If You Earned $310,000 a Year, Could You Survive a “Forced Retirement?”

If you were 22 years old, fresh out of college, and looking for a job, how’s this for an entry-level position:

  • The minimum first-year salary is $310,000, with a salary scale that rapidly increases each year (stay on the job for six years, and the minimum salary more than doubles). And depending on your resume of previous work experience and performance bonuses, your first-year income could easily approach $10 million.
  • In addition to your regular work, your employer will permit (and even encourage) you to pursue outside opportunities to earn even more income. In some cases, this outside work may double your income.
  • You are also a union member, with a deluxe benefit package. This includes a pension plan in which you are fully vested after only three years, and can begin receiving a monthly retirement income at age 55.
  • As part of your employment orientation, you will be provided top-flight financial education services from experts who understand the challenges of earning so much money so early in your career.

Of course, like every job, there are some drawbacks:

  • The work is extremely physical in nature, with a high incidence of on-the-job injuries, and many of these injuries will have long-term health consequences.
  • The average length of employment in this position is slightly more than 3 years. Even those who last a long time are usually out of the business before age 40.
  • You may consider moving into management, but in most cases, this will result in a significant pay cut.
  • Most workers will not leave the profession on their own terms, but instead will experience “forced retirement.” (“Forced retirement” is just another way of saying someone wants to work, but external events keep them from doing so. This could be the result of a layoff, downsizing, health problem, etc.)

If you haven’t guessed already, this unique “entry-level position” is a professional athlete, specifically a football player in the National Football League. And while pro football players are statistical outliers – both physically and financially – compared to the general population, there are some areas where these high-profile individuals are just like everyone else, maybe even more so. Here is how:
Even though they have earned far more than the average American in a very short period of time, and even though they know their high-salary career will most likely be brief, most pro football players are ill-equipped for surviving the loss of their incomes. Catch this statistic: according to a March 23, 2009, Sports Illustrated article “How (and why) Athletes Go Broke”…

(B)y the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.

At first glance, the numbers are shocking. How can almost four of every five ex-NFL players be broke within just two years after they stop playing? When you take a deeper look, this information isn’t really surprising. In fact, bankruptcy and/or financial distress are what happen to most people who suffer forced retirements in their chosen field of work. An often-repeated statement is that,

(M)ost American families can only maintain their current living expenses for 60 days or less when their income is interrupted for any reason.
                          (From “16 Causes of Financial Distress” by Jon Griffith, www.jongriffith.com.)

If this statement is accurate, pro football players who can survive for two years without an income from playing football are actually doing better than the general public! But really, the only difference for pro football players is that forced retirement usually comes sooner, and the size of the income loss is larger. Otherwise, the circumstances and financial conditions of most NFL players are just like those of the average American.

The factors that result in forced retirement for an NFL player – declining productivity, health issues, changes in management, and the need for employers to cut costs – are issues for other workers as well. Similar to many Americans, the Sports Illustrated story observes that a majority of NFL players aren’t financially literate, they don’t keep good financial records, and they tend to overspend. And even though they have far greater resources, many NFL players never develop the discipline of saving, and have a difficult time “saving for a rainy day” – just like much of the American populace. Getting cut from the team is usually a shock for NFL players, just like it is for any other employee who gets fired or laid off – they just didn’t think it could happen to them, or that it would happen when it did.

So, what can you do? Of course, the solutions to the problems of a forced retirement are fairly simple: Plan ahead. Save. Secure insurance to protect your greatest asset, which is your ability to generate an income. The plan is simple, but the follow-through is challenging, even for those with high incomes.
For many Americans, the greatest challenge in protecting against a forced retirement/job loss is not having enough money to simultaneously save and insure for the future while staying current with the cost of living today. But the challenge may run deeper than money.

By most measures, a 22-year-old earning $310,000 a year should be able to save something, even if his cost of living expenses include an agent, personal trainer, and private chef. But the Sports Illustrated story indicated many athletes appear to have an aversion to addressing the unpleasant possibility of a forced retirement. Agent Leigh Steinberg related the story of a “certain group of athletes who believed that if they ever sat down to write their wills, they were going to die.” Whether this aversion is superstition or simple avoidance of a mundane task, the fact is many Americans, not just pro football players, drag their feet when it comes to taking preemptive measures against forced retirement.

Your greatest asset is your ongoing ability to earn an income. A forced retirement not only stops your income, but threatens to undo all your financial accomplishments. Your greatest asset, and those who depend on its productivity, are worth protecting.