Dec 09

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Maintaining Wealth Eludes Most Professional Athletes

Sports Illustrated provides a surprising statistic:

“By the time they have been retired for two years, 78 percent of former NFL players have gone bankrupt or are under financial stress; within five years of retirement, an estimated 60 percent of former NBA players are broke.”

There are many contributing factors that quickly spring to mind which lead to this sobering statistic.  Certainly, the young age of the players who suddenly have access to tremendous spending power, coupled with the short duration of the average professional sports career, presents a difficult scenario to navigate.  Maximizing earning capacity is one step of the equation, but another required step is tracking and managing those earnings.

Most high performing professional athletes actually derive much of their overall compensation from endorsement deals.  Endorsement deals need to be prudently entered into and negotiated, as well as regularly audited to ensure proper payments are being received. Unfortunately simply cashing the checks that arrive often means any licensor of their image or likeness has not received all the money to which they are entitled under their contract.

Compensation should also be budgeted and invested in such a way to take into account the unique aspects of a professional sports career, the most important consideration being its fleeting nature.  Many standard models for retirement planning don’t anticipate such a pattern.  As is often the case, a competent and  well-intentioned team of trusted advisers can make all the difference.


About the author

Renee Howdeshell

Renee Howdeshell is a founding member of Fulcrum Inquiry, an accounting, finance and economic consulting firm that performs damage analyses for commercial litigation, forensic accountings, royalty & distribution audits, financial investigations, and business valuations. Ms. Howdeshell holds a degree in Finance and Marketing from the University of Virginia's McIntire School of Commerce and is a Certified Public Accountant (CPA) and a Certified Fraud Examiner (CFE). She has testified as an expert witness in federal court, CA state court and arbitration regarding the results of her work. She can be reached at (213) 787-4112 and her resume is available at www.fulcrum.com.

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