Wealth Planning for Athletes: What to Know

Financial planning presents unique challenges for athletes to overcome both in the short and long term. During your playing career, you may amass significant wealth that requires careful management. However, upon stepping away from the game, the focus shifts to stretching that wealth as far as possible. A well-crafted wealth management plan is essential for maintaining your lifestyle and building a lasting legacy.

Unlike other high-net-worth individuals, athletes face distinct challenges, including inconsistent income, public visibility, and a potentially short career span. This makes it crucial to identify a financial advisor with expertise and integrity to help you navigate the complexities of your unique lifestyle.

In this article, we’ll highlight what you need to know about wealth planning for professional athletes. This includes the unique challenges you may face as a result of your career and how to balance your current lifestyle with long-term needs. We’ll also offer tips on how to find and select a financial advisor.

Unique Financial Challenges Athletes Face

For professional athletes, achieving financial freedom isn’t as simple as earning a large income over a short career. During and after your playing years, you may encounter several key challenges, including fluctuating income, limited financial knowledge, and the pressure to uphold a certain lifestyle. As your athletic career winds down, you’ll also need to navigate the transition to what comes next—whether that means enjoying retirement or moving into a new profession.

Below is a closer look at the financial challenges you may face as an athlete:

1. Unpredictable Income

While you can earn substantial amounts during your careers, income can be inconsistent and fluctuate. According to Lauryn Williams, CFP^®, OLY, currently a financial advisor and the first American woman to earn medals in the Summer and Winter Olympics, “You can’t really count on your income as an athlete, especially because you don’t know if you’re going to…as a big four athlete make the playoffs or not…be renewed or not, be traded or not…those sorts of things.” In other words, many factors affect when and how much you get paid, including your contract, performance incentives, game checks, and more.

Not only is the inconsistent timing of your income an issue, but the total window of your career is another consideration. “Unlike traditional careers, where earnings build gradually over time, athletes earn large sums quickly, typically in seasonal cycles,” sports attorney and former NFL agent Robert Boland describes. For example, he explains that “an athlete may receive most of their annual income within six months.”

When you earn money this quickly and in such a short period, it “creates an urgent need for wealth preservation and management, especially because career-ending injuries or contract uncertainties can cut earnings short unexpectedly,” says Boland.

2. Lack of Financial Literacy or Knowledge

Financial literacy, or lack thereof, is another challenge. Because you may begin earning money at a young age, it’s not uncommon to feel inexperienced and, therefore, ill-equipped to deal with the large amounts of money you may receive. This makes it harder to deal with issues such as establishing a budget, investing, and planning for retirement.

Without a base of knowledge or perspective, it becomes easy to make poor or uninformed financial decisions. This includes overspending (similar to how one would after winning the lottery), hiring the wrong professionals, or failing to consider what life will be like after your career is over. Because of this, a financial advisor becomes even more of a valuable resource.

3. Shift in Career Path After Sports

While some athletes may end up extremely wealthy after their careers, many will have to continue to earn money afterward. According to Williams, “…in Olympic sports, you’re pretty much going to have to work afterward. Ninety percent of us are going to have to work once we complete our sport.” She adds that “[athletes] have this period of earning two, three hundred thousand dollars a year, but [their] skill set might actually only allow [them] to earn forty or fifty thousand dollars a year” after they retire.

Like the last challenge, it’s possible to overlook the need to work and earn money after your playing career ends. This may cause you to feel overwhelmed by what comes next and make the transition into the next phase of your life more difficult.

4. Pressure to Maintain an Expensive Lifestyle

“With high incomes often comes a high-profile lifestyle, making it easy to overspend without considering the long-term impact,” says Boland. When you receive a big sum of money, you should be aware of the pressure from society and those close to you to maintain a certain image. Boland adds that it can be “especially hard for rookies on teams of pro athletes who are making 10 or 20 times more and they have to live on that level to interact with those teammates and fellow players.”

With the influence you might feel from others, it’s crucial to uphold thoughtful spending habits and seek the help of an experienced financial advisor. The right system in place for your money can help make your spending more intentional, rather than emotional or impulsive.

Balancing Short-Term Spending with Long-Term Security

As an athlete, there will likely be many expenses demanding your attention, such as your physical fitness, diet, and lifestyle creep due to societal pressure. However, it’s also important to think ahead and plan for your financial future after you leave sports. Williams, as both a former Olympian and current financial advisor, tells us that “the thing about athletes is that they retire twice,” referring to the end of their playing careers and then traditional retirement when they stop working entirely.

In Williams’ experience working with professional athletes, she recommends putting “money aside in a brokerage account” to build an emergency fund for when you retire from athletics. This allows you the time and financial flexibility to smoothly transition into your next life phase, such as a new job.

Similarly, Boland stresses the need for athletes to be mindful of their spending habits during their playing careers:

Athletes should aim to live on a fraction of their income to ensure they have savings to fall back on after their sports career ends. This is particularly essential around the transition years out of their career, which is a vulnerable time. Players need two reserves of money, one pool for the 5 to 7 year transition period and one for the rest of their lives.

For example, a good advisor will help you allocate a percentage of your income for day-to-day living while investing the rest for long-term security. Many professional leagues offer savings and retirement plans, but these alone may not be enough, as the short span of athletic careers limits their overall impact.

Planning for Life After Sport

Sports careers, even for all-time greats, are finite. While it may be all you know right now, it’ll be up to you to craft what your life looks like after sport, including where you’ll live and work. It’s critical to begin planning for your future now to avoid as many surprises as possible, especially financially.

“What do you want to do in life after sport?” is a question Williams often asks when she meets with athlete clients. While seemingly simple, she observes that “it always, 100% of the time, catches them off guard. Because they’re like, ‘Well, I’m making this money now.’” To truly understand her clients and their motivations, she believes the best approach is to ask blunt questions, such as “What if you get injured?” or “What if you have a career-ending injury?”

Once you understand where you want to go or who you want to be, it becomes easier for you and an advisor to chart a course. This includes saving money to build an emergency fund and your retirement, as Williams explained earlier. It could also mean identifying jobs that may or may not appeal to you or charitable uses for your money.

How to Choose a Financial Advisor as an Athlete

Having an advisor by your side is essential to your financial success as an athlete. Unlike other high earners, you’ll need a professional who not only understands wealth management and investing but also the specific pressures of a sports career. Knowing the positive and negative qualities to look for can help you pick the right expert for your needs.

Only Hire Advisors with Experience and Credentials

Before you even sit down with a professional, it’s important to know they have the expertise to help you. Williams says she “always has the same three qualifications” when selecting an advisor: “You need to be a certified financial planner, you need to be a fiduciary, and you need to be fee-only.”

Certified Financial Planner (CFP) professionals receive a certification from the CFP Board after passing a series of rigorous requirements, including education and an exam. These experts must adhere to a fiduciary duty and are highly skilled in helping you build a comprehensive financial plan and coaching you on financial literacy.

When an advisor operates on a commission basis and doesn’t adhere to a fiduciary standard, conflicts of interest can arise. For instance, you might not know if they’re recommending investments because they want you to succeed or if they’ll see compensation from it. Williams describes past advisor relationships where she “felt the conflict of interest in the service [she] received,” as well as “the limitations in the advice that they could provide because they weren’t certified to provide anything related to financial literacy.”

Prioritize Fundamental Advice and Coaching

Many professionals are highly skilled at helping you manage investments, but it’s also imperative to work with someone who can help teach the basics of financial literacy. Managing debt, opening accounts, and learning how to form a monthly budget are core elements of your success. A professional who can work patiently with you on these tasks is optimal.

“Basic budgeting skills are necessary if you’re going to be an advisor to athletes, basic how to take care of debt is going to be necessary if you’re dealing with athletes, goal setting is going to be something you want to talk about,” Williams outlines. While some clients may have a certain level of financial literacy, others may “come from a background where they’ve operated on a cash basis their whole life,” she underscores. For these reasons, prioritize finding a professional who’s not only able to advise you on your portfolio but can also help you build a foundation of knowledge.

Ensure They Truly Understand Your Situation

As an athlete, you not only require a professional capable of assisting high-net-worth clients, you need someone who fully understands the financial issues you’ll face, as well as the implications of your unique upbringing. Your advisor shouldn’t just see you as a number but a person they’re helping.

Williams points out that “people will want an advisor that looks the exact opposite of them,” often because they want someone who appears wealthy or is from a different walk of life. For example, she says that “if they’re male, they’d like a female. If they’re black, they want someone white… and on and on.” However, “looks are not everything,” Williams cautions:

[An advisor different from you may not] understand that your mother has lived paycheck to paycheck their whole entire life, has only finished high school, has no financial literacy themselves and thinks that their child has made it, and that they should never have to work again, and that they should go from taking the bus to driving a Ferrari, and there’s no in-between.

In your initial consultation with an advisor, it’s vital to communicate your values, goals, and stresses. In this way, they’ll gain a better picture of what you want and how they can help. Similarly, you’ll be able to see how they respond to your circumstances and be closer to deciding if they’re the right professional for you.

If you need help finding a high-quality financial advisor near you, we recommend using this free matching tool. After a short quiz about your financial goals, it’ll match you with an expert who suits your needs.