A recent statistic from the National Bureau of Economic Research (NBER) revealed that 15.7 percent of NFL players have filed for bankruptcy 12 years after retirement. For many of us it’s hard to believe how professional athletes, who earn so much money, could end up bankrupt.
The report entitled, “Bankruptcy Rates Among NFL Players with Short-Lived Income Spikes,” focused on the traditional model of “consumption smoothing.” An athlete’s income peaks almost immediately after school while they are still very young, the exact opposite of most Americans. They retire young and in the vast majority of cases, never earn at the same levels. Because of this model, it is difficult for them to save. They are often taken advantage of financially and ill-equipped to manage the amounts of money they are earning at the time.
The data finds that bankruptcy filings begin “very soon after retirement” (but just 1.9% of retirees have filed after two years) and “continue at a substantial rate through at least the first 12 years of retirement.” Surprisingly, the bankruptcy rates were not affected by a player’s career length. Meaning: playing for longer did not make it any less likely a player would go bankrupt.
The report includes data on all players drafted to the NFL from 1996 to 2003.
Click here to read more on retired NFL players going bankrupt.
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