Going pro is a dream for any kid who grows up playing sports. Dreams of being drafted into the NBA, NFL, or MLB bring with it the idea of big homes, fast cars, beautiful women, and being able to take care of your family and friends financially. However, these same dreams are what get many athletes in trouble shortly after their professional career comes to an end. Pablo Torre of Sports Illustrated wrote in 2009 that no matter how much money athletes make and despite the economic climate, most NBA, NFL, and MLB players go for broke shortly after their retirement.
Each league, including the NHL, has experienced a lockout for some part of the season, which has put additional finance stress on athletes before they even stop playing. This may have put a dent in athletes’ emergency funds (if they ever established one). So there’s even cases where some players have been in the financial danger zone even before they made their exit. But without the proper money management team around like, like a trustworthy accountant or Certified Financial Planner, most jocks aren’t even aware there’s a problem until it’s too late.
More than half of retired NBA and NFL players find themselves bankrupt within 5 years of retirement. Why is that? Poor planning, or lack of planning. Players aren’t asking themselves the hard questions, such as; “When should I take Social Security benefits?” or “Will I be able to maintain this lifestyle when I stop playing?” Those millions don’t keep rolling in when you’re off the field or court.
Basketball players are enrolled in their pension plans after at least 3 seasons in the NBA. For the maximum benefit of $195,000, you have to play for 11 years. They also have the option to participate in a 401(k) program in which the league matches up to 140%!
When it comes to the NFL, The Bert Bell/Pete Rozelle Retirement Plan offers former NFL players pension and disability benefits. Players must play for at least 3 years to be eligible to earn $5,640/month for every year they played. They also receive a bonus if they reach 10 years of service.
Baseball is a lot more generous with their retirement plans. You only have to play for 43 days to qualify. MLB players can receive $34,000 per year, and as long as you were on the active roster for at least one day, you’re qualified for full medical benefits.
ESPN put a spotlight on the problem with the 30 for 30 documentary “Broke”, which interviewed several former professional athletes who found themselves, well, broke. Players blamed things like bad investments, costly divorces without prenuptial agreements, high child support payments, greedy loved ones, and an expensive lifestyle they couldn’t maintain overtime.
A lot of these athletes are fresh out of high school or college when they “make it”, so they don’t have the chance to acquire real world skills that will benefit them in jobs after their sports career is over. Not everyone is offered an anchor position to analyze the game. So they stay at home, continue to spend, and their savings go down while their bills continue to go up.
So what’s the solution for this serious problem? Better money management of course. Have plans for not only how you should and shouldn’t spend while you’re still playing, but definitely afterwards. A lot of these professionals don’t realize they’ll spend more time out of retirement than they spend in the league, so they should budget accordingly. We also suggest making wiser purchasing and investing decisions, maybe consider a prenup, and most definitely hire an accountant.