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NFL Player Salaries: Why a Million Doesn’t Buy What It Should

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If there’s one group in America that’s not getting any sympathy these days, it’s unions. If there’s another, it’s millionaires. So a union whose members’ average yearly salary is $1.9 million should make the left and the right cry foul, right?

Wrong. NFL fans supported the players’ union during last year’s standoff in what was primarily a fight over compensation. And Junior Seau’s suicide and increasing evidence of concussions highlight the costly, sometimes debilitating illnesses and injuries that retired players must fight. But how can the players possibly complain, when salaries have risen exponentially to nearly $2 million on average? That high number doesn’t tell the whole story.

Mean, median, debt and injuries

While the average salary is impressive, the median salary is less than half that: $770,000 a year. This disparity means that a lot of players earn less than the median, while a few Rodgerses and Bradys get paid far, far more. And speaking of quarterbacks, Drew Brees’ and Brett Favre’s long and storied careers hardly representative: your typical player spends less time in the NFL than he did in high school. The job is frighteningly tenuous – one irreparable ACL tear, one concussion too many, and a former franchise running back finds himself out of a job, while treatment for dementia, long-term injuries and obesity-related diseases continues to deplete his funds.

And here’s the shocking statistic: three in four NFL players go broke in just two years after retirement. Young men who have long prioritized athletics over academics are suddenly faced with mounting debt from their high-flying lifestyles, divorces, injuries and unemployment. To make matters worse, players often sink their money in get-rich-quick schemes and hold portfolios top-heavy with high-risk real estate and private equity.

Take, for example, former Saints running back Deuce McAllister. In a civil lawsuit, Nissan alleged that he owed the company $6.6 million for his car dealership. In 2007, quarterbacks Drew Bledsoe and Rick Mirer, along with five other NFL retirees, invested about $100,000 each in a now-defunct startup. Pro Bowler Travis Henry owes $3,000 a month in child support, and was jailed for falling more than $16,000 behind in payments.

The $20,000 watch

You might argue that the athletes’ money troubles are self-inflicted. Even before he’s drafted, a player receives a $150,000 college education free of charge. A hefty $770,000 salary for 3.5 years is quite a bit of money. And even invested in the most conservative of equities, that money should be enough to weather a few years of unemployment, medical bills and the costs of raising children. After all, most Americans get by with far less. But droves of players still flock to the bankruptcy courts and record numbers of title rings (400 in the first three months of 2009) crop up on online resale sites. Despite sky-high salaries for some, many players end up destitute.

The issue, argued money manager Michael Seymour in Sports Illustrated, is what financial advisors have dubbed the “$20,000 Rolex problem.” If a 22-year-old blows 20 grand on a Rolex, the money instantly depreciates or disappears. “But if they invested in a five percent, Triple A insured, tax-free municipal bond for a period of 30 years, that $20,000 would be worth $86,000 at that tax-free rate of return.” Which would buy our now-52-year-old player a little more than a gold watch.

Could addressing pensions have prevented the 2011 contract faceoff?

Remember last year’s standoff: NFL owners wanted more money. So did the players. The players pointed to their 75% bankruptcy rate and said they don’t have enough. Owners countered that players who subscribe to their pension plan receive health insurance for five years after retirement and a whopping 200% contribution match to a player’s 401(k). The players’ rebuttal: an NFL retiree’s pension is about a third of a professional baseball player’s.

What players really need isn’t money now, but money later, in the dark years after retirement and before the pension kicks in. NFL owners want an additional $1 billion in revenue; they could secure a portion of that, and agree to manage the remainder on the players’ behalf. In return for accepting a slightly lower paycheck, players receive a stake in a trusted mutual fund, guaranteed by the owners, and receive rigorous, honest, and free financial advice even after retirement. This way, the owners get more a bigger chunk of cash, the players see that $20,000 Rolex turn into something more, and we get our football season. It’s not every day that you see both sides win in the NFL.