Wealth Management for Pro Athletes: What’s Your Game Plan?
We’ve all heard the stories. An NBA All-Star earns multi-millions in salary and bonuses during his seven-year playing career. After years of living the high life and a bunch of unwise financial decisions, he retires. Two years later, he’s broke. Sadly, tales of athletes whose financial lives are in chaos are hardly uncommon. In fact, more than 60 percent of NBA players will be broke five years after retiring, 78 percent of NFL players after two-to-four years. How do you beat odds like that?
The key is to manage your finances while you are playing and create a strategy for the future when you are no longer competing. In short, long-term financial well-being, like success in sports, requires a smart game plan.
- Is there a second career in your future?
- What family obligations extend beyond your playing years?
- Do you have an updated, tax-advantaged estate plan in place?
- Are there charities or causes you would like to support?
The first step is to clarify your financial priorities for what you want to accomplish for you and your family. To do that successfully, you need a financial advisor who understands the unique needs of professional athletes and has the knowledge and experience to help you achieve your life goals.
Getting the Point After: One Player’s Experience
After signing a large free-agent contract with his new team, Adam realized he had a limited window of opportunity to preserve and grow his lucrative earnings. He owned multiple homes, had little investment experience and wanted to be certain of a continued income stream once his playing career ended. His estate plan was simple – he had only a will with no trusts or powers of attorney.
Adam’s goal was to have enough money saved from this contract to sustain a comfortable lifestyle once his career ended.
- His Northern Trust advisor helped him establish multiple accounts: one designated for in-season expenses, one for off-season expenses and another for retirement savings. Prior to determining the amount necessary to fund each account, the advisor ran a detailed cash flow analysis.
- Adam’s signing bonus was invested in a portfolio focused on his long-term goal of relying upon the income generation after the deferred payments ceased. His Northern Trust advisor and his attorney worked together to create a tax-advantaged estate plan.
- Adam had to relocate to another city for his new team. His Northern Trust advisor introduced him to a real estate agent accustomed to working with professional athletes, helped Adam secure financing for the new home, and made sure his new assets were properly titled.
Through thoughtful planning and professional investment advice, Adam felt confident that his financial needs would be well met, not just for the length of his playing career but throughout his life. It gave him the peace of mind he needed to focus on what matters most – playing his best.