Fascinating article on how much money a pro hockey player actually makes

[transplant99]

Unlocked Athletic content that includes their best stuff from this year.

This story is a great read on the expenses for these guys that most would not consider.

Not like they are in soup lines at Christmas or anything but it does expose the perils of being a young guy with a bunch of money if you are unaware of hw things work.

The numbers look huge to a kid whose main source of income in the previous three or four summers is washing dishes in a relative’s restaurant for $8 an hour: $643,000 (all figures U.S.) to play in the big league, $65,000 to play in the minors. The deal includes a signing bonus of about $260,000, which in this case is paid out in six equal installments over the three years of the entry-level contract.

So what’s the first thing you do when you’re 19 and that first check arrives?

“I bought a Lexus ISF,” Buffalo Sabres defenceman Marco Scandella said. “It was a good life lesson.”

“It was hilarious, he came to my parents’ backyard … he had about $300,000 saved up, I asked him what it’s invested in, do you like how they’re investing it?” Shannon said, who now runs Fortra V, a sports management consultancy that works with more than a dozen hockey players. “And he was like, ‘What do you mean?’ Well, what stocks do you own, do you have any ETFs and he’s looking at me like I’m speaking a different language.”

“I had no idea what I was doing,” Scandella said.

First thing: roughly $641,000 will be returned to the league via the escrow mechanism in the collective bargaining agreement between the owners and the NHLPA. Hockey players are employees of their respective teams and it’s a union shop; their income taxes are deducted at the source, the same is true for things like escrow.

So $4.75 million is de facto $4.109 million after escrow.

Because Scandella plays in the U.S., he is eligible to contribute to a 401(k) retirement account; the maximum contribution limit for 2019 is $19,000. Thus, the overall number drops to $4.090 million.

The U.S. federal marginal tax rate is 37 percent, according to Shannon’s estimations a player making $4.75 million can expect to pay roughly $1.84 million in income tax. Players also pay between zero percent (in Texas, Nevada, Tennessee, Florida and, soon, Washington) and 13.35 percent (California) in state tax. Canadian-born players who play in their home country can expect to be dinged for average combined tax rates that range from 47.2 percent in Alberta to 52.73 in Ontario.

https://theathletic.com/1133282/2019...-as-you-think/

[GGG]

So after paying his agent he ends up with 1.75 million over 3 years of NHL hockey. Put that in an ETF at a safe withdrawal rate of 4% and you have about 70k per year for life or live off 200k in cash per year and leave 1 million in an ETF let it grow for the 5-10 years of you career and never worry about money again.

These numbers are still huge for a guy making in the bottom quartile of NHL Salary.

[CroFlames]

Originally Posted by GGG

So after paying his agent he ends up with 1.75 million over 3 years of NHL hockey. Put that in an ETF at a safe withdrawal rate of 4% and you have about 70k per year for life or live off 200k in cash per year and leave 1 million in an ETF let it grow for the 5-10 years of you career and never worry about money again.

These numbers are still huge for a guy making in the bottom quartile of NHL Salary.

Huge numbers to be sure, but if no one told the young player what you just said, he's likely to end up poor.

Financial awareness is so rare among young people, and I'll warrant even more rare among young pro athletes who very likely missed a lot of schooling.

[Weitz]

So he ends up with about 40-50% of his stated yearly salary? Is that really that shocking?

It's interesting to see all the breakdown for sure though.

[manwiches]

I remember reading this back in August when it came out. This is an really great read for anybody really. While the numbers are high for someone like Scandella compared to middle class folk, you can apply those same principles and ratios to your own investing and savings, and see where it goes.

Honestly, they need to start teaching this stuff in high school. It's ridiculous how unprepared for life 18 year olds are coming out of high school. Even myself, all I knew about investing coming out of high school was put it in my bank account for a fraction of a return. Out of university, my first job had RSP Matching, which I had no idea what that even was until I researched it.

[Locke]

Originally Posted by manwiches

I remember reading this back in August when it came out. This is an really great read for anybody really. While the numbers are high for someone like Scandella compared to middle class folk, you can apply those same principles and ratios to your own investing and savings, and see where it goes.

Honestly, they need to start teaching this stuff in high school. It's ridiculous how unprepared for life 18 year olds are coming out of high school. Even myself, all I knew about investing coming out of high school was put it in my bank account for a fraction of a return. Out of university, my first job had RSP Matching, which I had no idea what that even was until I researched it.

Sorry, I dont disagree necessarily but whenever I see this I shake my head a little.

And who exactly is going to be teaching these kids about investment vehicles? Their Gym teacher during his spare?

Teachers are about as knowledgeable on these topics as their students. Its not like they're largely responsible for their own retirement investments and savings either.

[manwiches]

Originally Posted by Locke

Sorry, I dont disagree necessarily but whenever I see this I shake my head a little.

And who exactly is going to be teaching these kids about investment vehicles? Their Gym teacher during his spare?

Teachers are about as knowledgeable on these topics as their students. Its not like they're largely responsible for their own retirement investments and savings either.

Maybe not to the extent of what you need to know in your early/mid 20s, but honestly, anything is better than nothing. I graduated in 2003, and I only had one life class really in Grade 10. I agree, that even then, I could have cared less, but if it was an core course that I had to do well in, then I would have paid more attention. Have a Grade 10, 11 and 12 core course to teach you just the basics. Saving, taxes, intro investing, mortgages, renting, expenses etc.

Anyhow, I'm doing that whole yelling at clouds thing. haha. I'll exit now.

[afc wimbledon]

Originally Posted by GGG

So after paying his agent he ends up with 1.75 million over 3 years of NHL hockey. Put that in an ETF at a safe withdrawal rate of 4% and you have about 70k per year for life or live off 200k in cash per year and leave 1 million in an ETF let it grow for the 5-10 years of you career and never worry about money again.

These numbers are still huge for a guy making in the bottom quartile of NHL Salary.

The trouble is a bottom tier player spends his life living with and aspiring to be a top tier player, one of the guys that lives on several million a year, so telling him he should live in an average house, drive a mid tier bmw, generally live like an office manager when half the team is driving McLaren's and paying for the whole rooms drinks and lap dances at the peeler bar is a non starter.

200 a year isn't poor to you and I but in the world these guys move in that's living on welfare.

[Weitz]

Originally Posted by manwiches

Maybe not to the extent of what you need to know in your early/mid 20s, but honestly, anything is better than nothing. I graduated in 2003, and I only had one life class really in Grade 10. I agree, that even then, I could have cared less, but if it was an core course that I had to do well in, then I would have paid more attention. Have a Grade 10, 11 and 12 core course to teach you just the basics. Saving, taxes, intro investing, mortgages, renting, expenses etc.

Anyhow, I'm doing that whole yelling at clouds thing. haha. I'll exit now.

I still don't think this is true. People say it all the time but kids aren't suddenly going to start caring because its being taught it school. Seems very hindsighty to me.

[The Cobra]

Originally Posted by Weitz

So he ends up with about 40-50% of his stated yearly salary? Is that really that shocking?

It's interesting to see all the breakdown for sure though.

I don't end up with much more on a percentage basis.

Hockey players aren't treated a whole lot different, other than they make more.

[Locke]

Originally Posted by Weitz

So he ends up with about 40-50% of his stated yearly salary? Is that really that shocking?

It's interesting to see all the breakdown for sure though.

This is somewhat correct, however, it should be noted that they also have tax-savings and deferral opportunities due to the structure of their pay and the nature of their employment.

One example is deferred retirement trusts where they can park a large chunk of their salaries into investments over the course of their careers to live off of afterwards thereby smoothing their incomes over a longer period of time to reduce being subjected to top-tier tax rates during periods of high earnings.

[PepsiFree]

Originally Posted by Weitz

I still don't think this is true. People say it all the time but kids aren't suddenly going to start caring because its being taught it school. Seems very hindsighty to me.

But they’ll have the foundational level knowledge. Do I use everything I learned in high school? Of course not. Could I figure things out that were covered in high school much easier than things that weren’t? Absolutely.

The things that stick with you from high school are the things you can apply regularly.

Teaching financial literacy in high school should absolutely be a requirement and should be a requirement for all three years. Saying it wouldn’t help doesn’t really make sense. Of course it would. And even holding on to 15% of the financial literacy you might learn in high school would put you 15% ahead of where most HS grads are today.

And yes, you can make kids care by attaching grades to that learning and making those classes requirements to graduate. If you make financial literacy something kids must learn to graduate, they’ll learn it. Simple.

[Fighting Banana Slug]

That Athletic article didn't really reveal much, other than the players need to have agents to explain this stuff better. Escrow is really the only difference (other than they are paid millions rather than 10s or 100s of thousands).

[Geeoff]

For just 15 cents a day, you can help an NHL player buy a 2nd Lexus!

[CroFlames]

I'm no conspiracy theorist, but I think it serves corporate interests to have a good chunk of the population financially illiterate.

A lobby here, a bribe there, and they keep Investing 101 out of schools.

[VilleN]

Originally Posted by Locke

Sorry, I dont disagree necessarily but whenever I see this I shake my head a little.

And who exactly is going to be teaching these kids about investment vehicles? Their Gym teacher during his spare?

Teachers are about as knowledgeable on these topics as their students. Its not like they're largely responsible for their own retirement investments and savings either.

I don't see why that would be difficult. They teach calculus and chemistry, I'm sure it's feasible to to teach basic money management. Put it in the math curriculum.

[FlamesAddiction]

Don't the players get a chunk of that escrow money back once the league revenues are calculated?

[VilleN]

Originally Posted by FlamesAddiction

Don't the players get a chunk of that escrow money back once the league revenues are calculated?

Possibly. Not guaranteed and if I'm not mistaken I believe they have not gotten any escrow back in recent years... could be wrong though.

[Locke]

Originally Posted by VilleN

I don't see why that would be difficult. They teach calculus and chemistry, I'm sure it's feasible to to teach basic money management. Put it in the math curriculum.

Sure, but you're not factoring a whole bunch of other things into that.

First of all, its not part of the Math curriculum and changing curricula ain't like dustin' crops boy! As we in Alberta have had the pleasant experience of enjoying.

Further, does basic money management help get kids into University?

And then the whole 'how much attention do you think athletes aspiring to turn pro were paying attention in High School math?'

I could go on and on.

I would 100% support teaching basic financial skills in High School, but I'm also a realist (pessimist?!¿) that it likely wouldnt change anything.

[CaptainYooh]

Reading the posts in this thread and trying to gauge the level of compassion for the bottom tier players' financial abyss. It's got to be a real dilemma for some posters. On the one hand, as usual, they feel the need to step up and publicly side with the poor. On the other - the poor in this case are in the top 1% of income earning in North America. What shall they do?