21 ms·

How and Why Athletes Go Broke (2009)

158 points by gwern 9y ago

arcaster 9y ago
Pretty much the plot of the HBO series "Ballers". It's not the most intellectual show, but it does tie together the fallacy of "Balling", essentially how trying to maintain an outward perspective of wealth and excess usually leads to a quick demise of said wealth...
- deleted 9y ago
  [deleted]
Skunkleton 9y ago
This sounds a lot like how most people go broke. Even when you are talking about people who have been fortunate enough to make a lot of money (like lotto winners), the story sounds the similar. Maybe we need better financial education in the public school system?
- IntronExon 9y ago
  I have an unsupported conjecture that critical thinking skills and financial literacy aren’t taught in (US) schools more or less intentionally. Financial literacy would harm the business models of institutions offering many types of loans, mortgages, lines of credit, etc. Truly educated consumers are harder to fleece. Critical thinking dovetails with that, and would probably make it harder for ideological, religious, and political figures to “win hearts and minds.” In my experience parents want their kids to believe whatever they believe, politicians want vacuous morons, and ideologues only want to propagate their ideology. Giving people general tools to sort through the mess of competing ideas seems to appeal less than using the opportunity of education as a means of inculcation. In short most people and groups want their own version of reality instilled as early as possible, and no others. A relative minority want critical thinking, financial literacy, and sound scientific principles instilled. It’s harder to take advantage of the prepared mind after all, and so much profit and power is gained through shallow blandishments and lies.
  - whatshisface 9y ago
    The biggest difficulty with that theory is that when people loose money to loan sharks they stop buying other things. So as far as either the national economy or the sum of all lobbyists (whichever you think the government is most beholden to) are concerned it's not good on average when people loose everything.
    - IntronExon 9y ago
      Average people don’t lose everything, they live in debt, and increase their debt. Credit cards and student loans, medical bills and mortgages. People who make sound financial decisions don’t roll over debt on their cc’s, or allow for a housing bubble. They might be swayed by arguments that single-payer healthcare wouldn’t lower costs. They might even question the value of spending trillions in Iraq and Afghanistan.
      - marnett 9y ago
        Myself and my sound financial decisions question nothing about Iraq/Afghanistan. HAL performed amazingly in that period.
        IntronExon 9y ago
        Good investing, but arguably the harm to the overall economy would be difficult for you to compensate for over time. I’d also guess that you care about the wellbeing of others, in which case your personal enrichment is only part of the story.
  - pc86 9y ago
    1. There is a national (or international) cabal of executives and power brokers at major institutions of banking and finance that have infiltrated the federal and state Departments of Education, local school boards, curriculum writing organizations, and more in order to subtly dumb down the American populace with the goal that they will be able to make money off these idiots decades later to the tune of a car loan and a mortgage. 2. Financial literacy doesn't appear on any standardized test. I think there's a saying about horses and zebras that applies.
- MrFantastic 9y ago
  The education system depends on student loans. Financial education would make people question the value of a college education.
  - screye 9y ago
    College education pays back multiple fold though. Instate tuition for top public universities is not that high, and helps you gain skills and even more importantly build a network that is certainly worth the investment. Sure, there are many soft fields where job opportunities are sparse. But, a degree @ state tuition is certainly worth it for a good number of majors.
    - civilitty 9y ago
      You're just making the GP's point for them. If you're focusing on public universities and ignoring private universities with their $30-40k/year tuition (federally subsidized, of course), you're already questioning the value of college education. Most students are not even taught to question the common assumption that expensive private universities are better than low cost public ones.
      - screye 9y ago
        > federally subsidized, of course Wait, could you explain what that means. I thought private universities did not receive any government assistance at all. Do you mean subsidized loans to attend such universities ? If so, I can understand. That might not be the wisest thing for a government to do.
  - rconti 9y ago
    That's fine. Educate 'em on financial literacy at public middle schools and high schools. Let the colleges and universities make the argument that their education is worth the cost.
- rjkennedy98 9y ago
  Its not how most people go broke. Most people go broke because of health care costs.
- emodendroket 9y ago
  The article also makes the comparison to lottery winners, but I don't think "most people" go broke because they opened too many car dealerships.
rectang 9y ago
This article is from 2009.
- sctb 9y ago
  Thanks, we've updated the headline.
- gwern 9y ago
  Still one of the best articles on the topic, and if anything, it's even more topical now with the continuous drumbeat of evidence on brain damage in pro sports since 2009 (note the bankruptcy imbalances between professional sports - the ranking goes about as you would predict...).
ggm 9y ago
In many situations, people who are identified as being at risk have somebody else placed in control of the finance, by court action. Brain injury patients for instance. Hmmm.. hang on.. whats the major risk factor in the football circuit again? Seriously: the recruitment of minors for major league with giant cash benefits should require them to sign a consent form for arms-length management of their capital for some time period, and give them the income stream not the capital. after all, its often how the money is being controlled that wound up being their notional capital in the first place
- jstanley 9y ago
  > Seriously: the recruitment of minors for major league with giant cash benefits should require them to sign a consent form for arms-length management of their capital for some time period, and give them the income stream not the capital. No, thanks. It's their money, let them have it. If they want it to be invested on their behalf, that's fine. But it should be their choice. How would you like it if your employer told you that instead of paying you your wages, he was instead going to contribute to an investment fund, and you'd receive the income from that fund rather than receiving the money directly?
  - soared 9y ago
    Replace your employer with government and its real life social security. In theory I support it... if it lasted till I retired.
    - crankylinuxuser 9y ago
      Unfortunately, what Cato says is very worrying (1). Primarily, they highlight court cases in which Social Security is pulled away from people, and reaffirmed by SCOTUS. This is the troubling quote: The Court’s decision was not surprising. In an earlier case, Helvering v. Davis (1937), the Court had ruled that Social Security was not a contributory insurance program, saying, “The proceeds of both the employee and employer taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way.” We would likely have a national riot if Social Security was just yanked at once. But if my own life is any guess, the age to qualify for "benefits" keeps going higher and higher. It's theft by attrition, and backed as not theft by courts. I do not agree with CATO's eventual policy of "privatization" at all. The other choice, which was not posited, was to earmark the funds, keep them segregated from the general fund. Then do the right thing and set Social Security as a guarantee at the same age for everyone. And, remove that cap. (1) https://www.cato.org/publications/commentary/is-there-right-social-security https://www.cato.org/publications/commentary/is-there-right-...
tw1010 9y ago
Let me guess, getting your entire career salary in a lump sum before you're 30 and having the impulsive personality of an athlete doesn't mix well?
- andrepd 9y ago
  What's your basis for saying athletes have impulsive personalities?
  - manigandham 9y ago
    ...because many go broke?
  - ch4s3 9y ago
    Perhaps that could be better stated. Being a star athlete is highly correlated with having a risk insensitive personality. That type of personality also correlates with impulsive financial decisions. I'm no sure if that's all true of if it's anything more than correlation, but it makes some sense as a hypothesis.
    - 1jojojo 9y ago
      Being a star athlete is highly correlated with having a risk insensitive personality. According to whom?
      - ch4s3 9y ago
        Ahh, I'm postulating a bit. >I'm no sure if that's all true of if it's anything more than correlation, but it makes some sense as a hypothesis. As I said, I could be wrong. But we know that other fields like management, fashion, music, etc are dominated by risk takers. It may not be true of sports or all sports, but you could imagine that a risk taking basketball player, football QB or running back, soccer forward, or similar players tend to be risk takers. Again, I could be wrong.
        9y ago
dangerboysteve 9y ago
ESPN's "30 on 30" sports docs looked into this matter and did a really goof job and worth watching. The episode is called "2 Broke". https://www.youtube.com/watch?v=Elfw0ESih-A https://www.youtube.com/watch?v=Elfw0ESih-A
- crescentfresh 9y ago
  What a bunch of goofs. Edit: downvotes, really folks? You don't see the parent's typo?
  - varenc 9y ago
    I think most downvoters get the joke! It’s just that your comment seems a bit snarky to the op and doesn’t contribute much to the discussion. The HN community puts value on civil and substantial comments. (most of the time...) https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
  - sowbug 9y ago
    You would be upvoted on Reddit. Not here.
southphillyman 9y ago
The stereotype is that many of these athletes go broke because they are foolhardy with money. I appreciate that this article highlighted that a lot of these guys go broke because of scamming financial advisors. The athlete attempts to do the responsible thing and hires someone they are led to trust with managing their assets only to be ripped off. I'm not sure how financial literacy prevents this from happening when you literally may be lied to about where your money is.
- ChuckMcM 9y ago
  Agreed, look at it from their perspective. They haven't been around a lot of money before, they don't have a lot of friends who have been around a lot of money either, so they don't really know even what questions to ask to understand the people who are arguing to be their financial advisors. Perhaps major league sports would do well to help train their athletes in the basics of financial management in order to help avoid this situation.
  - test6554 9y ago
    It's not their responsibility though. The player could take a course on their own initiative.
    - specialist 9y ago
      Which courses do you recommend?
      - WalterBright 9y ago
        I'd start with a course on basic accounting, which you can get at your local community college. It's critical to be able to read and understand a financial statement, and it's not that hard, either.
    - Jtsummers 9y ago
      It doesn't need to be their responsibility, it is something they could do and wouldn't cost them much. If anything it could help with their recruiting efforts: Show a list of athletes that got screwed by shady advisors; show how they'll connect you with real advisors (at established and more trusted institutions) and education to discern what options are good and what aren't. Won't make a difference when tyring to get that top QB, but it may for all those guys who're only making $150k-300k.
boohoo2them 9y ago
I'm sorry, but I have an extremely hard time even feeling sorry for these guys. Someone who receives an 18 million contract over a short span of 3-6 years, [1] and then goes broke a year after the end, I'm just not going to have any sympathy for them at all. Lets see, an 18,000,000 dollar contract. If they did the second worst thing the could do (first being what they did do) which is just collect the money into a checking account earning no interest, that 18 mil would allow them to draw a $300,000/year salary for 60 years before the principle (the 18mil) was exhausted. [1] and I certainly have no sympathy for them given the fact that not one of these sports players ever deserves being paid anywhere near this amount of money. They don't even deserve 1% of what they are getting paid. So to be broke a few years later, boo-hoo to them.
efa 9y ago
I don't know all the tax implications around huge salaries like these, but every time I read one of these stories I always wonder why they don't just stick their money in t-bills or CDs. Something completely risk free that will get a modest return. If you have 20 million in the bank do you really need to invest in high risk stuff to try to double your money? The problem is everyone they've ever known comes out of the woodwork and is hitting them up for money or pitching some great investment. That's the hard part. Saying "no" to these people.
- lazerpants 9y ago
  This is why there should probably be an early age pension system for these athletes. The major sports leagues could certainly afford it (and it would lower players upfront salaries some).
  - efa 9y ago
    Agree. My young son was recently in a car accident. As part of the agreement with the insurance company he got some compensation. But this is in the form of an annuity with yearly payments when he turns 18. This protects him from parents looking to blow the money and from him blowing the money when he turns 18.
    - albertgoeswoof 9y ago
      This might be a bit rude, but can I ask what the compensation here covers? It seems odd to me to receive compensation for an accident from 10-15 years ago, without anything in between?
  - mobilefriendly 9y ago
    All the US pro sports have generous pension programs.
    - jonwachob91 9y ago
      Source?
CryoLogic 9y ago
tl;dr of the article: Athletes have high earnings for short periods of time, but often prefer risky "flashy" investments (e.g. nightclubs) and aren't typically knowledgable regarding anything having to do with basic finance.
doctorwho 9y ago
Finding it pretty hard to muster up any kind of empathy for millionaire professional athletes.
- emodendroket 9y ago
  Well, who cares whom you can "muster up any kind of empathy" for, especially when the article aims to answer the question "how" more than to engender sympathy?
kelukelugames 9y ago
A mitigating factor is professional sports offer amazing retirement benefits. https://www.bankrate.com/retirement/retirement-benefits-of-professional-athletes-2/ https://www.bankrate.com/retirement/retirement-benefits-of-p...
aphextron 9y ago
I’ll assume for this conversation we are referring to black and latino athletes in the US. In that case, a lot of it comes down to family. A $10 million contract is a life changing windfall for a single unnattached person with no extended family to support, or whose extended family already is self sufficient (as a much greater proportion of white people in the US naturally are). But when you are the first person in your entire family tree to have above a 5 digit net worth, you immediately become liable for everyone, and it can quickly go to squat. Its called the “brown tax”. Escaping poverty can be almost impossible for an individual when they are weighed down by these obligations. It doesnt matter how financially literate you are when your aunt is being evicted from her apartment or your cousin needs bailed out of jail.
- ghostly_s 9y ago
  I get what you meant, but I would suggest being careful with language like calling white people 'naturally' self-sufficient.
sytelus 9y ago
TLDR; 60-70% of players go bankrupt or are under financial stress after they retire. Reasons are (1) they don't follow balanced mix of investments and squander money in opportunities presented by smooth talkers (2) they end up hiring people who are friends of other players as opposed to actual professionals to manage their assets (3) divorce. The recommended mix of investments for 20+ million assets is apparently "5%to private equity, 7%-12% to real estate, 50%-65% to a mix of public securities(stocks, mutual funds and the like) and the rest to alternatives such as gold and hedge funds.".
- fivedogit 9y ago
  Thank you. That article was insanely long winded.
rjkennedy98 9y ago
So many of these athletes feel that they are role models and civic leaders, yet they can't so much as balance a budget. Our culture glorifies these guys so much when they are much more like lottery winners than anything else. It doesn't take intelligence to be 6-8 and jump out of a gym.
- dopamean 9y ago
  I think you've won the gold for the most useless comment on this thread. Congratulations, I'll take silver for this one.
DoubleCribble 9y ago
Let us not forget that even in 2018, your Financial Advisor (loosely defined) may not be obligated to act in your best interest [0]. The Financial Services industry has been fighting hard for the gravy train to continue unabated for years. Fortunately for them, Trump has been very receptive to their plight and doesn't want the party to end just yet.[1] [0]http://time.com/money/4809060/fiduciary-rule-financial-advisor-what-know/ http://time.com/money/4809060/fiduciary-rule-financial-advis... [1]https://www.dol.gov/newsroom/releases/ebsa/ebsa20171127-0 https://www.dol.gov/newsroom/releases/ebsa/ebsa20171127-0
- auxym 9y ago
  Reminds me of this John Oliver segment: https://www.youtube.com/watch?v=gvZSpET11ZY https://www.youtube.com/watch?v=gvZSpET11ZY
pascalxus 9y ago
At the end of the day, it's the same reason most people go broke: they know nothing about money. Unfortunately, Money is the most important thing in the world because you can't get anything without it. And yet, it's not even a primary subject taught in k-12. Where are people supposed to go for a decent financial education? Instead k-12 teaches kids about useless butterflies and countless other things that are of lesser importance. You would think, they'd at least teach it in college. But, I know MBA graduates with 3.8 GPA who don't even know what a tax deduction is! I recommend basic financial classes for everyone k-12, everyone should have the right to basic understanding of personal finances and basic economics.
- harscoat 9y ago
  you just explained that the most important thing is knowledge not money
  - beambot 9y ago
    No... Knowledge of money
- djellybeans 9y ago
  IMO the financial industry tries to make it seem so much more technical and complex than it is. Even for how an average person can invest money. A lot of people are perceiving it as such.
  - paulddraper 9y ago
    Well you're not going to be inclined to pay them for something simple.
- Baeocystin 9y ago
  Do you have any book recommendations? I have some younger relatives graduating from college soon, and although they are bright, I worry about their financial sense. I talk to them regularly, but something more concrete would likely also help.
starpilot 9y ago
Olympic athletes are known to sell some of their team clothes after the games. I overheard a well-to-do family at Mammoth saying they bought the jackets off some US Olympic ski team members who were broke.
- emodendroket 9y ago
  I don't think Olympic athletes are typically making Big Four league kind of money, are they?
DoreenMichele 9y ago
A couple of things: I can't manage to copy and paste it from the article, but one section talks about these guys hiring friends and family, not for their expertise, but as a favor. This inevitably goes bad places. The old boys club is about knowing you well enough to vet you on two things: 1. How trustworthy you are generally and 2. What you are good at. Having connections matters and if you can't establish those connections, you will go nowhere fast. But when it is at all healthy, establishing those connections is about vetting you. These athletes never got the memo. They haven't learned that the reason you hire someone you know is because you can literally trust them with your life, not because they need charity. If they need charity, give them charity. Don't entrust your millions with them. Second, I really appreciate the section where they talk about divorce and that it often happens after retirement in part because these guys can no longer avoid the hard conversations. A lot of marriages seem to only work in X circumstances and to fall apart if circumstances drastically change. The two people are compatible as cogs in X machine, but the personal relationship isn't really that strong. They don't adapt well when that situation goes away.
- sowbug 9y ago
  "I can't manage to copy and paste it" control-shift-I in Chrome, then use the element-selecting arrow to highlight the element in the DOM containing the text you want to share. I was there for a different reason: to figure out whether my browser was to blame for all the typos in this 9-year-old article ("Old habits diehard" being the one that set me on the quest.)
  - DoreenMichele 9y ago
    I am on a phone with an Edge browser. I usually can copy and paste. I don't know why I couldn't manage it that time.
partycoder 9y ago
It works like this: 1) Increase your income 2) Increase your expenses 3) Lower your income, keep your expenses the same
JiNCMG 9y ago
30 for 30 did an episode on this. It was so interesting and while true many get scammed out of their money, a lot more are spending it check to check. Quotes from the show "I had more mortgages than HUD" "I had 30 to 40 cell phone contracts" "No athlete wants to earn a few percentage points in bonds. They wanna go for the big dollars, Open restaurants, clubs and car washes! They conquered sports now they will own their next endeavor" Worst stat from the show: 60% of athletes are broke within 5 years and 70% are divorced within 3 years. Shocking stat: There is (was?) a website that tracks athletes as they go from town to town so women can go hook up with them. Many of these quotes are from the big money makers in various sports (NBA, NFL, MLB). They also interview the ones that were able to maintain their money. Like Jamal Mashburn who told his mom that he was going to set her up with a new house and car and before he could finish she told him to save it and take care of himself first.
- emodendroket 9y ago
  > Quotes from the show "I had more mortgages than HUD" "I had 30 to 40 cell phone contracts" "No athlete wants to earn a few percentage points in bonds. They wanna go for the big dollars, Open restaurants, clubs and car washes! They conquered sports now they will own their next endeavor" I mean those all sound like athletes either getting scammed or getting in over their heads with business endeavors.
aorloff 9y ago
Its easy to invest a lot of money in a good way when you have no ego and all the time in the world to learn about investing. Professional athletes almost never fit that bill.
jakidud 9y ago
There was a podcast by Freakonomics where they tried to educate ex-NFL players about finance and economics. It seems one of the most important differences from the average person is that NFL players earn almost all their life's earnings in the first quarter of their lifetime
aj7 9y ago
Everybody is being too nice. Athletics is hard, and is an almost full-time job for professional aspirations from 15 years old on. Many of these athletes are semi-literate. And this has been going on in boxing, for time immemorial, for the same reason. A means has to be found to better attack the perpetrators.

158 points by gwern 9y ago

Pretty much the plot of the HBO series "Ballers". It's not the most intellectual show, but it does tie together the fallacy of "Balling", essentially how trying to maintain an outward perspective of wealth and excess usually leads to a quick demise of said wealth...

deleted 9y ago
[deleted]

Skunkleton 9y ago

This sounds a lot like how most people go broke. Even when you are talking about people who have been fortunate enough to make a lot of money (like lotto winners), the story sounds the similar. Maybe we need better financial education in the public school system?

IntronExon 9y ago
I have an unsupported conjecture that critical thinking skills and financial literacy aren’t taught in (US) schools more or less intentionally. Financial literacy would harm the business models of institutions offering many types of loans, mortgages, lines of credit, etc. Truly educated consumers are harder to fleece. Critical thinking dovetails with that, and would probably make it harder for ideological, religious, and political figures to “win hearts and minds.” In my experience parents want their kids to believe whatever they believe, politicians want vacuous morons, and ideologues only want to propagate their ideology. Giving people general tools to sort through the mess of competing ideas seems to appeal less than using the opportunity of education as a means of inculcation. In short most people and groups want their own version of reality instilled as early as possible, and no others. A relative minority want critical thinking, financial literacy, and sound scientific principles instilled. It’s harder to take advantage of the prepared mind after all, and so much profit and power is gained through shallow blandishments and lies.
- whatshisface 9y ago
  The biggest difficulty with that theory is that when people loose money to loan sharks they stop buying other things. So as far as either the national economy or the sum of all lobbyists (whichever you think the government is most beholden to) are concerned it's not good on average when people loose everything.
  - IntronExon 9y ago
    Average people don’t lose everything, they live in debt, and increase their debt. Credit cards and student loans, medical bills and mortgages. People who make sound financial decisions don’t roll over debt on their cc’s, or allow for a housing bubble. They might be swayed by arguments that single-payer healthcare wouldn’t lower costs. They might even question the value of spending trillions in Iraq and Afghanistan.
    - marnett 9y ago
      Myself and my sound financial decisions question nothing about Iraq/Afghanistan. HAL performed amazingly in that period.
      - IntronExon 9y ago
        Good investing, but arguably the harm to the overall economy would be difficult for you to compensate for over time. I’d also guess that you care about the wellbeing of others, in which case your personal enrichment is only part of the story.
- pc86 9y ago
  1. There is a national (or international) cabal of executives and power brokers at major institutions of banking and finance that have infiltrated the federal and state Departments of Education, local school boards, curriculum writing organizations, and more in order to subtly dumb down the American populace with the goal that they will be able to make money off these idiots decades later to the tune of a car loan and a mortgage. 2. Financial literacy doesn't appear on any standardized test. I think there's a saying about horses and zebras that applies.
MrFantastic 9y ago
The education system depends on student loans. Financial education would make people question the value of a college education.
- screye 9y ago
  College education pays back multiple fold though. Instate tuition for top public universities is not that high, and helps you gain skills and even more importantly build a network that is certainly worth the investment. Sure, there are many soft fields where job opportunities are sparse. But, a degree @ state tuition is certainly worth it for a good number of majors.
  - civilitty 9y ago
    You're just making the GP's point for them. If you're focusing on public universities and ignoring private universities with their $30-40k/year tuition (federally subsidized, of course), you're already questioning the value of college education. Most students are not even taught to question the common assumption that expensive private universities are better than low cost public ones.
    - screye 9y ago
      > federally subsidized, of course Wait, could you explain what that means. I thought private universities did not receive any government assistance at all. Do you mean subsidized loans to attend such universities ? If so, I can understand. That might not be the wisest thing for a government to do.
- rconti 9y ago
  That's fine. Educate 'em on financial literacy at public middle schools and high schools. Let the colleges and universities make the argument that their education is worth the cost.
rjkennedy98 9y ago
Its not how most people go broke. Most people go broke because of health care costs.
emodendroket 9y ago
The article also makes the comparison to lottery winners, but I don't think "most people" go broke because they opened too many car dealerships.

rectang 9y ago

This article is from 2009.

sctb 9y ago
Thanks, we've updated the headline.
gwern 9y ago
Still one of the best articles on the topic, and if anything, it's even more topical now with the continuous drumbeat of evidence on brain damage in pro sports since 2009 (note the bankruptcy imbalances between professional sports - the ranking goes about as you would predict...).

ggm 9y ago

In many situations, people who are identified as being at risk have somebody else placed in control of the finance, by court action. Brain injury patients for instance. Hmmm.. hang on.. whats the major risk factor in the football circuit again? Seriously: the recruitment of minors for major league with giant cash benefits should require them to sign a consent form for arms-length management of their capital for some time period, and give them the income stream not the capital. after all, its often how the money is being controlled that wound up being their notional capital in the first place

jstanley 9y ago
> Seriously: the recruitment of minors for major league with giant cash benefits should require them to sign a consent form for arms-length management of their capital for some time period, and give them the income stream not the capital. No, thanks. It's their money, let them have it. If they want it to be invested on their behalf, that's fine. But it should be their choice. How would you like it if your employer told you that instead of paying you your wages, he was instead going to contribute to an investment fund, and you'd receive the income from that fund rather than receiving the money directly?
- soared 9y ago
  Replace your employer with government and its real life social security. In theory I support it... if it lasted till I retired.
  - crankylinuxuser 9y ago
    Unfortunately, what Cato says is very worrying (1). Primarily, they highlight court cases in which Social Security is pulled away from people, and reaffirmed by SCOTUS. This is the troubling quote: The Court’s decision was not surprising. In an earlier case, Helvering v. Davis (1937), the Court had ruled that Social Security was not a contributory insurance program, saying, “The proceeds of both the employee and employer taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way.” We would likely have a national riot if Social Security was just yanked at once. But if my own life is any guess, the age to qualify for "benefits" keeps going higher and higher. It's theft by attrition, and backed as not theft by courts. I do not agree with CATO's eventual policy of "privatization" at all. The other choice, which was not posited, was to earmark the funds, keep them segregated from the general fund. Then do the right thing and set Social Security as a guarantee at the same age for everyone. And, remove that cap. (1) https://www.cato.org/publications/commentary/is-there-right-social-security https://www.cato.org/publications/commentary/is-there-right-...

tw1010 9y ago

Let me guess, getting your entire career salary in a lump sum before you're 30 and having the impulsive personality of an athlete doesn't mix well?

andrepd 9y ago
What's your basis for saying athletes have impulsive personalities?
- manigandham 9y ago
  ...because many go broke?
- ch4s3 9y ago
  Perhaps that could be better stated. Being a star athlete is highly correlated with having a risk insensitive personality. That type of personality also correlates with impulsive financial decisions. I'm no sure if that's all true of if it's anything more than correlation, but it makes some sense as a hypothesis.
  - 1jojojo 9y ago
    Being a star athlete is highly correlated with having a risk insensitive personality. According to whom?
    - ch4s3 9y ago
      Ahh, I'm postulating a bit. >I'm no sure if that's all true of if it's anything more than correlation, but it makes some sense as a hypothesis. As I said, I could be wrong. But we know that other fields like management, fashion, music, etc are dominated by risk takers. It may not be true of sports or all sports, but you could imagine that a risk taking basketball player, football QB or running back, soccer forward, or similar players tend to be risk takers. Again, I could be wrong.
      - 9y ago

dangerboysteve 9y ago

ESPN's "30 on 30" sports docs looked into this matter and did a really goof job and worth watching. The episode is called "2 Broke". https://www.youtube.com/watch?v=Elfw0ESih-A https://www.youtube.com/watch?v=Elfw0ESih-A

crescentfresh 9y ago
What a bunch of goofs. Edit: downvotes, really folks? You don't see the parent's typo?
- varenc 9y ago
  I think most downvoters get the joke! It’s just that your comment seems a bit snarky to the op and doesn’t contribute much to the discussion. The HN community puts value on civil and substantial comments. (most of the time...) https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- sowbug 9y ago
  You would be upvoted on Reddit. Not here.

southphillyman 9y ago

The stereotype is that many of these athletes go broke because they are foolhardy with money. I appreciate that this article highlighted that a lot of these guys go broke because of scamming financial advisors. The athlete attempts to do the responsible thing and hires someone they are led to trust with managing their assets only to be ripped off. I'm not sure how financial literacy prevents this from happening when you literally may be lied to about where your money is.

ChuckMcM 9y ago
Agreed, look at it from their perspective. They haven't been around a lot of money before, they don't have a lot of friends who have been around a lot of money either, so they don't really know even what questions to ask to understand the people who are arguing to be their financial advisors. Perhaps major league sports would do well to help train their athletes in the basics of financial management in order to help avoid this situation.
- test6554 9y ago
  It's not their responsibility though. The player could take a course on their own initiative.
  - specialist 9y ago
    Which courses do you recommend?
    - WalterBright 9y ago
      I'd start with a course on basic accounting, which you can get at your local community college. It's critical to be able to read and understand a financial statement, and it's not that hard, either.
  - Jtsummers 9y ago
    It doesn't need to be their responsibility, it is something they could do and wouldn't cost them much. If anything it could help with their recruiting efforts: Show a list of athletes that got screwed by shady advisors; show how they'll connect you with real advisors (at established and more trusted institutions) and education to discern what options are good and what aren't. Won't make a difference when tyring to get that top QB, but it may for all those guys who're only making $150k-300k.

boohoo2them 9y ago

I'm sorry, but I have an extremely hard time even feeling sorry for these guys. Someone who receives an 18 million contract over a short span of 3-6 years, [1] and then goes broke a year after the end, I'm just not going to have any sympathy for them at all. Lets see, an 18,000,000 dollar contract. If they did the second worst thing the could do (first being what they did do) which is just collect the money into a checking account earning no interest, that 18 mil would allow them to draw a $300,000/year salary for 60 years before the principle (the 18mil) was exhausted. [1] and I certainly have no sympathy for them given the fact that not one of these sports players ever deserves being paid anywhere near this amount of money. They don't even deserve 1% of what they are getting paid. So to be broke a few years later, boo-hoo to them.

efa 9y ago

I don't know all the tax implications around huge salaries like these, but every time I read one of these stories I always wonder why they don't just stick their money in t-bills or CDs. Something completely risk free that will get a modest return. If you have 20 million in the bank do you really need to invest in high risk stuff to try to double your money? The problem is everyone they've ever known comes out of the woodwork and is hitting them up for money or pitching some great investment. That's the hard part. Saying "no" to these people.

lazerpants 9y ago
This is why there should probably be an early age pension system for these athletes. The major sports leagues could certainly afford it (and it would lower players upfront salaries some).
- efa 9y ago
  Agree. My young son was recently in a car accident. As part of the agreement with the insurance company he got some compensation. But this is in the form of an annuity with yearly payments when he turns 18. This protects him from parents looking to blow the money and from him blowing the money when he turns 18.
  - albertgoeswoof 9y ago
    This might be a bit rude, but can I ask what the compensation here covers? It seems odd to me to receive compensation for an accident from 10-15 years ago, without anything in between?
- mobilefriendly 9y ago
  All the US pro sports have generous pension programs.
  - jonwachob91 9y ago
    Source?

CryoLogic 9y ago

tl;dr of the article: Athletes have high earnings for short periods of time, but often prefer risky "flashy" investments (e.g. nightclubs) and aren't typically knowledgable regarding anything having to do with basic finance.

doctorwho 9y ago

Finding it pretty hard to muster up any kind of empathy for millionaire professional athletes.

emodendroket 9y ago
Well, who cares whom you can "muster up any kind of empathy" for, especially when the article aims to answer the question "how" more than to engender sympathy?

kelukelugames 9y ago

A mitigating factor is professional sports offer amazing retirement benefits. https://www.bankrate.com/retirement/retirement-benefits-of-professional-athletes-2/ https://www.bankrate.com/retirement/retirement-benefits-of-p...

aphextron 9y ago

I’ll assume for this conversation we are referring to black and latino athletes in the US. In that case, a lot of it comes down to family. A $10 million contract is a life changing windfall for a single unnattached person with no extended family to support, or whose extended family already is self sufficient (as a much greater proportion of white people in the US naturally are). But when you are the first person in your entire family tree to have above a 5 digit net worth, you immediately become liable for everyone, and it can quickly go to squat. Its called the “brown tax”. Escaping poverty can be almost impossible for an individual when they are weighed down by these obligations. It doesnt matter how financially literate you are when your aunt is being evicted from her apartment or your cousin needs bailed out of jail.

ghostly_s 9y ago
I get what you meant, but I would suggest being careful with language like calling white people 'naturally' self-sufficient.

sytelus 9y ago

TLDR; 60-70% of players go bankrupt or are under financial stress after they retire. Reasons are (1) they don't follow balanced mix of investments and squander money in opportunities presented by smooth talkers (2) they end up hiring people who are friends of other players as opposed to actual professionals to manage their assets (3) divorce. The recommended mix of investments for 20+ million assets is apparently "5%to private equity, 7%-12% to real estate, 50%-65% to a mix of public securities(stocks, mutual funds and the like) and the rest to alternatives such as gold and hedge funds.".

fivedogit 9y ago
Thank you. That article was insanely long winded.

rjkennedy98 9y ago

So many of these athletes feel that they are role models and civic leaders, yet they can't so much as balance a budget. Our culture glorifies these guys so much when they are much more like lottery winners than anything else. It doesn't take intelligence to be 6-8 and jump out of a gym.

dopamean 9y ago
I think you've won the gold for the most useless comment on this thread. Congratulations, I'll take silver for this one.

DoubleCribble 9y ago

Let us not forget that even in 2018, your Financial Advisor (loosely defined) may not be obligated to act in your best interest [0]. The Financial Services industry has been fighting hard for the gravy train to continue unabated for years. Fortunately for them, Trump has been very receptive to their plight and doesn't want the party to end just yet.[1] [0]http://time.com/money/4809060/fiduciary-rule-financial-advisor-what-know/ http://time.com/money/4809060/fiduciary-rule-financial-advis... [1]https://www.dol.gov/newsroom/releases/ebsa/ebsa20171127-0 https://www.dol.gov/newsroom/releases/ebsa/ebsa20171127-0

auxym 9y ago
Reminds me of this John Oliver segment: https://www.youtube.com/watch?v=gvZSpET11ZY https://www.youtube.com/watch?v=gvZSpET11ZY

pascalxus 9y ago

At the end of the day, it's the same reason most people go broke: they know nothing about money. Unfortunately, Money is the most important thing in the world because you can't get anything without it. And yet, it's not even a primary subject taught in k-12. Where are people supposed to go for a decent financial education? Instead k-12 teaches kids about useless butterflies and countless other things that are of lesser importance. You would think, they'd at least teach it in college. But, I know MBA graduates with 3.8 GPA who don't even know what a tax deduction is! I recommend basic financial classes for everyone k-12, everyone should have the right to basic understanding of personal finances and basic economics.

harscoat 9y ago
you just explained that the most important thing is knowledge not money
- beambot 9y ago
  No... Knowledge of money
djellybeans 9y ago
IMO the financial industry tries to make it seem so much more technical and complex than it is. Even for how an average person can invest money. A lot of people are perceiving it as such.
- paulddraper 9y ago
  Well you're not going to be inclined to pay them for something simple.
Baeocystin 9y ago
Do you have any book recommendations? I have some younger relatives graduating from college soon, and although they are bright, I worry about their financial sense. I talk to them regularly, but something more concrete would likely also help.

starpilot 9y ago

Olympic athletes are known to sell some of their team clothes after the games. I overheard a well-to-do family at Mammoth saying they bought the jackets off some US Olympic ski team members who were broke.

emodendroket 9y ago
I don't think Olympic athletes are typically making Big Four league kind of money, are they?

DoreenMichele 9y ago

A couple of things: I can't manage to copy and paste it from the article, but one section talks about these guys hiring friends and family, not for their expertise, but as a favor. This inevitably goes bad places. The old boys club is about knowing you well enough to vet you on two things: 1. How trustworthy you are generally and 2. What you are good at. Having connections matters and if you can't establish those connections, you will go nowhere fast. But when it is at all healthy, establishing those connections is about vetting you. These athletes never got the memo. They haven't learned that the reason you hire someone you know is because you can literally trust them with your life, not because they need charity. If they need charity, give them charity. Don't entrust your millions with them. Second, I really appreciate the section where they talk about divorce and that it often happens after retirement in part because these guys can no longer avoid the hard conversations. A lot of marriages seem to only work in X circumstances and to fall apart if circumstances drastically change. The two people are compatible as cogs in X machine, but the personal relationship isn't really that strong. They don't adapt well when that situation goes away.

sowbug 9y ago
"I can't manage to copy and paste it" control-shift-I in Chrome, then use the element-selecting arrow to highlight the element in the DOM containing the text you want to share. I was there for a different reason: to figure out whether my browser was to blame for all the typos in this 9-year-old article ("Old habits diehard" being the one that set me on the quest.)
- DoreenMichele 9y ago
  I am on a phone with an Edge browser. I usually can copy and paste. I don't know why I couldn't manage it that time.

partycoder 9y ago

It works like this: 1) Increase your income 2) Increase your expenses 3) Lower your income, keep your expenses the same

JiNCMG 9y ago

30 for 30 did an episode on this. It was so interesting and while true many get scammed out of their money, a lot more are spending it check to check. Quotes from the show "I had more mortgages than HUD" "I had 30 to 40 cell phone contracts" "No athlete wants to earn a few percentage points in bonds. They wanna go for the big dollars, Open restaurants, clubs and car washes! They conquered sports now they will own their next endeavor" Worst stat from the show: 60% of athletes are broke within 5 years and 70% are divorced within 3 years. Shocking stat: There is (was?) a website that tracks athletes as they go from town to town so women can go hook up with them. Many of these quotes are from the big money makers in various sports (NBA, NFL, MLB). They also interview the ones that were able to maintain their money. Like Jamal Mashburn who told his mom that he was going to set her up with a new house and car and before he could finish she told him to save it and take care of himself first.

emodendroket 9y ago
> Quotes from the show "I had more mortgages than HUD" "I had 30 to 40 cell phone contracts" "No athlete wants to earn a few percentage points in bonds. They wanna go for the big dollars, Open restaurants, clubs and car washes! They conquered sports now they will own their next endeavor" I mean those all sound like athletes either getting scammed or getting in over their heads with business endeavors.

aorloff 9y ago

Its easy to invest a lot of money in a good way when you have no ego and all the time in the world to learn about investing. Professional athletes almost never fit that bill.

jakidud 9y ago

There was a podcast by Freakonomics where they tried to educate ex-NFL players about finance and economics. It seems one of the most important differences from the average person is that NFL players earn almost all their life's earnings in the first quarter of their lifetime

aj7 9y ago

Everybody is being too nice. Athletics is hard, and is an almost full-time job for professional aspirations from 15 years old on. Many of these athletes are semi-literate. And this has been going on in boxing, for time immemorial, for the same reason. A means has to be found to better attack the perpetrators.