Professional athletes o꧑ften earn massive salaries, sometimes totaling millions in a single year. However, despiteꦓ these extraordinary earnings, many athletes need help managing their finances wisely. The reality is that the majority of athletes have relatively short careers, and without careful planning, they can burn through their earnings quickly.

Some also fall behind on their taxes, or they divorce and end up with expensive alimony and child support obligations. A compounding factor is that athletes tend to be young when they suddenly find themselves with plenty of money. This article explores financial planning strategies for pro athletes to ensure their wealth lasts well beyond their playing days.

Here’s an inside look at what 澳洲幸运5官方开奖结果体彩网:financial planners recommend for high-earning professional athletes who want to manage tꦦheir incomes wisely and make it last beyond their playing years.

Financial Management Strategies 🌸for Pro Athletes

While athletes can earn impressive paychecks, these high earnings usually come over a brief period—often only ♛a decade or two. The key to long-💃term financial security lies in careful planning from day one.

Ryan Kwiatkowski, a financial advisor for Retirement Solutions in Naperville, IL, and former professional volleyball player, highlights the importance of saving early. "If you don’t see it, you won’t spend it, and you can still have a great lifestyle on a fraction of what you earned during a season," he advises.  Maintaining a lavish lifestyle after signing a big contract is tempting for athletes. Still, Kwiatkowski warns that unexpected injuries or contract disputes could leave them with little to fall back on.

It's critical for athletes, especially those who are only paid during the season, to manage their finances so their income stretches year-round. One of the biggest mistakes athletes make is to immediately splurge on luxuries like expensive cars or houses, without considering how long their peak earning years will last. 

Tax-Minimizing Strategies for Athletes

Tax strategies can help athletes keep as much of their earnings as possible, says certified public accountant Steven Goldstein, former partner in charge of the sports and entertainment practice of , a public accounting firm in New York City. Goldstein says that the foဣllowing tax strategies can help.

• Choosing the right domicile: Does the team’s 澳洲幸运5官方开奖结果体彩网:home state have tax advantages for high-income earners? Residing in one of the seven no-tax states can mean significant tax savings. They include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming.
• Mitigating the jock tax: This involves projecting the tax impact of playing in various states and paying taxes to those states. Players must pay 澳洲幸运5官方开奖结果体彩网:withholding tax to the state they're visiting for road games, but they also receive a tax credit in their home state for taxes paid to other states. Players may owe more tax than they expected if their home state has a higher tax rate.
• Understanding the impact of taxes on signing bonuses: Signing bonuses are typically allocated to the athlete's home state, so if that state has no income tax, athletes can save considerably on their bonuses.
• Allocating deductions: Athletes can deduct certain 澳洲幸运5官方开奖结果体彩网:business expenses, including agent fees, workout clothes, gym memberships, athletic equipment, and even nutritional supplements. A CPA can help determine whether 澳洲幸运5官方开奖结果体彩网:deductions should be itemized or claimed as business expensesbased on the nature of the income (e.g., endorsement deals or salary).

Tax planning for 澳洲幸运5官方开奖结果体彩网:retirement is required, too. Retirement contribution limits to 401(k) and 澳洲幸运5官方开奖结果体彩网:IRA accounts are relatively low compared to an athlete's income, but they can still provide some tax relief. Athletes must make the bulk of their 澳洲幸运5官方开奖结果体彩网:retirement investments in ac🐈counts that don't have the tax advantages of 401(k)𝔍s and IRAs.

Plan for the Long-Term

One challenge for athletes is recognizing that their high income is not sustainable throughout their lives. 澳洲幸运5官方开奖结果体彩网:Certified financial planner and founder of , Derek Tha🍒rp advises athletes to treat their financial future like a long-term plan, factoring in the short time frame during which they’ll earn the bulk of their income.

“What seems like a very high income may not be when it’s amortized over the time frame of a typical career,” says Tharp. “This is particularly true given the high taxes experienced by indiv🥃iduals with income concentr♑ated over a short time horizon.”

, a certified financial planner witღh Ferrigno Financial in Washingtonville, NY, recommends that professional athletes create a goal-based financial plan. This plan should outline short—and long-term financial goals, with clear steps for achieving them. Ferrigno emph🌜asizes the importance of monitoring progress regularly to stay on track and avoid poor financial decisions in the future.

“Creating the plan and monitoring their progress will help them obtain the financial freedom they want after their playing days are🐈 done,” Ferrigno says. “A financial plan can also serve as a road map to a second career since most players will be out of work by age 30, with much lower incomes on the horizon.”

, a four-time Olympian champion, financial planner, and founder of Worth Winning, suggests that athletes prepare for two retirements: one from their sports caree♛r and another from full-time work.

"Not all athletes earn at a rate that will allow them to retire forever when their sports career is over," Williams says. One strategy Williams recommends is setting aside money to gain time to figure out what an athlete wants to do next. “The transition is extremely emotional. You don’t want to have to jump into something to make a living while trying to get closure.”

Managing Personal Relationships

One of the most challenging aspects of financial planning for athletes is managing relationships with family and friends. Many athletes feel an obligation to give back to those who have supported them, but this can quickly lead to financial strain. Tharp re💫commends setting clear boundaries earl🌟y and involving professionals to handle requests for money. Establishing limits on gifts or loans is important to prevent emotional pressure from jeopardizing long-term financial security.

Choosing the Right Financial Advisor

Given the complexities of their contracts, investments, insurance, and estate planning, professional athletes often find themselves overwhelmed by financial decisions. Tharp suggests that athletes look for fee-only financial advisors who are 澳洲幸运5官方开奖结果体彩网:fiduciaries and have experieꩵnce working with athletes. This ensures the advisor's compensation is not tied to commissions, reducing potential conflicts of interest.༺ Tharp says pro athletes should be wary of would-be advisors who act too much like fans because these advisors won't be able to objectively consult with the athlete as a client.

Professional athletes must understand how advisors are compensated and what their outside conflicts of interest migh🐻t be, says fee-only financial advisor , founder and CEO of Dias Wealth LLC, which is dedicated to working with current and former professional athletes as well as their agents.

Dias points to the example of Ash Narayan, a financial advisor who was approved to manage assets for NFL players but was accused of cheating several clients and has had his assets frozen by the 澳洲幸运5官方开奖结果体彩网:Securities and Exchange Commission. Narayan was ordered to pay over $18 million in restitution and was sentenced to over three years in prison in 2020.

“There has to be involvement on the part of🎉 the professional athlete to make sure their▨ earnings are invested wisely and managed correctly,” Dias says. “I always say no one is more responsible or accountable for their own money except for themselves.”

Williams also says that it's important that professional athletes stay engaged with their money. “Athletes often think it is cool to say, 'I have people that handle that stuff for me.'" According to Williams, athletes should expect their financial advisors to help them understand what they have.

The Bottom Line

Professional athletes face some of the same financial challenges that the average person faces, such as not saving and investing properly for retirement, being tempted to overspend, and wanting to help struggling family members and friends. They also face the unique challenge of receiving a large percentage of their 澳洲幸运5官方开奖结果体彩网:lifetime earnings over a short time frame. This requires special tax planning and 澳洲幸运5官方开奖结果体彩网:wealth management strategies.

Understanding the potential pitfalls and knowing how to hire a trustworthy advisor can go a long way toward helping pro athletes turn a𒁏 𒀰huge but short-term paycheck into a lifetime of financial stability.