A celebrity who earns an enormous amount of money and still goes through major financial struggles can be baffling to the everyday worker. Such is the case, however, for many multi-million dollar earners. The NBA, in particular, has produced so many financially-troubled athletes that it has decided to create a retirement savings plan that will force players to save responsibly.
Are you any better than these athletes at saving your money for retirement? If not, how can you do a better job of adding to your own nest egg? You may not bring in as much as the players you see on TV, but with the right strategies, you may be able to give yourself the comfortable lifestyle you want in retirement.
NBA Players Get New Retirement Savings Plan
Last month, the National Basketball Association (NBA) announced its plans to set up a program that would require players to save for retirement.
The program will require players to put away 1 percent of their income into an annuity, and an additional 5 to 10 percent of their salaries may be deposited automatically into a separate plan, according to reports.
Details of the program have yet to be released, but it is known to be a part of the 10-year collective bargaining agreement between the NBA and players union that ended a lockout in November.
It comes as a response to a number of former players, including Scottie Pippen, Latrell Sprewell and Antoine Walker, experiencing significant financial troubles after their careers ended. Walker, in particular, filed for bankruptcy after being paid more than $100 million over 12 years in the NBA.
Some financial advisers have criticized the plan because it will not give players access to their savings until age 50, which could be years or even decades after they retire. But union attorney Ron Klempner has said that retired players could actually take an early pension at age 45.
While the kinks may need to be worked out of the program, there’s no doubt that requiring players to save is a step in the right direction.
Saving for Retirement: Easier Said Than Done
While workers are not typically forced into saving money for retirement, most employers will offer a retirement savings plan like a 401(k) to aid in setting money aside for the nest egg.
As a result of the challenges associated with saving for retirement, many people don’t feel confident that they will have enough money available when they leave their jobs. Saving money for retirement is often a gray area for people have a difficult time estimating just how much money they’re going to need as the cost of living continues to rise.
Further, according to the AEGON Retirement Readiness Survey released in June, only 15 percent of today’s workers feel confident that they are on course to achieve the retirement savings they will need by the Social Security full retirement age.
With all of these concerns present, it’s understandable that looking for strategies to save retirement would be the last thing on the minds of millions of workers.
Retirement Strategies for Saving
The good news is that there are several retirement strategies you can use to get on the right track toward building your nest egg. Here are a few to consider:
- Open a time deposit account: In addition to opening a 401(k) or IRA, consider opening a time deposit account, like a CD, that will penalize you for withdrawing money before maturity.
- Direct deposit money into your savings account: Rather than manually deposit money into your savings account, treat it like a 401(k) and have your job direct deposit the money into your account. This way, you won’t count on the income and can grow accustomed to spending the money left in your checking account.
- Save your tax refund: Use your tax refund to fund your retirement — if you bring in anywhere from a few hundred to a few thousand, why not put that lump sum away, and let it earn interest for later in life?
- Save your bonuses: If you receive lump-sum bonuses from your job, it’s a good idea to put that money away as well.
- Cut back on some expenses: If you have not already taken a good look at the amount you’re spending each month, it’s time to review your expenses and cut back on those that aren’t vital. You might be surprised by the number of ways you can cut corners on expenses tied to items and services that aren’t really must-haves.
There are a lot of people who dream to be NBA stars in their lifetimes, but, of course, they don’t want the financial difficulties associated with some players’ careers. By taking time to save your money early and often, strategizing appropriately as you notice changes in the economy, hopefully you won’t have the same worries as your rich counterparts.