Researchers, media and an insider weigh in on how so
many players go broke
A National Bureau of Economic Research (NBER) working paper last spring found that one in six retired NFL players go bankrupt within a dozen years after they retire.
Researchers from the California Institute of Technology, George Washington University and the University of Washington concluded, “Having played for a long time and being well-paid does not provide much protection against the risk of going bankrupt.”
The reasons may vary from bad business investments, mooching family members and friends or just lavish spending habits.
The Sports Buzz.com compiled a list of 15 former NBA players “who lost everything” ranging from $4.4 million dollars by David Harrison to $200 million by Allen Iverson.
As a result, while listening to Roberta Flack’s “No Tears in the End (When It’s Over),” it’s too hard to work up any sympathy for any player who makes enough money in their athletic lifetime to not have to work another day in their post-athletic life finding themselves in dire financial straits.
Are today’s pro athletes playing only for the moment, or are they also playing for financial keeps?
The NBER researchers hypothesized that the NFL players would have set aside a significant amount of their income for their retirement years. “Our findings are different from what the life-cycle model predicts,” they wrote.
But saving for a rainy day education should begin at home. My parents and uncle taught me how to save before I entered kindergarten — neither of them made anywhere close to these players. And even if they had, I believe bankruptcy would have been the very last thing that would ever happen.
Athletes, as soon as they are identified as such, “are removed from normal society,” notes local attorney Lee Hutton, who played Gopher college football (1996, 1998) then opted for a legal career. Many of his clients are pro athletes, whom he regularly advises on financial matters, such as having a good financial advisor and tax person on board as well.
“I get a lot of calls from athletes,” says Hutton, especially after they have been burned by someone like an agent. “I encourage athletes to hire attorneys — you save so much more money and get value for it. Agents hate what I’m doing.”
The NFL Players Association in 2011 started a financial wellness program to help its players prepare for life after football. The NBA does something similar as well.
“I was fortunate to play for a long time and build a nice financial nest egg,” admits former NFL player Vonnie Holliday, who played 15 years.
Finally, if these players’ salary is more than a working stiff’s three lifetimes of income, then for a player to make millions, even billions, and not save 10-20 percent of their annual salaries and squirrel it away for life later is a head-scratcher, an unfathomable thought in the least.
Therefore, pardon me if we can’t muster up enough sympathy when they go broke later.
Furthermore…
Forbes Magazine last month reported that every NFL team’s value has gone up on average nearly 40 percent more than last year. “Every team is immensely profitable. In 2014, operating income (earnings before interest, taxes, depreciation and amortization) averaged $76 million for the league’s 32 teams,” stated the article. “Even if they don’t play in a big market or profit from hosting non-NFL events at their stadium, owners can still make an obscene amount of money.”
Add in the annual television revenue — each NFL club “equally shared $4.4 billion in national broadcasting revenue last season” — win or lose, every team owner makes money.
Information from Forbes.com and Yahoo.com was used in this report.