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Pro athletes need a sound, long-term fiancial plan

“High-profile retired athletes like [former Indianapolis Colts quarterback Andrew] Luck may well be able to keep earning money in the future, perhaps in broadcasting, coaching or launching a business venture. But keeping that investment portfolio intact provides a financial safety net for athletes who retire relatively early in life and their families who face decades of household expenses.”
“High-profile retired athletes like [former Indianapolis Colts quarterback Andrew] Luck may well be able to keep earning money in the future, perhaps in broadcasting, coaching or launching a business venture. But keeping that investment portfolio intact provides a financial safety net for athletes who retire relatively early in life and their families who face decades of household expenses.” AP file | Nov. 18, 2018

In August, Indianapolis Colts star quarterback Andrew Luck stunned the football world by retiring at age 29, giving up $58.1 million on his current contract. Luck had suffered a series of concussions during his pro career, and put his health first, rather than risking another serious injury.

For Luck, the decision was made easier by having already set aside a significant portion of the $97.1 million in his seven-year professional career, giving him a net worth higher than most other athletes, entertainers or other celebrities.

Unfortunately, many professional athletes are not as careful with their finances. NBA star guard Allen Iverson filed for bankruptcy after earning $150 million his career. So did tennis pro Boris Becker, who had $126 million in career earnings. In fact, a study by Sports Illustrated back in 2009 found that 78 percent of NFL players and 60 percent of NBA players faced financial struggles after they retired from sports.

So, what makes the difference? Like Americans at all income levels, some athletes put money away in a well-constructed investment portfolio to support them in retirement, while others don’t.

A professional athlete like Luck may only have a few years of earning a multimillion-dollar salary in sports. That means taking a disciplined approach to personal finances, and working with an objective financial advisor to plan for the future. It means resisting the temptation to enjoy a lavish lifestyle and spend away until the big contracts come to an end.

High-profile retired athletes like Luck may well be able to keep earning money in the future, perhaps in broadcasting, coaching or launching a business venture. But keeping that investment portfolio intact provides a financial safety net for athletes who retire relatively early in life and their families who face decades of household expenses.

A professional financial advisor can also screen well-off athletes from the many requests they receive from extended family members, friends and strangers who want to borrow money or invest in a high-risk business scheme. After all, it can be tough for a young athlete who has struggled all his life to say “no” to the people who are hoping to capitalize on his fame and fortune.

Other mistakes that athletes make include spending beyond their means. Like other professionals with more modest incomes, athletes may be tempted to spend heavily to support a luxurious way of life. That might include exotic sports cars, yachts, private jets or top-of-the-line mansions. But whether your income is $50,000 or $50 million, it’s vital to have a monthly budget so you can track your spending and income.

Another error is investing in a business without understanding the risks. A sports star brings two valuable assets — investible funds and name recognition — to a restaurant, retail, real estate, hospitality or service venture. Therefore, athletes often face a list of proposals that seem attractive on the surface. But it’s important to look closely at the business plan, as well as the market opportunity, before making a limited financial commitment. Again, a professional advisor can help sort through these proposals and explain the risks involved with business investments.

Finally, athletes like Luck should be concerned about paying for their future medical and health requirements. An athlete with repeated concussions, for instance, may be at higher risk for brain disorders in the future. Someone with a badly broken leg, arm or joint may require expensive surgery to repair the damage, followed by long-term care during the recovery period. A relatively young athlete might have to pay a high premium for health insurance or pay those costs out of pocket — another factor that should be considered in a long-term financial plan.

In summary, professional athletes who are fortunate to receive a multimillion-dollar contract can spend away, enjoying their wealth they face the cold realities of life when their careers come to a close. Or they can take a disciplined approach to their finances, just as they do to their daily workouts, and aim for a secure financial future.

Andrew Menachem,

CIMA®, is a wealth adviser at The Menachem Group

at Morgan Stanley in Aventura. Views expressed are those of the author, not necessarily Morgan Stanley, and are not a solicitation to buy or sell any security. The strategies and/or investments referenced may not be suitable for all investors. Follow Menachem on

Twitter @AMenachemMS.

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