Following the often very public financial troubles of several retired NBA players, the league is taking a new approach. It is forcing players to save for their retirement.
The NBA retirement program
is part of the 10-year collective bargaining agreement between the NBA and the players union singed last November. This season, approximately $34 million, or 1 percent of basketball-related income, was invested on behalf of players. Beginning next season, players will surrender 5 percent to 10 percent of their salary to be placed in an annuity.
Players will be automatically enrolled in the program and would have to opt-out to keep from participating in the plan, according to union attorney Ron Klempner. He also noted that retired players would be able to access the money before their pensions begin at age 50.
The new retirement plan highlights the financial troubles that often plague professional athletes. Sixty percent of NBA players become financially insolvent within five years of leaving the league, according to a Sports Illustrated
investigation in 2009. Antoine Walker famously filed for bankruptcy after being paid more than $100 million over 12 years in the NBA.
Like many other investors, professional athletes are often not well versed in financial matters. A Sports Illustrated article on why professional athletes go broke quotes one former football player as stating, “I once had a meeting with J.P. Morgan and it was literally like listening to Charlie Brown’s teacher.”
While some athletes fail to manage their money properly, other players are given bad financial advice or become the victims of outright fraud. Between 1999 and 2002, at least 78 players were defrauded of more than $42 million from a wide variety of investment schemes, according to the NFL Players Association.
With this in mind, it is imperative that professional athletes hire trusted professionals like sports attorneys
that will always look out for their best interests.