One reason why so many athletes become broke after retirement is overspending, but a secondary issue is the unexpected costs associated with earning millions of dollars each year. This segment of the ESPN 30 for 30 special looks at the taxes and unexpected costs associated with earning millions of dollars per year. For many athletes, this may be the first real job they have held, which means they are unaware that they are now part of the highest tax bracket, so approximately 40% of their millions is withheld. A secondary issue is that athletes play in multiple states and countries, which means that they owe state and federal taxes in more than one jurisdiction. Because of the complicated tax situations, many athletes need a financial advisor in addition to their agents, who also take a percentage of the total income.
Abdullah Al-Bahrani and Darshak Patel have a great paper in the Southern Economic Journal that looks at using ESPN 30 for 30 to teach economics.
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