Lydon signs

[CusefanATL]

You can't get a second contract without getting the first one. But that has nothing to do with money management.

Let's have this conversation again. My wife and kiddos are sick so I have free time.

2.5 mil isn't lasting Lydon or me or you the rest of our lives at 21. Hopefully he saves/invests 25% (high side) That is still only 625,000 of savings at 23. Plus some of which will be matched (generously) by nba... we'll call it $1,000,000. We all know 1,000,000 wouldn't last a 60 yr old who is used to making 100k a year. How would it even be in the ballpark of last a 23 yr old making 50k a year?! let alone 1.2 mil.

Its more than money management. He needs a long term job or a 2nd contact. a 1 yr 900k deal only helps him in prolonging the inevitable. If you retire at 39 (high side) you need A LOT more money than if you retire at 65 (obviously)

 

[Fireball Jr.]

2.5 mil isn't lasting Lydon or me or you the rest of our lives at 21. Hopefully he saves/invests 25% (high side) That is still only 625,000 of savings at 23. Plus some of which will be matched (generously) by nba... we'll call it $1,000,000. We all know 1,000,000 wouldn't last a 60 yr old who is used to making 100k a year. How would it even be in the ballpark of last a 23 yr old making 50k a year?! let alone 1.2 mil.

Its more than money management. He needs a long term job or a 2nd contact. a 1 yr 900k deal only helps him in prolonging the inevitable. If you retire at 39 (high side) you need A LOT more money than if you retire at 65 (obviously)

True, but whenever he's done, his earning power won't be. There are jobs/careers after the NBA.

 

[CusefanATL]

True, but whenever he's done, his earning power won't be. There are jobs/careers after the NBA.

It would be awesome if it were just that easy. But its nearly impossible to plan (especially at 21-23) for the pay cut you could possibly take if you get relegated to a good foreign deal - let alone, worse.

 

[OttoinGrotto]

2.5 mil isn't lasting Lydon or me or you the rest of our lives at 21. Hopefully he saves/invests 25% (high side) That is still only 625,000 of savings at 23. Plus some of which will be matched (generously) by nba... we'll call it $1,000,000. We all know 1,000,000 wouldn't last a 60 yr old who is used to making 100k a year. How would it even be in the ballpark of last a 23 yr old making 50k a year?! let alone 1.2 mil.

Its more than money management. He needs a long term job or a 2nd contact. a 1 yr 900k deal only helps him in prolonging the inevitable. If you retire at 39 (high side) you need A LOT more money than if you retire at 65 (obviously)

I can't tell if you're trolling or serious.

 

[AZOrange]

2.5 mil isn't lasting Lydon or me or you the rest of our lives at 21. Hopefully he saves/invests 25% (high side) That is still only 625,000 of savings at 23. Plus some of which will be matched (generously) by nba... we'll call it $1,000,000. We all know 1,000,000 wouldn't last a 60 yr old who is used to making 100k a year. How would it even be in the ballpark of last a 23 yr old making 50k a year?! let alone 1.2 mil.

Its more than money management. He needs a long term job or a 2nd contact. a 1 yr 900k deal only helps him in prolonging the inevitable. If you retire at 39 (high side) you need A LOT more money than if you retire at 65 (obviously)

What are we comparing this to? The whole great premise of investing is to sock money away early and for the long term. Having $1MM in the bank at 23 is a pretty nice start.

 

[TexanMark]

True, but whenever he's done, his earning power won't be. There are jobs/careers after the NBA.

I believe he majored in Communications at VPA. Being halfway through a degree will only open so many doors...the overwhelming amount will be low paying initially.

 

[Fireball Jr.]

I believe he majored in Communications at VPA. Being halfway through a degree will only open so many doors...the overwhelming amount will be low paying initially.

He'll make contacts, have opportunities, who knows, maybe he'll own a car dealership or get a broadcasting gig. Opportunities galore. He's going to Colorado, maybe he'll become involved in a hot, growing sector: cannabis.

 

[MSOrange]

I believe he majored in Communications at VPA. Being halfway through a degree will only open so many doors...the overwhelming amount will be low paying initially.

He can go back to school and get his degree any time, like other players have done, if it becomes necessary.

 

[OttoinGrotto]

He can go back to school and get his degree any time like other players have done if it becomes necessary.

Mm, that's not true actually. You give that up when you declare for the draft. And the government mandates that you can only be employed in basketball in some capacity for the rest of your life.

I don't make the rules, it is what it is.

 

[Bayside44]

So I take it you guys are saying that a rookie deal isn't enough to live on for the rest of a guy's life - making the college degree something worth having. Which is a nice positive.

 

[Flacusian]

He is going to love Denver and his entourage will kick your entourage's butt.

Just remember... that contented grin and the RICO all started at CUSE!

 

[TexanMark]

So I take it you guys are saying that a rookie deal isn't enough to live on for the rest of a guy's life - making the college degree something worth having. Which is a nice positive.

And some of us are saying...while a gross amount of $2.88M is a lot of money...his real net amount will be about $2M. If I were his advisor I would tell him to: rent an apartment on a month to month lease but with controlled access (insert an NBA trade clause if you have to sign a year lease). Buy a normal SUV for Colorado. I would invest the rest (stocks, land for his future post NBA house, CDs and a retirement/future education account). Make sure money is set aside to pay taxes on the land for 20 years.

Finally, stay away from the NBA lifestyle as much as possible: Better to have one serious girl than three baby mamas.

 

[Bayside44]

And some of us are saying...while a gross amount of $2.88M is a lot of money...his real net amount will be about $2M. If I were his advisor I would tell him to: rent an apartment on a month to month lease but with controlled access (insert an NBA trade clause if you have to sign a year lease). Buy a normal SUV for Colorado. I would invest the rest (stocks, land for his future post NBA house, CDs and a retirement/future education account). Make sure money is set aside to pay taxes on the land for 20 years.

Finally, stay away from the NBA lifestyle as much as possible: Better to have one serious girl than three baby mamas.

His net will be less at a 40% tax hit plus they pay taxes in every city they play in.

A lot of these guys get hosed in buying things they cannot maintain or investing in schemes. Rent / lease and invest wisely. And stay healthy, get that second deal.

 

[Capt. Tuttle]

It would be awesome if it were just that easy. But its nearly impossible to plan (especially at 21-23) for the pay cut you could possibly take if you get relegated to a good foreign deal - let alone, worse.

Unless you live like you make 50k. That's the secret. He seems to be a pretty basic kid.
He should get an apartment and a Jeep.

 

[AZOrange]

His net will be less at a 40% tax hit plus they pay taxes in every city they play in.

A lot of these guys get hosed in buying things they cannot maintain or investing in schemes. Rent / lease and invest wisely. And stay healthy, get that second deal.

Plus their required NBA pension contributions and agent fees. Basically they walk away with 50% to live on. Which is superb

 

[OttoinGrotto]

Plus their required NBA pension contributions and agent fees. Basically they walk away with 50% to live on. Which is superb

It's just weird to me how the goalposts move.

"A guy should enter when he has the best chance to stick!"

"A guy shouldn't enter unless he's lottery!"

"Ok, first round picks get guaranteed money, I guess that's ok then."

"But wait! That whole contract isn't guaranteed!"

"Don't forget, the player has to pay taxes. Taxes. Don't forget that!"

"You don't make any money until your 2nd contract anyway!"

"Most players go bankrupt after their playing days!"

"Should have gotten their degree!"

Like, what the heck just happened? It's the most bizarrely predictable conversation ever.

 

[Knicks411]

His net will be less at a 40% tax hit plus they pay taxes in every city they play in.

A lot of these guys get hosed in buying things they cannot maintain or investing in schemes. Rent / lease and invest wisely. And stay healthy, get that second deal.

They do pay taxes in every state they play in, but I believe it's generally not double counted; it's just paying essentially the same amount in taxes, just allocated to different states.

Plus their required NBA pension contributions and agent fees. Basically they walk away with 50% to live on. Which is superb

Did some research on this stuff. NBA players can also participate in a 401(k) where the NBA matches contributions up to 140% (so a $1.40 for every $1.00 you contribute)

And of course, you may put money into the pension plan now (not sure how much), but the idea is you do get stuff on the back end. According to my googling, you are vested after 3 years (so basically Tyler just needs the first option to be picked up), and the minimum benefit is about $60,000 per year.

Also, based on the cursory googling I have done, so this is not definitely correct, but it sounds like the league and the PA are funding the pension plan. Not sure how much each player puts in, if anything.

 

[AZOrange]

They do pay taxes in every state they play in, but I believe it's generally not double counted; it's just paying essentially the same amount in taxes, just allocated to different states.



Did some research on this stuff. NBA players can also participate in a 401(k) where the NBA matches contributions up to 140% (so a $1.40 for every $1.00 you contribute)

And of course, you may put money into the pension plan now (not sure how much), but the idea is you do get stuff on the back end. According to my googling, you are vested after 3 years (so basically Tyler just needs the first option to be picked up), and the minimum benefit is about $60,000 per year.

Also, based on the cursory googling I have done, so this is not definitely correct, but it sounds like the league and the PA are funding the pension plan. Not sure how much each player puts in, if anything.

The players are forced to fund into the pension plan. I believe some can opt out but it's painful.

 

[Knicks411]

The players are forced to fund into the pension plan. I believe some can opt out but it's painful.

Any idea how much?

https://www.soa.org/Files/Research/Projects/research-2015-nba-pension-stats.pdf

I found this from 2015, it says "nba clubs" (which i am reading to mean the teams/owners themselves) contributed $38 million. Nothing on player contributions

 

[Alsacs]

Watching Lydon in this summer league game looks out of place.

He isn't aggressive on offense and is non existent on the court.

 

[Briancuse]

It's just weird to me how the goalposts move.

"A guy should enter when he has the best chance to stick!"

"A guy shouldn't enter unless he's lottery!"

"Ok, first round picks get guaranteed money, I guess that's ok then."

"But wait! That whole contract isn't guaranteed!"

"Don't forget, the player has to pay taxes. Taxes. Don't forget that!"

"You don't make any money until your 2nd contract anyway!"

"Most players go bankrupt after their playing days!"

"Should have gotten their degree!"

Like, what the heck just happened? It's the most bizarrely predictable conversation ever.

The goal posts have moved quite a bit, It used to be if your not a top 5 pick you go back to school, then it was if your a lottery pick you have to go, then it was if your a first round pick, leave, now its if you can just get drafted.

 

[ssbriefcase]

Watching Lydon in this summer league game looks out of place.

He isn't aggressive on offense and is non existent on the court.

Unfortunately true so far. Hernan is what we want Lydon to become.

 

[CusefanATL]

What are we comparing this to? The whole great premise of investing is to sock money away early and for the long term. Having $1MM in the bank at 23 is a pretty nice start.

"a nice start"

without question, absolutely. The problem (in my post) is if he only gets the 4 years, or heaven for bid only the 2 years. Even if he has $1 mil saved - he shouldn't touch any of the retirement vehicle money (a very high chunk of it) until he's 59.5.

But its definitely not lasting the rest of his life. I'm a self proclaimed *and also by a lot of friends/family* a personal finance "expert" - and i put that in quotes because while I am in in the insurance biz and licensed in insurance - i am not licensed in any sort of financial planning outside of life insurance - but i also wouldnt charge nor pay exorbitant fees for a financial planner.

There are so many emotional factors when it comes to money. Its a math game plus so much more. And when you give kids a huge amount of it but its only for a very short time - its really hard to make last. The sudden paycut (whenever it happens) and I see some pension posts later in this thread (they cant access that money at 35 or 25) is almost impossible to really plan for emotionally.

And even with a degree - its not going to be that easy for a 30 yr old with no real life experience getting a job paying even $100k. And unless you lived on 70k *post tax* salary while playing in NBA and making $1.2 million - its really hard to comprehend the severe difference. Especially if he buys a home(s) or nice car(s)

 

[CusefanATL]

I can't tell if you're trolling or serious.

100% serious.

 

[CusefanATL]

Any idea how much?

https://www.soa.org/Files/Research/Projects/research-2015-nba-pension-stats.pdf

I found this from 2015, it says "nba clubs" (which i am reading to mean the teams/owners themselves) contributed $38 million. Nothing on player contributions

you begin vesting after 3 years of service:

Top Pro Athlete Pension Plans

NBA
NBA players have one of the most generous pension plans in all of professional sports. They are vested into their pension plans after playing at least three seasons in the league. The minimum benefit for a player that retires at the age of 62 is $56,988 per year - not a bad retirement for a three-year career. The maximum benefit for any player is $195,000, and it takes 11 years of NBA service to qualify for this benefit.

But that's not all! NBA players are also eligible to participate in a league-sponsored 401(k). Do you think your 401(k) plan is good with a 50% matching policy? The NBA matches player's contributions up to 140%. (Learn more about retirement plans in Independent 401(K): A Top Retirement Vehicle For Sole Proprietors.)



Read more: Top Pro Athlete Pension Plans Top Pro Athlete Pension Plans
Follow us: Investopedia on Facebook