Why athletes have financial troubles too—and what they do about it

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As an old-timer hockey player who still pays to play our national pastime, I can relate to the average sports fan’s tendency to envy the elite athletes who get paid millions to play kids’ games—especially when we know they love it enough to play for nothing.

But after reading Chris Moynes’ book, After the Game, I became more sympathetic to the plight of professional athletes whose careers average about 5.5 years. The median is just 4 years (so half have careers that last less than that) and a sudden critical injury could end it all at any moment.

Of course, while it lasts, the pay is astronomical compared to what mere mortals can generate in regular jobs: an average US$2.4 million per season. That means the average pro athlete will earn about $13 million over that short career. However, citing Sportrac.com, Moynes says 200 of the 683 players in the NHL earn less than US$1 million per year because the stats are skewed by the huge salaries of the biggest stars.

Big bucks for that brief window of opportunity, for sure, but that sum has to last another half century or more, and odds are no second career is going to pay like pro hockey, baseball or basketball. As Moynes writes, “it probably means you’re going to have to find work after you retire, and that’s the NHL. Salaries in the AHL average only about US$100,000 annually.”

This is decidedly a young man’s (they’re mostly men, of course) challenge: 70 to 90% of a pro athlete’s lifetime earnings will be generated before they turn 35.

Here’s another astonishing stat: there’s a 70% chance a pro athlete will file for bankruptcy or face severe financial pressure within five years of retiring from the sport.

Moynes is the son of Riley Moynes, whose book The Four Phases of Retirement, we reviewed in this space last year. Having played hockey and tennis himself in his teens, Chris decided to focus on the niche of professional athletes, starting with pro hockey clients. The book is subtitled Challenges for the Retiring Pro Athlete. Chris started his career as a financial planner at Assante Wealth Management (where he worked with Riley), then moved on to RBC Sports & Entertainment Group, and then Aligned Capital Partners Inc., as a senior partner.

Since 2014, he has been Managing Director of the ONE Sports & Entertainment Group division of California-based One Capital Management LLC, which caters to professional athletes and entertainers.

The original print run of the book is almost exhausted and Moynes is preparing a new edition. In the meantime, it is available at Amazon.com or directly through his web site at www.onesports.ca, as is an earlier book called The Pro’s Process.

If you’re a mere mortal (like me or you, dear reader,) you may worry about amassing enough wealth and developing an avocation to last perhaps from age 60 or 65 to the end. Imagine instead peaking in your career at age 28 or 30, then having to fill – and pay for – another 60 years!

These athletes pay huge taxes while they’re on top but Moynes’ case histories reveal that many retiree athletes also lose half their wealth to divorce: some marry well but there is a significant percentage of partners who turn out to have been there only for the good times.

One thing that fascinated me was the revelation of what pro athletes missed most once they left the game and the glory. Turns out to be the camaraderie in the locker room and on the road with their team-mates.

The opening chapter outlines the six biggest “landmines” facing pro athletes. First, are overspending and the combination of big paycheques spread over a short career. They seldom understand finances and often make poor investment choices, typically being prime targets for those selling “can’t miss” investments like nightclubs, casinos, real estate ventures, and other private-equity type deals. In short, they entrust their money management to the wrong people. And finally, many fall prey to “an almost predictable downward spiral” precipitated by the failure to avoid such landmines as gambling, trouble with the tax man, alimony payments and excessive leverage.

Obviously, there are lessons here for the vast majority of readers of this column who have more traditional employment but my bet at this point is that if you harbored any lingering envy of the wealth and fame of pro athletes, you’re starting to feel a touch of sympathy now. As Moynes points out in a chapter comparing athletic career retirement and “civilian” retirement, most civilians eagerly look forward to the end of their long (often 30 or 40 years) careers, while most pro athletes and even elite amateur athletes wish their careers could go on indefinitely: “The thought of retirement is anathema to most pro athletes.” And many athletes when interviewed later in life confess that they regret quitting their game as early as they did.

The need for athletes to get their money managed professionally should be apparent from a WyattResearch.com report (publicized in Sports Illustrated in 2009) that found an astounding 78% of NFL players and 60% of NBA players file for bankruptcy within five years of retirement.

While ordinary people should by now be familiar with the need to automate their savings programs, the pro athletes using Moynes’ services at One Sports save a far higher percentage of their income than the 15 or 20% that regular folk are counseled to save. When you’re earning millions a year, saving 80 or 90% of it is normal, Moynes said in an interview. At those levels, “do you need more than $20,000 in your bank account every two weeks? Likely not.”

So, for these clients, One Sports pays off their credit cards in full, leaving $20,000 in a chequing account and sweeping the rest into investment accounts. This may be invested in money market funds or fairly aggressively in retirement accounts like 401(k)s or RRSPs, up to 75 or 80% in equities. Older more conservative investors may be in a 50/50 asset mix: “You don’t need to hit home runs: just singles and doubles.”

While civilian retirees may feel some loss of identity when they give up the role that defined them for decades, the void is much less intense than it is for athletes accustomed to the media limelight.

Similar to Riley’s four phases, Chris describes three “periods” of retirement for athletes: Feeling Lost and Feeling Loss, a second period of Experiments, Initiatives, and Rehab; and a third period he calls “Breakthrough to a New Sense of Purpose.”

Jonathan Chevreau is founder of the Financial Independence Hub, author of Findependence Day and co-author of Victory Lap Retirement. He can be reached at [email protected]

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About Jonathan Chevreau

As MoneySense’s Investing-Editor-at-Large, he is also author of Findependence Day and co-author of Victory Lap Retirement. Reach him at [email protected], where he is the founder of Financial Independence Hub.