How Much Is $1 Million Really Worth for Professional Athletes?
Key Takeaways:
- Pro athletes typically only take home around 50% of their contract value after taxes and fees.
- Additionally, most professional sports leagues pay athletes only part of the year, creating variability in income.
- While contract values may seem high, thoughtful financial planning is necessary to make money last.
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A lifetime of training, hard work, and performance has earned you elite earning potential. While the headline numbers are eye-popping, it’s important to understand what you're actually taking home.
Taxes and fees will vary, but generally professional athletes take home approximately 50% of contract value — and that’s before deducting rent/lease costs, living expenses, and support for family and friends. If you picture your salary as several piles of stacked bills, half those piles immediately get taken away before any of it even reaches your hands.
The example below shows that for an athlete with an annual salary of $1 million, once you pay federal taxes, state and local taxes, agent’s fees, and put money into a 401K for retirement, you’re left with a little over $534K. Divide that up over 12 months of the year and that contract million becomes $44K/month to cover all your expenses for that year.
That’s no small amount of money — but if you’re also shelling out high dollar amounts for a home (or homes), cars, clothing, jewelry, travel, nights out, loans to friends, etc., or you run into one of these common pro athlete financial pitfalls, it can dwindle much quicker than you expect.
Pro Athletes Don’t Receive Paychecks Year-Round
Most professional leagues pay athletes during the season, which means large in-season checks — but no reliable income the rest of the year.
For example: NFL players are paid in 36 pay periods across the year starting in September, leaving three months of the year where they are not receiving a paycheck. In the NBA, most players are paid twice a month throughout the regular season (November-April).
This variable cycle of paychecks makes it necessary to know when and how much money is coming, how to treat expenses like travel and training, and how to plan for major purchases to avoid financial issues.
Understanding the True Value of Professional Sports Contracts
For pro athletes, it’s easy to be struck by the big number on your contract and believe you’ll never have to think about money again. But the truth is, everybody has to think about money. And the more money you have, the more you have to think about it — especially if you want to make your money (and your lifestyle) last.
The good news is, by being aware of the amount of money that actually goes into your pocket, you can properly budget and plan to both live well in the present and set yourself up for a comfortable financial future.
Need help making your money go the distance? Reach out to MGO Entertainment, Sports, and Media Industry Leader Tony Smalls today.
