By: Tobie van Heerden
Living a high life and earning a small fortune as a seasoned sports player doesn’t mean that this lifestyle will continue forever. Retirement will come earlier than expected, and sportsmen need to prepare for that as soon as possible.
While we all dream of our favourite sports heroes continuing their legacy into perpetuity; however, at some point, retirement is inevitable. Many sports stars won’t retire on their terms, whether that’s through injury, deselection, or other factors out of their control. So preparation is key to maintaining the lifestyle they are accustomed to.
Many sports careers have a limited time span, especially in sports like rugby, cricket, hockey, or soccer where the chances of being injured are high, ending a career and the income that goes with it.
For instance, rugby greats like Dan Carter, Jonny Wilkinson, Richie McCaw, and Rachael Burford have made the effort to bring organisations like the Global Rugby Players Foundation into being. Organisations like these are meant to ensure a smooth transition into new careers after retirement. While this kind of institutional support will make a difference in the industry's attitude toward retirement planning, more work can also be done on a personal level.
The keys to a prosperous retirement
The key to financial retirement planning is to ensure that money is invested each month, so it can grow on a compound basis in a fund that doesn’t charge ridiculous fees, can pivot quickly to take the best advantage of market moves, and has market-beating growth.
While living the high life generally means more expenses, these can easily be cut down.
Instead, trim expenses and invest as much as possible. Especially since some sports athletes rugby players have an earlier retirement age than most due to injuries and, even if they have studied for something else and can move into another career, they will be unlikely to maintain the same quality of life as they did before.
There are a few guidelines as to how much to put away:
1. Multiply your final annual salary by 15
- If, for example, your take-home pay is R25,000 a month in your final year of playing, that would mean an annual salary of R300,000. To maintain your lifestyle after retirement, you’ll need around 15 times your annual income, which is a lump sum of roughly R4.5 million.
- However, if you are hoping to do things during retirement that you didn’t have a chance to do during your working years, such as coaching a school team on a volunteer basis, you should rather multiply your final salary by 20 or more.
- To work out this amount, speak to an investment expert who can help you determine what your final income will be based on your age, as well as compound annual growth at inflation as a good indicator.
2. Save R1 million for every R5,000 you want to draw down as a pension every month.
- Another option is to work backward and determine how much you will need to effectively pay yourself in multiples of R5,000. Then, save R1 million for every R5,000.
3. Multiply your monthly needs by 300
- One of the simplest calculations is to multiply what you think you’ll need per month (say R25,000) by 300 to determine the lump sum you will need to have saved (R7.5 million in this example). While this results in a slightly higher figure than the first two options, it’s less risky.
Why the right information matters
The sooner these investments are made, preferably into an annuity that grows year-on-year, the easier it will be to ensure a comfortable retirement from the sports field.
The key to making sound investments is to speak with an experienced investment expert who has a broad understanding of the financial markets and insight into financial products aligned with your investment goals.
When it comes to retirement, you can’t afford to take a dropkick and just hope for the best down the line.
* Van Heerden is the CEO of 10X Investments.
PERSONAL FINANCE