4 ms·

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 thei

by 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?
curun1r 9y ago
Taxes are especially pernicious for athletes. Beyond the fact that they can't structure their income to get out of the top tax brackets like those in the business world (there's no stock compensation, dividends or anything else that turns their compensation into capital gains), athletes also have to file a state return and pay taxes for every state that they work in, and away games count as work. But it's not really taxes that are the problem. ESPN's "Broke" documentary covered it well and it's a combination of many factors. Financial literacy is high on the list. One story told in the documentary has a rookie cashing his $500k signing bonus at a check cashing store because that's the only thing he knew to do with checks. When you're underbanked, simple things like t-bills or index funds and even checking accounts are a part of a completely separate world. The second is lifestyle. When you're new to the league, everyone is buying expensive cars, jewelry and other frivolous purchases and there's pressure to keep up. And since you're traveling with your teammates, they're your social circle as well, so expensive meals out, clubs and other distractions on the road end up costing money. And being known to have lots of money makes you a target, both for people you knew before going pro and for women who see child support as a ticket to a better life. And the common pattern is that players live it up and don't save much in the first half of their careers and then realize that there's going to come an end to the high income stream and that they need to make it last the rest of their lives, only to find that simple, stable investments aren't going to get them to a point where they can provide for everyone they feel responsible for once they're out of the league. So they end up chasing long-shot investments that almost always result in a total loss, making the problem even worse. Some of this isn't much different from most people in other professions. The main difference is that athletes have their prime earning years during a time in their lives where they're still financially irresponsible. I know most of my friends didn't save much during their early-to-mid 20s. We spent way too much going out to bars and clubs, bought toys that were way more than we should have been spending and basically lived paycheck-to-paycheck despite the fact that we could've been saving a bit. These guys have that same period, just with a lot more money. But whereas the rest of us get to keep earning until we retire in our 60s/70s, often with the highest salaries coming near the end, these guys have their prime earning years end, often abruptly, usually well before the age of 40.
emodendroket 9y ago
I mean, it says right in the article. Besides the "friends" coming with "great investment ideas" that they have trouble turning down, the kind of person who becomes a pro athlete is often not the kind of person who thinks that investing your money in a mutual fund sounds like a good idea when they could be "swinging for the fences" doing something more tangible.

by efa 9y ago

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?

curun1r 9y ago

Taxes are especially pernicious for athletes. Beyond the fact that they can't structure their income to get out of the top tax brackets like those in the business world (there's no stock compensation, dividends or anything else that turns their compensation into capital gains), athletes also have to file a state return and pay taxes for every state that they work in, and away games count as work. But it's not really taxes that are the problem. ESPN's "Broke" documentary covered it well and it's a combination of many factors. Financial literacy is high on the list. One story told in the documentary has a rookie cashing his $500k signing bonus at a check cashing store because that's the only thing he knew to do with checks. When you're underbanked, simple things like t-bills or index funds and even checking accounts are a part of a completely separate world. The second is lifestyle. When you're new to the league, everyone is buying expensive cars, jewelry and other frivolous purchases and there's pressure to keep up. And since you're traveling with your teammates, they're your social circle as well, so expensive meals out, clubs and other distractions on the road end up costing money. And being known to have lots of money makes you a target, both for people you knew before going pro and for women who see child support as a ticket to a better life. And the common pattern is that players live it up and don't save much in the first half of their careers and then realize that there's going to come an end to the high income stream and that they need to make it last the rest of their lives, only to find that simple, stable investments aren't going to get them to a point where they can provide for everyone they feel responsible for once they're out of the league. So they end up chasing long-shot investments that almost always result in a total loss, making the problem even worse. Some of this isn't much different from most people in other professions. The main difference is that athletes have their prime earning years during a time in their lives where they're still financially irresponsible. I know most of my friends didn't save much during their early-to-mid 20s. We spent way too much going out to bars and clubs, bought toys that were way more than we should have been spending and basically lived paycheck-to-paycheck despite the fact that we could've been saving a bit. These guys have that same period, just with a lot more money. But whereas the rest of us get to keep earning until we retire in our 60s/70s, often with the highest salaries coming near the end, these guys have their prime earning years end, often abruptly, usually well before the age of 40.

emodendroket 9y ago

I mean, it says right in the article. Besides the "friends" coming with "great investment ideas" that they have trouble turning down, the kind of person who becomes a pro athlete is often not the kind of person who thinks that investing your money in a mutual fund sounds like a good idea when they could be "swinging for the fences" doing something more tangible.