on your playing career.
In this blog, I am going to talk about the emotional side and the numbers side of retirement planning for professional athletes.
Retirement Planning For Professional Athletes
The magnitude of a decision to stop something you have been doing your entire life cannot be understated.
I remember being on a plane coming home from South Korea and thinking, "This is it". That one decision led to a host of new problems that needed to be solved.
You see, retirement planning for professional athletes is an endless Rubix cube. The range of outcomes for players is endless but there are certain frameworks to guide your decision.
As a professional athlete, your financial team needs to understand both the elements of retirement planning for professional athletes ~ emotional and numbers.
Let's dive into both ⬇️⬇️⬇️
Retirement Planning (Emotional Side)
What makes the news is when a former professional athlete is facing financial troubles post-career. Yet, what often doesn't make it is the fact that those troubles stem from the emotional side as much as the numbers themselves.
Let me say it out loud for everyone, transitioning to a post-career life for us as professional athletes is hard.
Like really really hard...
I say that because you shouldn't feel alone in this journey. It is hard for everyone and anyone who says otherwise probably isn't giving you the whole truth.
For me, it took months of thinking, a few years of checking boxes I didn't want to, and pushing through many days of doubt to be in the place I am today.
That place is filled with purpose, hope for the future, and a business exploring one of my passions.
Here are the three biggest emotional challenges I had to navigate (and how to think about each).
When To Stop
I remember when I first got drafted, a fresh faced 18 year old in locker rooms with journeymen in their mid-thirties. I thought one of two things ~ "I can't believe those guys are still playing" or "That will never be me".
Fast forward 11 years and I was that guy... a journeyman heading to South Korea looking to further my career any way I could.
At the end of another subpar season, I found myself asking that dreaded question, "Should I stop or keep going?"
You see I had seen guys continue for years only to find themselves in independent ball essentially paying to still play yet on the flip side I had seen many of those same guys revive themselves.
For me, it comes down to this simple question: "Is my heart still in the day to day grind it takes?"
If it is then keep going, you have plenty of time "to do normal life".
If it isn't then be real with yourself, you can have an incredible second chapter.
You see stopping your playing career is a personal choice. I stopped at 29 when I had certainly had more physically in the tank yet mentally my heart wasn't there anymore. I would have been doing myself and the game a disservice by continuing on.
Shutting Off The Tap
We were in San Francisco and I remember checking my bank account and seeing my first two-week paycheck hit as a big leaguer ~ tens of thousands of dollars.
I remember thinking...so in two more weeks I will get this again.
The money tap was flowing and it can quickly create a false sense of reality as a professional athlete.
One of the biggest challenges many athletes face (me included) is when the tap shuts off and you start pulling money from your nest egg.
I cannot stress this enough, you need to work with your financial team to gain a clear understanding of how you will access money in the next stage.
For us at Moment, we think about athlete's money in three buckets:
War Chest
Growth Portfolio
Aspirational Bucket
I will tell you this now, no matter what the numbers say, it will feel weird not making a paycheck.
You need to be ready for that and clarify what money is in which investments.
What Is Next
Remember how I posed the question, "Is my heart still in the day to day grind it takes?"
Well, the biggest reason most athletes play on even when the answer to that question is no is that answering ~ "What is next?"....... is even scarier.
I have to think it is a bit like a college student ready to graduate without a clear job lined up. The jaws of life are staring you in the face and the only thing for certain is uncertainty.
Here is my 5 step framework for determining what is next:
Dip Your Toe In ~ You do not have to have the next several decades of your life figured out weeks after moving on. You do need to be taking baby steps in that direction though.
Lean In ~ The biggest mistake I see athletes make here is failing to be vulnerable. Look you don't have it all figured out and the minute you let those around you know...they want to help.
Be Curious ~ Make a list of everyone in your network that you deem "successful". Ask them if you could buy them lunch and learn more about their story. Remember step 2 (lean in) and ask them this question, "If you could do it all over again, would you?" That one question will provide you incredible insight into their current role, the path to get there, and if it is something worth exploring.
Skills Over Money ~ If you can swing it financially, take the first role that allows you to gain skills not the one with the highest comp package. You will thank yourself in a few years.
Go All In ~ It will take work (a lot of it). There is no easy path to carving the second chapter as a professional athlete. You need to find something you can commit to (just like you did sports).
The frame in which I think about the second chapter is this:
Imagine sitting around the fire pit in 20 years and the conversation turns to what you do. I want to be talking about what I am doing now, not the stuff I did (while still cool) 20 years ago in professional sports.
Athletes do not underestimate the emotional side of retirement planning.
Moving on from your sport will hit you like a ton of bricks ~ that is normal.
Just understand it is up to you to start carving out the next chapter.
Retirement Planning (Numbers Side)
The first few years of retirement as a professional athlete are everything. If you can nail the first 3-5 years it will compound for decades into the future.
The reason is simple ~ establishing a clear framework for saving, spending, and investing money in this next chapter is everything.
If I have learned anything guiding professional athletes into retirement it is this ~ no two situations will look the same.
On top of that, your situation will continue to change and evolve through the years.
While there are countless things for professional athletes to consider with retirement planning, here are the three key building blocks.
The Snowball
Picture this....you are pushing a snowball up a mountain, as it nears the top it is heavy, hard work. Yet as it peaks the cliff it starts tumbling down the other side picking up snow along the way.
The hardest thing to do in wealth building is to create the initial snowball.
Do that while you are playing and watch it pick up speed into retirement.
The number one thing I want you to understand as a professional athlete is you will need more money in your snowball than you think.
Remember our goal is to keep the snowball intact (and growing) while you in retirement.
To do that, we need to determine the "safe withdrawal rate" or how much money we can use every year without our snowball getting smaller.
A good baseline for a professional athlete is 3% per year.
Example: For every $1,000,000 an athlete has saved they could spend $30,000 per year without touching the initial principal.
***There are endless scenarios here that are specific to each athlete but I want you to understand this point ~ you need more than you think.
Inflation is real.
Your time horizon is long.
The nest egg needs to support your entire life.
The Tax Game
As a professional athlete, your largest lifetime expense is your tax bill.
Chances are you have been camped in the top tax bracket (37%) for much of your playing career.
Well, the good news with retirement is those big tax bills are about to come down.
Your income will drop (at least at the start) giving you the optionality to position your money for the future.
Some of the most common moves we see our athlete clients use when nearing or in early retirement are:
Roth Conversations
Taking Capital Gains
Repositioning Investments
Bunching Together Donations (end of career)
Switching Bond Incomes (tax-free vs taxable)
The list is endless so understand that you have the opportunity when nearing or in retirement to save serious money off your lifetime tax bill.
It is why I can't stress enough working with specialists in athlete wealth management.
Understand this ~ not all investments and investment accounts are the same. They are each taxed differently, treated differently, and should be positioned differently.
Doing this right early in retirement will help you keep more of your hard-earned money.
Source of Income
We serve athletes across the spectrum of earning money in the second chapter.
Some want to
Some need to
Some have the option to
Whether you are an athlete retiring with six, seven, eight, or nine figures in your nest egg you need to understand sources of income.
The two biggest reasons are this:
Taxes matter
Supplemental income matters
Income coming from your investments will be taxed at capital gains rates.
Income coming from traditional sources (W2 and 1099) will be taxed at ordinary income rates.
Capital gains rate max out at 20% (plus 3.8% NIIT)
Ordinary income tax rate maxes out at 37% (federal)
How you are "earning" the money you will ultimately spend in retirement depends heavily on how it is taxed.
The second piece is supplemental income.
We know we will have some (or most) of our income coming from our nest egg. Yet many athletes underestimate how big of an effect supplemental income can have.
Example: An athlete with $10,000,000 saved has a baseline spending of $300,000 per year. If he earns $50,000 in supplemental income for work in retirement that increases spending by nearly 20%!
Athletes I say this because I run across clients who think, "Oh a little extra income won't make a difference"...it does!
The types and amounts (even if small in your mind) make a huge difference in retirement planning for professional athletes.
You see when you retire from professional sports, this weird thing happens.
Everyone around you assumes opportunities will be plentiful, yet the reality is your phone has never been more silent.
That is why retirement planning for professional athletes is about as tough as hitting a breaking ball spinning at 3,000 rpm (for those non-baseball people that is an elite breaking ball).
You see one thing only to realize it is going in a different direction.
Time and time again, I see professional athletes overwhelmed by the process without a place to turn.
Frankly, that is one of the biggest reasons I founded Moment Private Wealth ~ To help professional athletes navigate the same complexities I faced before, during, and after my playing career.
If you take one thing away from this post, take this ~ your "retirement" from sports is just the entry into a second chapter of your life.
One that can be as big as your first chapter.
It starts with understanding that this is the starting line, not the finish line.
If you are a professional athlete looking for more confidence in your retirement schedule a call, and talk with a Moment founder.
Not sure what questions to ask, check out this video on 10 questions you should ask when interviewing a financial advisor.
Get in Touch With An Advisor
Frequently Asked Questions
Here are some answers to questions I received frequently about this topic.
Are you a fiduciary? Moment Private Wealth serves clients as a fiduciary 100% of the time.
How does Moment Private Wealth make money? We are only paid in one transparent way, by our clients. We receive no kickbacks or participate in any profit-sharing arrangements. Our fees are simple, transparent, and clear for our clients.
How are you different than other financial advisors? We are specialists in working with professional athletes and entrepreneurs. We limit the number of new clients we take on. This allows us to provide unparalleled value and highly personalized service to professional athletes. We work as a team to service our clients. We believe in building a team of “A” players. This ensures our clients receive world-class tax, estate, insurance, and investment strategies. We focus on educating first, then executing.
Where do you hold my investments and how can I see them? Moment Private Wealth uses Fidelity Investments as a third-party custodian for our client investment accounts. As a third-party custodian, Fidelity safeguards and provides reporting to you and the IRS each year. Clients can also access all financial information via the Moment Private Wealth Client Portal.
How do you work with other members of my team? We believe in the power of the team. For most of our clients, their team consists of Moment Private Wealth, an accountant, an attorney, a banker, and an insurance specialist. We help our clients build out their team of individuals or work with existing partners clients have. Our goal is to ensure every family has a team of experts to protect their interests.
How do you choose investments for clients? As independent financial advisors, we can gather research and make recommendations based on all available options. We determine clients’ portfolios in partnership with some of the largest asset managers in the world. Each quarter, we have calls with teams of CFA (Chartered Financial Analysts) to ensure our clients are receiving the most up-to-date strategies and recommendations.
What does your average client look like? Our clients are nearly all athletes and entrepreneurs. Our average client has a net worth greater than $10M. The strategies, solutions, and planning that we implement have a high-net-worth and ultra-high-net-worth client in mind.
Why should I consider hiring Moment Private Wealth? Great question! But first, let us explain why you shouldn’t hire us. If you’re looking for an advisor who will pitch shiny object investments or be a “yes man” you are in the wrong place. Why? Because we believe in being truth tellers and only giving advice that we take ourselves. The investments, strategies, and planning we do are all things our advisors do with their own money. If you are an athlete or entrepreneur interested in things like lowering your tax bill, investing smarter, and finding a trusted partner we might be a good fit.
*Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.
