NBA and NFL Athletes Go Broke at Very High Rates
Image Source: Parker Anderson
Many of our celebrity bankruptcy updates here involve athletes across many sports fields – but two sports, in particular, account for the lion's share of athlete bankruptcies. The NFL and the NBA are the two biggest athlete feeders into the US bankruptcy system. Today we'll take a look at how many of these sportsters go broke, why they go bust and what this means to the average consumer.
NFL players go broke at alarming rates
The National Bureau of Economic Research (NBER) recently published a study titled Bankruptcy Rates among NFL Players with Short-Lived Income Spikes. Their study is based on the premise that most people have the instincts to save more when their income is high to provide for a period of lower income later, such as in retirement.
The average consumer, over their work life, sees their income gradually rise over the years, then falls off upon retirement. In contract, NBER noted that NFL players' income tends to “a very large spike lasting only a few years.” The average NFL athlete plays in the pro leagues for about three and a half years and earns almost $7 million.
NFL earnings, retirement, and bankruptcy
This income may seem modest, but it equates to $150k a year over a 40-year career. For most people, that's not too shabby. But for NFL players, those seven figures don't go very far. NBER concluded that almost 16% of NFL athletes file bankruptcy within 12 years of their retirement and Mint.com's numbers indicate 78% of NFL players will file bankruptcy within five years of retirement.
Either way it's not a good situation, but if Mint's numbers are more accurate, that's much more dire for the future finances of today's NFL athletes. Here's a quick look at just a few of the more recent instances of NFL athlete bankruptcies, but there are reams of examples of household name NFL athletes that have earned millions then gone belly up.
- Luther Ellis – $11.6 million NFL earnings – filed bankruptcy six years after retiring
- Warren Sapp - $77 million NFL earnings – filed bankruptcy four years after retiring
- Andre Rison - $20 million NFL earnings – filed bankruptcy two years after retiring
- Mark Brunell - $50 million NFL earnings – filed bankruptcy while still active
NBA players also go bust faster than the average earner
Recent research by economist Ruby Henry asserts that an NFL player's shooting stats can predict their tendency to go broke. The more 3-pointers a player shoots and lands, the higher their odds of bankruptcy. Seems strange, right? You might assume that a more successful player is less likely to go broke, but it's the confidence to take risks that lands NBA players in financial trouble.
Henry found that players more likely to shoot 3s are more likely to make risky investments off the court which can lose many of their millions. Billy Corben, director of sports documentary Broke says, “These are guys coming from a life of being very good at one thing and constantly being told they're very good, so they think maybe they're just as good at being a businessman, too.”
NBA earnings, retirement, and bankruptcy
NBA players tend to last longer and earn more than the average NFL player. This makes sense based on the smaller rosters and likelihood of greater game time. NBA careers last, on average, nearly five years versus a little more than three with the NFL. But the earnings difference is almost triple with average earning of nearly $25 million over their career span.
Yet NBA athletes go broke at rates not much lower than NFL players despite the much higher earnings. Mint.com research shows that 60% of NBA players will file bankruptcy within five years of retirement. That's a lot of hoops players declaring insolvency after earning some big bucks. Here's a look at a few recent NBA athlete bankruptcies, although the roster of broke ballers is much lengthier:
- Jason Caffey - $35 million NBA earnings – filed bankruptcy four years after retiring
- Kenny Anderson - $63 million NBA earnings – filed bankruptcy as he retired
- Derrick Coleman - $87 million NBA earnings – filed bankruptcy while still playing
- Antoine Walker - $108 million NBA earnings – filed bankruptcy two years after retiring
Athletes go broke for the same reasons average consumers do
The same money problems plague rich athletes as they do average consumers. It can be divorce and a messy money battle, overspending when earnings rise, bad investments, failure to save money when times were good, living beyond their means, and more. These are all issues that anyone can have, no matter how meaningful or modest their earnings. And bankruptcy is a legal safety net that can offer a fresh start to everyone.
Contact the Law Offices of John T. Orcutt to find out how North Carolina bankruptcy can get you the financial fresh start you deserve. Call +1-919-646-2654 for a free consultation in Raleigh, Fayetteville, Greensboro, Garner, Durham, or Wilson.