Financial Planning for Professional Athletes

Roll of dollars on a blackboard with football strategy planning to symbolize financial planning for athletesWhile you may think someone earning millions of dollars per year couldn’t possibly have financial concerns, the opposite is in fact true. A high net worth can exacerbate the financial challenges faced by others. When that net worth is earned rapidly and over a short timeframe, as is the case for most professional athletes, the financial risks become even greater.

At Watts Gwilliam & Company, we specialize in helping professional athletes (and other high net worth professionals) with these concerns. In our experience, what often happens with professional athletes is that they receive the bulk of their lifetime earnings over the course of a few years or a decade before retiring from their sport. They may earn more in a few years than some people see in a lifetime. These high earnings can lure pro athletes into a false sense of financial security, but mishandling their money during their peak earning years could leave athletes strapped for cash later in life.

Financial planning for professional athletes requires a specialized approach, one that addresses the unique career trajectory and financial challenges they face. 

This guide addresses some of the more important elements of financial planning for professional athletes, from managing current cashflow to combatting the risks of being in the spotlight. If you have a concern that is not answered here, contact us. A no-obligation conversation can go a long way.

Chapter 1


Managing cashflow is one of the most important aspects of financial planning for professional athletes. How you spend your money today will dictate many aspects of your future. 

The first thing to recognize is that the dollar amount on your contract is not the amount that will land in your bank account. Taxes and agent fees will take a significant chunk out of your net earnings, so take care not to start spending money you don’t have and won’t actually receive.

Even after accounting for taxes and fees, it’s important that you don’t let your lifestyle expand to consume all of your take-home pay. Why? Because that pay won’t last forever. Athletes often start their adult lives earning huge paychecks but this income is short-lived. It’s far easier to create a reasonable budget early on than to try to reign in your spending when your income can no longer support your lifestyle.

One way to manage your cashflow as a professional athlete is to treat it like the scarce resource that it is. Save as much as you can in the beginning of your career by putting it directly into your savings and investments. When you don’t see the money in your bank account, people are less likely to spend it; and if you don’t get in the habit of spending it, you won’t miss it when you’re no longer playing.

This is especially important for athletes who are only paid during the season. In such cases, you’ll want to make your temporary income last for a full year. 

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Chapter 2


Having short-paying careers means professional athletes need to plan ahead for the years when their earnings may not be so generous. One thing we work with clients on is building up their cash reserves so they won’t need to vastly alter their lifestyle after retiring from their sport. How big of a cash reserve you should have will depend on your career after you stop playing. Do you plan to get another full-time job after you stop playing? Or are you hoping to live off of your earnings from your playing days? If you intend to keep working after leaving professional sports, you won’t need as big of a cash reserve.

Make sure to research the salary potential of your future field to gauge how much income you can expect after retiring from pro sports. It can be hard to go from earning seven figures to six. Depending on your future career’s earning expectations, you may want to build up enough of a cash reserve to supplement your future salary so you don’t have to drastically alter your lifestyle. If you don’t end up spending your reserves during your second career, you can always keep them for retirement.

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Chapter 3


Professional athletes’ career journeys are unique in that they often have two retirements. The first is when they retire from their sport after their playing career ends. Many athletes will continue working after this first retirement, however, especially if their earnings and/or savings during their pro-sports career wasn’t enough to sustain them for the rest of their lives. In this case, there will be a second retirement when they stop working altogether.

It’s important for professional athletes to plan financially for both of these retirements. Saving in tax-advantaged retirement accounts, such as an IRA or 401(k), is generally a smart move, but the IRS doesn’t let you access that money without penalty until age 59-½. To plan for your first retirement when you stop playing professional sports, you may want to keep some money in investment accounts you can access before age 59-½. Since these accounts aren’t usually tax-sheltered, it’s important to think about using tax-efficient investments to help minimize your taxes, which can be a heavy financial burden for high-earning athletes.

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Chapter 4


Minimizing your taxes will help you keep as much of your earnings in your pocket as possible, but tax planning for professional athletes presents many unique challenges. For instance, you’ll face different tax consequences depending on the state you play in as well as the state where you live. You’ll pay tax to the state you play in for road games while receiving a tax credit in your home state for these out-of-state taxes. The amount of tax you pay relative to the credit will depend on if your state has a higher or lower tax rate than the one you played in.

Some states offer better tax benefits for high-income earners, such as Texas, Florida and Tennessee. If you can make your primary residence in one of these states, it may help lower your overall taxes – especially for sign-on bonuses, which are only charged by your state of residence. Thus, if your home state doesn’t charge income tax, you could net big savings and take home much more of your sign-on bonus.

Professional athletes can also take advantage of business-expense tax deductions, such as agent fees, nutritional supplements, and gym memberships and equipment. Consult your financial advisor and tax professional on what business expenses you can deduct to help lower your taxable income.

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Chapter 5

Risks to a High Net Worth

No matter what field you play on, if you earn a significant income, you’ll face the same risks as other high net worth individuals. Unfortunately, among the most trying of these challenges can be those closest to you. Professional athletes often feel obligated to help friends and family financially, especially those who helped them achieve success in their sport. While there is nothing wrong with helping your loved ones, make sure you do so in a manner that won’t put your own financial stability at risk. It can be helpful to work with a financial advisor who can mediate financial bequeathments or requests for money.

Professional athletes are also at risk from less benign sources. Having a high profile can make you and your money a target for financial scams. Professional athletes are often frequently targeted by salespeople who make big promises. This can make it hard to determine who truly has your best interest at heart and who is secretly trying to take advantage, which is where a trusted financial advisor who has experience working with professional athletes like you can be hugely beneficial.

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Chapter 6

The Right Financial Advisor 

A financial advisor can help you protect yourself and your wealth from the common risks to a high net worth. A financial advisor can also help you manage your current finances so that you don’t have to drastically alter your lifestyle after you stop playing. The challenge is how to determine the right financial advisor for you and your career.

As with most areas of financial planning, professional athletes face the same challenges to finding the right financial advisor that average-earners do, and then some. Given the unique financial situations of professional athletes, make sure that the financial advisor you partner with is experienced and knowledgeable about financial planning for professional athletes. 

You’ll also want to make sure that he or she is a fiduciary (only fiduciaries are legally required to put their clients’ best interests first at all times), and consider how the advisor is compensated. Fee-only advisors earn a flat, hourly or annual fee based on the assets they manage. Advisors who earn commissions are paid for the products they sell. This can create a conflict of interest, giving an advisor an incentive to sell you the investments or products that earn the highest commission as opposed to those investments or products that are truly the best for your financial situation.

Once you do choose a financial advisor to work with, it’s important to stay involved in your finances. Delegating financial and investment management to a professional doesn’t mean you shouldn’t be aware of what is happening with your money. The right financial advisor should encourage you to stay engaged and be an active participant in your financial life as a professional athlete and beyond.

If you’re looking for a financial advisor who specializes in working with professional athletes, schedule a no-obligation conversation with the Watts Gwilliam team. We are a fee-only, fiduciary financial advisory firm headquartered in Gilbert, Arizona and serves investors nationwide. Watts Gwilliam and Company was established to provide a conflict-free environment that’s dedicated to our clients’ success. We provide innovative investment and financial planning strategies so you can build wealth, generate income and secure your future. Click here to schedule a time to talk.

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