Time and time again we see professional athletes that were
once wealthy millionaires filing bankruptcy. There is no single reason that
this happens so often, sometimes it is poor investment choices other times it
is simply poor life choices such as excessive gambling. this is not always the
fault of the athlete. Their job is to play which ever sport it is that they are
great at, not to make financial and business decisions with millions of
dollars. Generally speaking, athletes go directly into professional leagues
before completing any post secondary education. This certainly leaves them
ill-equipped to properly manage the millions of dollars they will make over
their careers. Although the money being made during the prime of an athlete’s
career can seem like a lot, in can certainly be spent if poorly managed.
Another issue facing athletes is retirement at a young age. If an athlete is
lucky he may play until he is 40 years old but most do not make it that far.
This leaves a significant portion of an athlete’s life with a much lower income
than they are accustomed to. Today, most athletes will have an entire team
managing every aspect of their life. Often what that team is missing is a
financial professional that the athlete can trust to have their best interest
at heart. Three key financial services that athletes require include tax
planning, investment advisory, and retirement planning.
Tax Planning
Athletes often have international income which can lead to
very complex tax filings. Athletes should ensure that they have a tax
professional handling these matters. The number of times athletes have had the
IRS or CRA here in Canada come after them is incredible. Some notable examples
include boxer Mike Tyson owing over $2 million in back taxes and golfer John
Daly owing over $1 million. Situations like this should not occur and can be
detrimental to athletes who receive large single pay days like those of golf
and boxing. The key to avoiding situations of this nature is for athletes to
surround themselves with people they can trust. Agents and managers aren’t
always the best people for these situations. It is important for every athlete
to have a financial advisor and professional accountant that they trust.
Accountants can make sure that tax situations of this nature do not occur and
they will also minimize athletes tax liabilities.
Investment Advisory
It is important for athletes to seek investment advice. Professional
athletes earn salaries in the millions of dollars. If this salary is put in the
proper investments, it can last a lifetime through passive income. It is
extremely important for athletes to seek an investment advisor that is a
professional and is someone they can trust. A good investment advisor will help
clients develop comprehensive financial plans that are individually tailored.
It is a good idea for this plan to set aside a set percentage of income for
investment. This will both create a safety net and begin to generate an
alternative source of income. It is very important for professional athletes to
develop a stream of income that isn’t related to their sport of choice. An
Athlete may not always be able to earn an income from sports, so creating
alternative sources of income is crucial. This can come from many different
sources. Some examples include, stocks, bonds, real estate, and direct business
investment. What an investment advisor can provide is direction for which of
these investments will best suit the needs of the unique individual. Golfers
are a good example of athletes who often create alternative sources of income. Mike
Weir, Arnold Palmer, Ian Poulter, and John Daly have all created their own
clothing brands which far out earn the money they are making from golf. All the
wealthiest golfer’s primary sources of income are not tournament winnings. The key to learn from this is that at least a
portion of income should be invested into assets that can provide alternative
sources of income. This does not include fancy cars, big houses, and gold
chains. Investment advisors can help create at a plan and select strong investment
opportunities.
Retirement Planning
The most important decision an athlete can make is to plan
for retirement. Athletes need to understand that they will not always be able
to play their given sport. If they realize this, it is often beneficial to their
long-term financial success. Hopefully the athlete has taken the previous step
of seeking an investment advisor, but if not, now would be the time to get one.
Again, an investment advisor will be able to assist the athlete in selecting
the right investments for their specific situation. If the athlete had an
investment advisor throughout his/her career they should have a good amount of
capital saved. The most ideal way to retire is to be able to live off the
cashflow of capital. This means that the individual will not have to decrease
their net worth on an annual basis and will thus be able to sustain their
lifestyle perpetually. Most athletes should have saved enough capital over
their careers and will be able to do this if their money is well managed. In conclusion,
the most important thing to do for retirement planning is to seek investment
advisory.
Canadians Employed in
the United States
Canadian players make up approximately 50% of the players in
the NHL. The NHL has only 7 Canadian teams and 23 US teams. The major
considerations for tax purposes are residency and citizenship. A Canadian
citizen that is also deemed a resident of the United States, would likely face
a tax liability in both countries. For professional athletes, this can get even
more complicated. Players must pay tax based on where they play games, which is
both in Canada and the US for all the big 4 sporting leagues. This is then
broken down even further to pay tax on the state level based on games played.
This is a very long and involved process that is complicated even for tax
professionals. Athletes should ensure that they find a qualified professional
that has experience with international tax matters to prepare their returns.
http://www.tsn.ca/canadians-do-not-make-up-the-majority-of-nhl-players-this-season-1.380861