The Uncertain Financial Futures of Athletes and Entertainers Demand Training and Discipline

How professionals with unpredictable and short-term earning windows can lock down their financial futures.

In one corner, you have the likes of Mike Tyson, Michael Vick, Allen Iverson, Antoine Walker, Evander Holyfield, Lawrence Taylor, Scottie Pippen, and Lenny Dykstra, who collectively earned in excess of $1B throughout their respective athletic careers. And in the other corner you have the likes of George Foreman, Magic Johnson, Michael Jordan, Roger Staubach, Wayne Gretzky, Tiger Woods, Greg Norman, and Cal Ripken Jr., who not only earned large sums of money in uniform, but went on to build successful business careers, both during and after their playing days. The former group figured out how to burn through a cool billion dollars, and have nothing left to show for their domination in their respective sports.

According to Sports Illustrated, 78% of NFL players who are retired for only two years file for bankruptcy. After five years of retirement, 60% of NBA players suffer the same fate. According to a study by the National Bureau of Economic Research, nearly 16% of the NFL players in the study who were drafted during 1996-2003 filed for bankruptcy within just 12 years of retirement.

In this article, I will examine the common mistakes made by those working in a profession where the longevity, predictability, and sustainability of earning power are difficult to forecast. I will share my own experiences working with and advising athletes and entertainers (A|E) and what I learned about the many challenges they face. I will address several important planning considerations these professionals must address, plan, and solve for, regardless of the length of their careers. In addition to the financial planning and investment mistakes that have haunted this group for generations, many other tangible and intangible factors contribute to the success or failure of A|E during and after their careers. I will discuss the common themes and actions of professionals who not only survive but thrive after their playing days are over.

Read more of Brian Werdesheim’s thought leadership.

Mistake #1: Surrounding yourself with yes-men.

A|E are spending the vast majority of their lives mastering their craft to reach the pinnacle of success and little time on the subjects of financial literacy and investing. By the time they ascend the draft, or graduate from college and sign their first big contract, a host of “advisors” enters the picture and this begins a journey that often ends badly. These advisors are often friends of their family, acquaintances, and others whose agendas may not be in alignment with the athlete and/or without the requisite skill set and experience to provide high-level guidance. Within a short period of time, the “high earner” is surrounded by a group of people without credentials and often with conflicting loyalties, who are unwilling or unable to provide the discipline and objectivity that are so critical to the equation. Hearing “No, you can’t do this or that,” doesn’t happen very often because these advisors don’t want to disappoint their high-profile client or put their relationship at risk. These figures have long found themselves in national headlines and the story always reads the same: “John Smith is bankrupt after he spent lavishly, while learning his advisors invested poorly, stole money, and squandered millions.” It is imperative for A|E to have a well-vetted and qualified team of professionals working together for the best interests of the client and willing to challenge groupthink when it’s not always convenient to do so.

With the help of an experienced financial planner, attorney, and CPA, this effort may go a long way toward locking down the planning part of your life. 

Mistake #2: Having an unrealistic view of your long-term earning potential.

It is not difficult to understand why someone like Ryan Leaf, who was the second player taken in the 1998 NFL Draft after Peyton Manning, would think that their financial life is secure. One would think that a $31.25 million contract and an $11.25 million signing bonus would secure the future for most people. But think again. Within a few short years, Leaf was out of the NFL, was on drugs, and had a criminal record. Most professionals who sign a contract are also continuously told how great they are, and will be forever. They invariably assume there’s another contract coming down the road. For people like Derek Jeter, Tom Brady, and others, that was certainly the case, but they are the exceptions to the rule. Recently, Joe Burrow, the first player taken in the 2020 NFL Draft, signed a record-breaking contract with the Cincinnati Bengals. Shortly thereafter, he publicly stated he had no intention of spending the contract money and would rely on endorsement contracts and other cash flows for his annual living expenses. While his contract represents an enormous amount of money, when you net out agent fees, taxation, and other embedded expenses, his bottom line quickly dropped to about 35 cents on the dollar. Unless one lives in a jurisdiction without state income tax, the bottom line is that most athletes sign one major contract in their lives, so having some forethought and sense of reality is critical. I would bet Burrow probably has another contract in his future, but he’s not going to need it.

Mistake #3: Lack of a real financial plan that allows you to build a safety net. 

Thankfully, for every athlete who lacked the discipline and structure around them to achieve financial independence, many did it right. The key difference between the winners and losers relates to the presence of a deep and thoughtful financial plan that maps out one’s financial future, based on a number of simple variables, including income, spending, taxation, inflation, and investment returns. Having a document that shows A|E what’s possible given these variables is very liberating and creates a degree of confidence, if the high-wage earner can exercise some discipline and control. The relationship between athlete and investment advisor is a trusted partnership. Both sides have to keep their end of the bargain. If the advisor does a good job investing the capital, it may not matter if the client is spending like a drunken sailor.

Mistake #4: The absence of a unified team of tax, legal, and financial professionals, who are not conflicted with regard to the client’s personal well-being.

Ask the CEO of a large publicly traded company and they will tell you they are only as good as the support system below them. This includes the CFO, COO, and other key members of the C suite. In the case of the professional athlete, they need to embrace the idea of being the CEO of their life, while building out the team of advisors around them. It is true that “agents” or “attorneys” for A|E have existing relationships that will be referred to their client, but this exercise can present a host of challenges and potential failures down the road. It’s hard to overemphasize the importance of building out a highly skilled and battle-tested team of advisors for the long haul. Many sports agents have done an outstanding job surrounding their clients with talented and ethical advisors, and their athletes are the ones who are thriving, both during and after their careers.

Mistake #5: Making outsized investments into opportunities that have little chance for success. 

“I have an investment opportunity that’s a no-braineryou can’t lose.” Just about everyone has heard this promise from someone but never more than the athlete who has a target on their back. Unfortunately, all too often the unsophisticated and unprepared target is seduced by such an opportunity because they believe the person making the pitch is credible and believable, and the story is too good to pass up. Years ago, an athlete client of mine asked me to get on an airplane to meet with his attorneys to discuss a business opportunity they were presenting to him. At this point our client had already invested $1M into the deal without our knowledge. After the long dinner, I called the client and told him to cease any further investment. I felt pretty strongly that the only people making money on this deal were the attorneys. While I didn’t follow the deal beyond our client’s initial investment, things went south fast, and all of the investors lost tens of millions of dollars. Taking on some level of risk to generate outsized returns with an amount of capital that will not put you in harm’s way is acceptable, but extreme caution and due diligence are required anytime an opportunity presents itself. 

Mistake #6: Not investing in their personal growth, leaving them ill prepared once their careers are over. 

Magic Johnson is the poster child for what success looks like after your athletic career is over. Right out of Michigan State, Johnson surrounded himself with some extremely smart people, whom I know personally. They kept him out of trouble but also helped position him for a remarkable level of success during and after his professional basketball career was over. His development projects in urban areas have not only improved the quality of life for residents, but have made Johnson a very wealthy man, who is now part owner of the Los Angeles Dodgers and former shareholder of the Los Angeles Lakers. For many athletes, the season is half the year. The off-season should be dedicated to developing skills and relationships that can help them after their career. The average length of an MLB career is 5.6 years; for the NBA, 4.5 years; and for the NFL, just 3.3 years.* Assuming a 75-year life span, an athlete’s outsized earning power comes during just 6% of their lifetime. If this doesn’t tell the story, nothing will.

Working with an astute and well-credentialed financial planner can provide great insights into strategies and thinking that can really move the ball forward on the planning front. For example: 

  • Choosing a proper domicile. Where do you live? Does the team’s home state have tax advantages for high-income earners? If not, residing in a non-tax state like Florida, Texas, or Tennessee can mean significant tax savings.
  • Mitigating the so-called jock tax. This involves projecting the tax impact of playing in various states and paying tax to those states. Players have to pay withholding tax to the visiting state for road games, but they also receive a tax credit in their home state for taxes paid in other states. If their home state has a higher tax rate, players may owe more tax than expected.
  • Understanding the impact of taxes on signing bonuses. A player’s signing bonus is only allocated to their state of domicile. If that state does not levy income tax, it can mean huge tax savings.
  • Allocating professional athlete tax deductions to earned wages versus earned income from endorsements, appearance fees, and residuals. Certain deductions can be taken as itemized deductions or as business expense deductions. A certified public accountant (CPA) can help an athlete determine which method is most advantageous.

We always look into the very important but less well-known planning aspects for athletes and entertainers, including:

  • Employment agreements for household workers
  • Privacy policies for employees
  • Kidnap and ransom insurance for high-profile athletes
  • Security companies to protect an athlete’s dwelling and vehicles

Learn more about The Summa Group’s approach to Wealth Management.

The following exercises are game changers for any person who wants to be prudent and proactive with regard to their financial lives. With the help of an experienced financial planner, attorney, and CPA, this effort may go a long way toward locking down the planning part of your life. 

  • Create a current balance sheet, cash-flow summary, income and expense summary, and financial plan that provide the athlete a road map and confidence—review with a certified financial planner.
  • Review the structure and estate tax consequences of the recent liquidity/income and long-term contracts. Make sure all assets are held in trust or protected. Maximize the value of the estate exemption via low-basis stock gifts or other entity structuring. Explore and become educated on the world of estate planning—review with an estate lawyer.
  • Review current and potential future tax liabilities. Strategically position assets for tax-efficient investments through the use of certain offset credits, tax carryforwards, residency planning in different states, and income shifting via insurance or retirement strategies—review with a CPA.


A perfect storm surrounds the financial lives of athletes and entertainers because they are high profile with targets on their backs and oftentimes have little experience in the areas of financial literacy and investing. The agent, attorney, or business manager who has taken the time to conduct due diligence and background checks on investment advisors, attorneys, CPAs, and others who are critical to the success of their client’s financial lives are doing themselves and their high-profile clients a worthy and invaluable service. Having worked closely with athletes and entertainers for more than three decades, I have witnessed the good, the bad, and the ugly under different sets of circumstances. I believe it’s always in the best interests of A|E to invest the time into gaining knowledge and experience with regard to financial matters. The most successful people across multiple industries know what they don’t know, and then take the time necessary to surround themselves with experts to fill the gaps. Even the most well-intentioned athlete can suffer irreversible financial damage if they fail to surround themselves with a team of advisors dedicated to helping them secure their financial future and independence. The NFL, NBA, and MLB have made some progress toward implementing an educational platform and screening process for their athletes, but unfortunately, too many are victimized by their own missteps and the presence of people who have an alternate agenda. A|E can have it all during and after their athletic careers if they are properly advised and willing to embrace prudent proactive planning with a long-term view. 

*Statistical sources: Science Daily,,

Oppenheimer & Co. Inc. does not provide legal or tax advice, but will work with your other advisors to assure your needs are addressed. The opinions of the author expressed herein are subject to change without notice and do not necessarily reflect those of the Firm. Additional information is available upon request. Investors should review potential investments with their financial advisor for the appropriateness of that investment with their investment objectives, risk tolerances and financial circumstances.

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