Thesis: The NFL should institute a league wide mandate requiring players to save money for retirement.
It has been widely documented the financial distress that former NFL players find themselves in after they stop playing. This can be attributed to many reasons, but so far has had no solution emerge. Leigh Steinberg writes that, “Sports Illustrated recently estimated that 80% of retired NFL players go broke in their first three years out of the League.” This seems like an anomaly since the average NFL salary is almost $2 million per year. However this number is much higher due to some superstars’ outrageous salaries. “The median income in the NFL is roughly $750,000 and the average career span is less than four years.” This is still a lot more money than most people will make in their entire lives.
A separate research paper released in the National Bureau of Economic Research “found that 15.7% of [NFL] players file for bankruptcy within 12 years of retiring from the league, with little difference based on career length or earnings.” The researchers were attempting to test the “theory of consumption smoothing, that people will save more when their income is high to help cover future expenses when their income will be lower. NFL players offer an extreme example of people with large but short-lived income spikes.” The results are different than what would be expected from current life-cycle model predictions, but that is not what I am here to discuss right now.
The NFL is in a prime position to try and help their current and future players better manage their money. They have started requiring NFL draft picks to attend rookie seminars trying to offer financial and career advice for these rookies, but it is up to the athletes to take the suggested actions. I propose that the NFL along with the NFLPA (National Football League Players Association) make a league wide mandate requiring NFL players to put 10% of their salary in savings.
This can be accomplished by implementing 401k’s among other plans to be offered by each team that each player must put at least 10% of their salary into. This will help reduce the amount of financial distress that former NFL players have, as well as cast a better image on Roger Goodell by showing that the NFL cares about and supports their players. While the NFL does already have a retirement pension plan in place for former athletes, and offers 2 for 1 matches up to $24,000, they do not require players to make contributions.
This will cause players to learn to spend less money, as they will be receiving smaller paychecks, and also help these players build their retirement nest egg as they are required to save about $75,000 per year. For an average NFL player this will result in over $300,000 saved over their average four year careers. While this will certainly not eliminate ALL bankruptcies of former NFL players, it will help lower the number. This requirement along with educational sessions on budgeting and saving, should help these elite athletes better save their money and reduce the number of bankruptcies declared within a few years of retirement from the league.