In a single year, thriving pro athletes earn more than what an average office desk-dweller makes in a lifetime. Thus, players discovering their newfound wealth can burn through six or even seven-figure salaries quicker than they can score their next goal.
Like the ordinary employee, pro athletes indulge in similar spending habits—helping out a family member, impulse shopping, dining out, and not saving up for the future. Whether a forward or goalie, if you’re seeking athlete financial advice, you’re already headed down the right path.
Depending on your sport, role, contract terms, and potential injuries, your attractive paycheck isn’t going to keep cashing in. More transient athletes will only receive a pretty penny for a couple of years.
With the right advisor, you can easily craft tax strategies for professional athletes to protect the bulk of your earnings. Consider whether your home state provides tax advantages for high-income earners. If not, consider moving to a no-tax state such as Florida, Texas, or Tennessee.
If you’re playing across various states and regions, you’ll likely have to pay withholding tax to the area you’re traveling to. However, you will receive a tax credit in your home state for taxes you pay elsewhere. Take note of whether your home state charges a higher tax rate. If so, you might have to pay more tax than you expected.
The amount you receive on your signing bonus will depend on the state of your domicile. Should your government not levy your income tax, you could be in for massive tax savings.
As a professional athlete, you become entitled to tax deductions regarding wages and income from endorsements, appearance fees, and residuals. Some charges will be deducted as itemized or business expense deductions. Determining which method is most advantageous to your savings is painless with a certified public accountant (CPA).
Should you have any tax deductions available, claim them. These deductions might comprise agent’s fees, exercise clothing, gym memberships, corrective massages, nutritional supplements, and athletic equipment.
For athletes, a “retirement age” is anywhere between 35 and 45. Because retirement contribution limits to 401(k) and IRA accounts are low relative to earnings, athletes must do the bulk of their investing into retirement accounts. Without the tax advantages of 401(k)s and IRAs, professional athletes must make intelligent tax-efficient investments.
Often tempted to overspend, most athletes skimp on proper saving and investment habits that will pay off in the long run. Though unique in itself, making a large percentage of their lifetime earnings in a short period may create difficulties for athletes.
Short-term paychecks don’t’ have to disappear as quickly as you earn them. With the right financial advisor, you can turn these quick and hefty earnings into a lifetime of financial stability.
For athletes and advisors alike, navigating a complex financial landscape is just as big a challenge for both. With Aaron Parthemer, you can receive the best athlete financial planning and get to know the incredible story of a man who beat the odds.