Playing in the NFL can be a financially rewarding career, but it also comes with unique challenges. The average NFL career lasts just over three years, making it critical for players to think long-term about their financial health. As NFL players earn significant money over a short period, it’s crucial for them to invest wisely to secure their futures once their playing days are over.
Here’s a breakdown of smart investment strategies that NFL players should consider to build and preserve wealth:
1. Diversified Stock Portfolio
One of the most basic but essential strategies for NFL players is to invest in a diversified stock portfolio. Stocks provide an opportunity for long-term growth, and by spreading investments across various industries, players can reduce risk while capitalizing on the stock market’s potential. It’s crucial to invest in blue-chip companies, emerging markets, and index funds that track the broader market, like the S&P 500.
For NFL players, working with a financial advisor who specializes in creating custom, diversified portfolios based on risk tolerance and future goals is key. Players should also consider dividend-paying stocks, which can provide a reliable income stream even after their careers end.
2. Real Estate
Real estate is another excellent investment avenue for NFL players. Property tends to appreciate over time, and it can also generate passive income through rentals. Players might consider investing in:
- Residential properties: These can be bought and rented out for steady income, especially in high-demand urban areas.
- Commercial real estate: While more complex, commercial real estate can offer higher returns and long-term stability.
- Vacation rentals: Platforms like Airbnb allow property owners to make money by renting out vacation homes or investment properties to tourists.
Real estate investment can also provide tax benefits, including deductions for mortgage interest, property taxes, and depreciation.
3. Private Equity and Venture Capital
Many athletes look for opportunities to invest in startups or businesses through private equity or venture capital. These investments can offer significant returns if the businesses succeed. However, they come with a higher level of risk, as many startups fail.
For NFL players, it’s important to work with an experienced financial advisor who can help vet potential investments and diversify these higher-risk ventures. Investing in areas like tech startups, consumer products, or sports-related ventures that players are passionate about can also help them stay engaged with their investments.
4. Franchise Ownership
For players with entrepreneurial ambitions, owning a franchise can be a lucrative investment. Well-known franchises like fast-food chains, fitness centers, or retail outlets provide an established business model and brand recognition, reducing the risk of starting a business from scratch. Franchise ownership allows NFL players to leverage their name and status while creating a business that generates ongoing income.
While it requires an initial investment, owning multiple franchises can diversify income streams and build a substantial business portfolio that continues to earn money long after retirement.
5. Retirement Accounts
NFL players need to prepare for life after football, and one of the smartest ways to do that is by maximizing contributions to retirement accounts. Players should take full advantage of tax-deferred accounts like:
- 401(k) plans: The NFL offers a 401(k) plan, where the league matches player contributions. NFL players should always contribute at least enough to receive the full employer match, as it’s essentially free money.
- Roth IRAs: Players who meet the income requirements can also contribute to a Roth IRA, which allows for tax-free growth and tax-free withdrawals in retirement.
Even though NFL players may earn large salaries early in their careers, it’s essential to save consistently for retirement. Investing in these accounts ensures a steady income later in life and provides significant tax advantages.
6. Bonds and Fixed-Income Investments
Bonds and other fixed-income investments offer a more conservative option compared to stocks and real estate. Bonds provide a reliable income stream through interest payments and are generally less volatile than the stock market. NFL players can invest in:
- Government bonds: These are considered one of the safest investments, offering low but consistent returns.
- Corporate bonds: These offer higher interest rates than government bonds but come with slightly more risk.
- Municipal bonds: These provide tax-free income, making them attractive for high-income earners like NFL players.
Fixed-income investments offer stability and can help balance a portfolio’s overall risk.
7. Annuities
Annuities can provide NFL players with a reliable source of income during retirement. By purchasing an annuity, a player can receive regular payments for a set period or for life. There are different types of annuities, such as:
- Fixed annuities: These provide guaranteed payouts, making them a safe investment.
- Variable annuities: These offer the potential for higher returns based on the performance of underlying investments.
Annuities are a great way for NFL players to ensure that they have a consistent income stream after their playing days are over, especially considering the uncertainty of how long their career will last.
8. Endorsements and Personal Branding
While this may not be a traditional “investment” in the financial sense, personal branding and leveraging endorsement opportunities can be highly lucrative for NFL players. Investing time and effort into building a strong personal brand allows players to maintain a public profile even after their careers end, opening up opportunities for endorsements, speaking engagements, and partnerships.
NFL players who develop a strong social media presence and reputation for integrity and community involvement can maximize their earning potential well beyond their playing years.
9. Life Insurance and Estate Planning
Many NFL players overlook the importance of life insurance and estate planning in their investment strategy. Life insurance provides financial security for a player’s family in the event of an unexpected tragedy. By purchasing whole life insurance, players can also build cash value that can be accessed later in life.
In addition, proper estate planning ensures that assets are distributed according to a player’s wishes, protecting their wealth and reducing the tax burden on their heirs.
Conclusion
NFL players are in a unique financial position. With potentially short careers and large earnings, it’s crucial that they think strategically about their financial future. By diversifying their investments in stocks, real estate, private equity, bonds, and retirement accounts, and by leveraging their personal brand, players can ensure that they are financially secure long after their football careers are over.
Written by Pat Brown, MBA