By Jeffery M. Leving, of The Law Offices of Jeffery M. Leving, Ltd.
The current debate over NFL players who kneel during the National Anthem demonstrates the skepticism with which some fans view professional athletes. The perception of athletes is frequently that they are being paid a great deal of money to play games and therefore, should have nothing to complain about. However, this view overlooks the real-life challenges athletes face that are unique to their personal and professional lives. Lawyers who have represented athletes recognize the areas in which athletes can be particularly at risk, chief among these are their marriages, relationships, and finances. In my own legal practice, I have represented many professional athletes who played for the Cubs, Bears, New York Jets, Oakland Raiders and other great teams, and I have learned that, despite their large salaries, they face unique financial challenges.
Incredibly, according to Pablo Torre of Sports Illustrated, 78 percent of NFL players have gone bankrupt or are in debt just two years after they retire from the NFL. There are three primary threats to the long-term financial well-being of former professional athletes. They are joblessness after their athletic careers are over, poor investments, and, above all, divorce. I would like to address each of these potential pitfalls and discuss the role that money managers, lifestyle professionals, and attorneys can play in helping these highly skilled individuals navigate them.
Many of the qualities that make athletes successful in their respective sports can work against them in their personal lives after retirement. Boundless confidence, out-sized sense of their own judgement, and a charismatic personality all contribute to a winning combination on the playing field. From an early age, future professional athletes stand out from their peers. They display natural abilities that set them apart from their classmates, and they spend the next several years devoting themselves to the singular pursuit of a goal. While the quest for success requires long hours of solitary training, young athletes become the objects of admiration. The hopes of a high school and later a college education may rest upon their performances. They come to see their popularity as a reward for their dedication. While this mindset is understandable, it also contains the roots for later personal and financial difficulty.
The most important financial reality for pro athletes that differs from the rest of us is that many, if not most, of them will earn the majority of their life’s income in the span of a few short years. The idea is these highly skilled individual will earn large salaries during their playing career and save a significant amount of the money they earn to augment the diminished income they will receive throughout the rest of their lives. However, it rarely works out that way.
According to Torres, “By the time they have been retired for two years, 78 percent of NFL players have gone bankrupt or are under financial stress because of joblessness or divorce,” and “within five years of retirement, an estimated 60 percent of former NBA players are broke.” Torres quotes sports agent Bill Duffy as saying, “A pro athlete’s money is supposed to outlive his career. Most players don’t get that.” If players were to invest their earnings during their careers, they would be able to cushion the shock of transition from player to retired player, but these days in particular, players feel they have to maintain an extravagant lifestyle. As recently as the 1980s, athletes in our major spectator sports supplemented their incomes with an offseason job. As unappealing as such an option might sound to today’s stars, side-jobs often became full-time jobs in the past, which eased transition to life off the playing field.
In addition to the absence of a regular paycheck, another persistent threat to the financial well-being of the retired athlete is bad investing. Too many athletes ignore sound long-term investments, including top tier mutual funds and high quality bonds in favor flashier investments, such as restaurants and car dealerships. In this tech age, former athletes, like many inexperienced investors are looking for the next Facebook or Google, but the path to easy money is rarely straight. The overwhelming majority of tech startups fail. Venture capitalists succeed by doing a great deal of research and financial analysis, and they have financial reserves that allow them to take certain risks. Amateur investors, including pro athletes and retired athletes, may be wealthy but few of them are wealthy enough to withstand repeated bad investment losses. Torres singled out Magic Johnson as an example of how to go about the business of post-career investments. Magic Johnson, for his part, credits making the right choices in picking his financial advisors.
Of all the threats to the wealth of athletes and retired athletes, the most devastating is divorce. While the national divorce rate in the United States is 50 percent, the rate for professional athletes is between 70 and 80 percent, according to online statistics. The reasons for this are easy to guess. “It’s tough sustaining a marriage,” says leading divorce attorney Michael Halusek. “There are endless temptations, travel, a rapid short-term influx of money and a lot of people suddenly surrounding the athlete looking to share in their spotlight and wealth. Athletes need to know their rights and be protected.”
As a divorce attorney, I consider it a crucial part of my role to educate my professional athlete clients as to how to protect both their short term and long-term financial security. Additionally, as a leading advocate for fathers’ rights, I understand the challenges faced in custody battles and protecting and maximizing their involvement in their children’s lives.
The important lessons from these cautionary tales about athletes and their financial circumstances is that the intervention of legal and financial professionals early in a player’s career and early in their retirement, as well, can do a lot more good than coming in to pick up the pieces after bankruptcy or divorce. In my practice, I have found that athletes are overwhelmingly interested in doing right by their families and their communities. I am proud of my role in helping and protecting these athletes.
