In January 2017, a proposal in the Illinois legislature that would limit how long retired professional athletes can access workers' compensation benefits ignited a firestorm on a little-talked about topic—the significant health care costs that professional athletes may have to endure long after they've retired.
“Many players want to think that an injury isn't going to happen to them. They think they'll beat the odds," says Morgan Stanley Global Sports and Entertainment Director Jeremy J. Schwendeman. “If you do, that's great. But what if you don't?"
Short Careers, Lasting Issues
Professional athletes face unique factors when it comes to retirement planning. While the minimum NBA salary for this year's season is just over $543,000, that income may last only a few years. For instance, the average NFL player's career spans just 3.5 years. For NBA and MLB players it's 4.8 years and 5.6 years, respectively.
“You might have someone who is making millions in a contract and endorsements, but the fact is some professional athletes are living year to year, wondering if they're going to make the club following year," Schwendeman says. “They're making the minimum, but that's not life-changing money, factored over the course of total earning years. And that’s assuming an injury doesn’t sideline their career."
Indeed, many pro athletes find themselves retired in their 30s, and still dealing with chronic, sports-related injuries—and the costs.
Reggie Williams, a former record-setting linebacker for the Cincinnati Bengals, told the Washington Post that he had two dozen knee operations following his 13-year NFL career. He amassed hundreds of thousands in out-of-pocket expenses that insurance didn't cover.
“We're seeing some trends in terms of what's happening with players as they age, whether it's heart issues, concussion (related injuries) or something else," says Global Sports and Entertainment Director Debra Jones-McConnell, “We want our younger players to start thinking about—and planning for—these possibilities."
Life After Sports
A few of the leagues offer retired players health-care assistance, but the resources are varied. For instance, the National Basketball Players Association announced a plan last summer to provide insurance to retired NBA players. Injured retirees from all sports can attempt to tap into workers' compensation; however, such claims can be disputed and the payouts can be relatively small.
This is where early planning and saving for health-care costs can make a big difference. “For a lot of my clients—they're ages 21 to 35—health care isn't at the forefront of their thinking," says Mark Mann, a Global Sports and Entertainment Director and former athletic trainer for the Cincinnati Reds. “We're continually talking about planning for life after their career is over, and we make health care a key part of the process."
Mann notes that these conversations should start as soon as possible. At the core of this planning is ensuring that athletes have health insurance for the decades after retiring from professional sports. In some cases, they may find a second career that comes with health benefits; in other cases, they need to save enough to cover their insurance premiums for the rest of their lives as well as any ancillary medical costs.
Building a Safety Net
Beyond solid savings, Morgan Stanley Global Sports and Entertainment Directors often suggest that their athlete-clients consider additional tools that can provide a health-care safety net, both for while they're playing and after they retire. These include:
• Disability insurance. This can help fund living and health-care expenses if an athletic career comes to an unexpected stop. “If you're in the NFL and an injury means you can no longer throw for 400 yards, then you want to cover that loss of that expected income," Schwendeman says.
• Long-term care insurance. This insurance can help pay for the cost of home health, assisted living or nursing care. While it's a good idea for everyone, Jones-McConnell says it can be especially important for football players, who may face the long-term effects of multiple concussions. Athletes can usually make a one-time payment for this coverage, instead of paying additional monthly premiums.*
Stories of athletes going from rags to riches—then back—are all too common, and unexpected health care costs can be a big contributor. But with the right planning, it's possible to change the narrative.
“For Financial Advisors and planners, it's really important that we help our athlete clients save for health care," Jones-McConnell says. “If there's savings in place, then those stories won't continue."