The Hidden Costs of an Athlete’s Life

There is almost no avoiding the physical costs of decades of training on an athlete’s body. While the primary focus of this article is on avoiding bankruptcy after retirement, for many athletes receiving a payday for their efforts is not even a realistic dream. 

59% of Olympic hopefuls, for example, make less than $25,000 a year. They exist on sponsorship dollars, crowd-sourced income, and prize money winnings. Few, if any, have the time to hold a part-time job and still maintain their training schedules. While the US does pay for receiving an Olympic medal, $37,500 for a lifetime of work is obviously not the primary driver for their decision to compete. 

Regardless of what sport or the compensation level for any athlete, the decades of physical training have long-term effects on any competitor. Former athletes consistently make healthcare decisions that may affect their mobility, mental well-being, and financial outlook. With hefty price tags, it’s nearly impossible to avoid the lengthy care associated with being an elite athlete later in life. The hidden costs associated with sports injuries have wide-ranging effects on an athlete’s life and happiness. 

Insurance Isn’t Always a Lifeline

Depending on the sport, playing under a team contract isn’t always a solution. The NBA, for example, has gone to great lengths to make sure that players, player’s wives, and children have access to team healthcare plans. 

But many other professional organizations have a long way to go to keep up with the NBA. 

This is due in part to the small number of total NBA players. With only 600 players across the league and an average career length of 4.8 years, the NBA Players Association is in a much better bargaining position around healthcare. The NFL, by contrast, has 1,696 players to consider and they churn through their careers at a much faster rate. With the merger of Major League and Minor League Baseball unions, MLB is negotiating for around 6,500 players every year. 

As for their benefits, Major League Baseball players who play less than four years receive an additional two years of healthcare. Eclipsing that four-year mark in their career allows them to access the health plan indefinitely.

NFL players are eligible to receive supplements and alumni bridges. For the impact sport of professional football, players and their families can only access an additional five years of coverage after hitting their full pension at three years (or more) of play. 

Because 67% of NHL players have Canadian healthcare, hockey players have long dodged long-term healthcare negotiations within their contracts. With the understanding of impact sports and its potential CTE and concussion implications, the NHL is now finding itself trying to resolve player safety and retired player safety. 

After the team coverage lapses, most athletes are looking for their next career at an extremely young age, and health insurance is often a primary driver of their career selections. 

Additionally, none of the above-described scenarios cover professional players who are not part of collective bargaining. Gymnasts, golfers, tennis players, and many other professional athletes do not have healthcare or health insurance included in their salary. In fact, these professionals are responsible for the costs of their own insurance, their own trainers, and the entire staff that works with them on the touring circuit. 

For many athletes who don’t have a professional avenue open to them after college, they are stuck dealing with all the negatives that other athletes have to resolve but without any of the large-scale paydays their counterparts received. Many of the top-earning college athletes. Few NCAA athletes have the NIL money of Arch Manning or Instagram followers of Livvy Dunne. 

Why Athletes Face Financial Hardship

Short Careers, Long-Term Consequences

The average career of a professional athlete is 4.6 years, which is very comparable to an average NCAA career. Because these careers are so short, many people are dealing with the financial implications of retirement at a time when they may not have the maturity to grapple with the full repercussions of their investments.

Even professional players retire at an average age of 26, and in spite of the NFL Players Association requiring financial literacy classes for all players, an astounding 78% of professional football players will struggle with financial hardship in their lives.

Retiring in your 20s is a wild proposition. With only 2% of NCAA players having a professional career, finding a new identity in your early-to-mid 20s is a tough task for anyone. But considering that most athletes hit their maximum lifetime earning years so early, building a long-term financial cushion for the long haul is often not within their sights.

 

Endless Wealth Trap

There are endless reasons for the struggle that athletes face financially after retirement. Many athletes trust the wrong financial advisors, make poor investments, or are taken advantage of by predatory money managers or similar career managers. If Shohei Ohtani can be taken for $17M, what hope is there for other athletes?

The problem most athletes face is feeling those paydays are endless. While all athletes know that big paychecks are temporary, many don’t realize the implications. An average earner of $5M will take home just $2M after paying their taxes and agent. While that feels like enough to live a life of luxury, most players will not have a second career ready immediately upon retiring.

Athletes also typically run with other athletes, who may have more lucrative contracts and spend like it. Luxury items, flashy lifestyles, and ever escalating salaries can give a false sense of security. No matter the sport, there are always icebergs ahead. Whether an injury, unexpected change in playing time, or a divorce, many players are shocked at how volatile their earnings actually are. ESPN reports the divorce rate for athletes is 60% to 80%. Many athletes have alimony payments and child support. These payments will far outlast most player’s careers. 

If Curt Schilling and Tony Gwynn can go bankrupt, it’s no leap to think that bankruptcy lies in wait for other, lesser known, players. 

Unforeseen Sports Injuries and Challenges

The cost of injuries is not just care. For many athletes, a promising career cut short is always unexpected. When a player feels good and is planning on having multiple years of playtime, an injury will upend their financial plan. 

While the stories of professional players who saved all their cash, like Larry Bird, it was a joke on the court for him. Players teased him while he was a Celtics star, only to later have players ask for handouts. Bird has been open about how being frugal prepared him for the next chapter of his life, but these lessons don’t seem to resonate with all athletes. 

Whenever anyone retires, feelings of depression and lack of purpose can follow. If this happens to people spending 40 years preparing for retirement, it’s no surprise that an athlete will have the same emotions in their 20s. Additionally, if athletes don’t have a second career plan or plan for how to spend their time, there is little to do except overspend what they’ve saved. 

The emotional toll of retirement and injury is likely to disrupt more than just an athlete’s income, it has the potential to derail their entire financial stability if mismanaged. 

Athletes are often not versed with their options for disability insurance and life insurance when it matters. Having a qualified financial advisor can assist with these planning issues, not just about managing the dollars and cents in a portfolio. 

Life After Athletics

Finding a positive activity or second career should be the first priority of any retired athlete. Whether you signed a multi-million dollar contract or competed in a sport that you knew would only last through college, knowing what the next chapter is will be essential for your mental and financial well-being.

Good financial advisors will tell you it’s not about hitting a financial home run. The goal should be finding something that occupies your time that doesn’t cost more money, or finding another career that you’re passionate about. Trying to hit it big with another business shouldn’t be the goal when trying to create financial stability.

A willingness to talk about the role that race can play in money management is also an idea that is gaining traction. There are organizations specifically targeted to help student-athletes learn to manage their money and find qualified advisors. These organizations have financial advisors who specialize in sudden wealth increases like athletes encounter. 

Dealing with life after athletics is more than financial. Purpose Athletics has created a workbook and some personal-building exercises to help with transitioning into everyday life after sports. Remember, there is no shame in asking for professional help in anyone’s retirement journey. 

Taking Control of Your Financial Future: Balancing Sport and Finance

The biggest lesson we hope athletes will take away from this blog post is that finding the right people to help you plan your financial future is essential. When an athlete goes from High School to college or from the NCAA to the pros, there will be an avalanche of information that is almost impossible to sift through alone. Having the right people in place early is the best way to ensure your financial future. 

Planning early, before you receive your first paycheck is essential. There are stories from big-name athletes who met with marquee investing firms and felt like they were watching ‘the teacher from Charlie Brown’ talk to them. Finding a financial advisor who can talk you through your first payday, your tax implications, and help you build a lifetime financial plan is a must. 

With the NCAA’s changes to Name Image and Likeness (NIL), finding a financial advisor you can trust is no longer something that can be put off till your first contract is signed. Work with trusted financial advisors who have a fiduciary responsibility to you, their client.

Avoid quick investments with potential big pay-days. Learn from other athletes and skip investing in businesses you don’t understand and ones that promise to have big payouts on short timetables. 

Sports and finance don’t have to be at odds with each other. Remember, life after athletics is something that every athlete has to encounter, without exception. 

Build an Emergency Fund

The best way to ensure a happy and healthy life after retirement is to have the largest nest egg possible. Regardless of the sport or position, injuries are inevitable. Whether small sprains and tears to large surgeries and recovery, saving an emergency fund can prevent later financial stress. 

There are lots of online ‘emergency fund’ calculators, but keep in mind that most of those won’t take into account the stress that gets put on an athlete’s body. Make sure that if you are building an emergency fund with cash from an NIL deal, or a professional contract, you must plan for the financial impact of injuries that are difficult to avoid for anyone. 

Having an emergency fund as a safety net is essential for any athlete to prevent financial ruin. 

The Nebraska Greats Foundation 

We believe every athlete deserves a fulfilling and financially secure retirement. It’s time to break the cycle of bankruptcy and empower athletes to take control of their financial future.

Ready to create a winning financial game plan? Contact the Nebraska Greats Foundation. We offer resources and support to help you navigate the challenges and reclaim your future.