Annuities in Sports: How Some Athletes Use Annuities to Fund Their Retirement

Professional athletes can earn huge sums of money quickly, but it’s often a peak earning window of just a few years. That’s why annuities can make an excellent option for athletes looking to stretch a large sum of money through their retirement years. Many famous players have taken advantage in a variety of formats.

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  • Written By
    Christian Simmons, CEPF

    Christian Simmons, CEPF

    Financial Writer, Certified Educator in Personal Finance

    Christian Simmons is a financial writer who has worked professionally as a journalist since 2016. As an active member of the Association for Financial Counseling & Planning (AFCPE), Christian prides himself on his ability to break down complex financial topics in ways that readers can easily understand.

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  • Edited By
    Lamia Chowdhury
    Headshot of Lamia Chowdhury, editor for

    Lamia Chowdhury

    Financial Editor

    Lamia Chowdhury is a financial editor at Lamia carries an extensive skillset in the content marketing field, and her work as a copywriter spans industries as diverse as finance, health care, travel and restaurants.

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  • Financially Reviewed By
    Chip Stapleton
    Chip Stapleton

    Chip Stapleton

    FINRA Series 7 and Series 66 License Holder

    Chip Stapleton is a financial advisor who has spent the past several years of his career working primarily in financial planning and wealth management. He is a FINRA Series 7 and Series 66 license holder and passed the CFA Level II exam in 2022.

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  • Updated: November 21, 2023
  • 8 min read time
  • This page features 15 Cited Research Articles

Why Annuities Might Make Sense for Athletes After They Retire from Sports

There are plenty of reasons why an annuity can make sense for a professional athlete. One of the most important aspects is the very short earning window that athletes face.

While an everyday American may expect to work and earn a steady paycheck from their job for 40 years, professional athletes typically have a short — but lucrative — earning window. According to ESPN, the average NFL career lasts just 3.3 years.

While athletes at the highest level of their respective sports can make hundreds of thousands and even millions of dollars, those paychecks only last a handful of years. Even the most successful athletes rarely play more than 15 to 20 years.

An annuity is an easy and safe way to take money that’s earned in a relatively short amount of time and convert it into a stream of payments that can last a lifetime, making it an attractive option for high-earning players.

The Effects of Sudden Wealth

According to Basketball Reference, the average salary of an NBA player is $5,877,261. This means that a typical biweekly paycheck before taxes for a professional basketball player would come in at about $226,000. Rookies are immediately inundated with life-changing wealth from the moment they sign their first professional contracts — and the checks just keep coming.

Average Salaries of Professional Athletes

  • NBA: $5,877,261
  • MLB: $4,170,000
  • NFL: $2,700,000

There is a psychological component to suddenly earning a significant amount of money, and it can create real problems. According to Huffington Post, sudden wealth syndrome can occur when a person quickly becomes rich, leading to social isolation, stress, anxiety and other serious issues.

Sudden wealth syndrome can also lead to mistrust, lack of relation to others and significant overspending as you feel forced into a new lifestyle. Converting income into an annuity can alleviate many of these potential issues for athletes.

Annuities can offer guaranteed financial security for the long term while avoiding misuse of money in the short term. It can also shield athletes from bad financial advice, dubious investment suggestions and other issues that plague the newly wealthy.

Shaquille O’Neal’s Financial Advice

Former Orlando Magic and Los Angeles Lakers star Shaquille O’Neal is one of the most commercially successful athletes of all time. On top of his playing career that spanned nearly 20 years and included four NBA championships, he has appeared in plenty of movies, dropped multiple studio albums and cultivated an impressive list of lucrative endorsement deals that extend to this day.

O’Neal credits annuities for the continued financial security that allowed him to branch out in so many directions.

“Advice number one: learn what annuities are,” O’Neal said in a CNN article.

He invested heavily in annuities throughout his playing career, which freed him up to use the masses of money he earns today on whatever he sees fit.

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Annuities Paid Out to Individual Players

Multiple athletes have looked to annuities for financial security through retirement. Whether their last game was five or 30 years ago, annuities have offered them a stable income and financial flexibility for the years ahead.

Athletes Who Landed Big Paydays from Annuities

Bobby Bonilla

Few players have benefited more from deferred money than former baseball star Bobby Bonilla. Heading into the 2000 season, Bonilla was coming up on the end of his career and had become a bit of a problem for the New York Mets.

He was no longer good enough to start but still a major expense for the team, earning a salary of nearly $6 million. So, a solution was worked out that seemingly made sense for all sides. Bonilla would willingly walk away from all that money so the Mets can spend it on better players — or at least he’d walk away from it in the short term.

According to Bloomberg, the deal that was struck allowed his salary to be deferred for 10 years, at which point, the Mets would give him a yearly payment for 25 years from 2011 to 2035.

It was a great deal for the Mets at the time, giving them the opportunity to immediately bring in talent. As of July 2022, Bonilla has received over $14 million from New York. He will continue to receive about $1.2 million per year until he turns 72.

When all is said and done, Bonilla will have made $29.8 million over 25 years in exchange for deferring one year of salary.

Bobby Bonilla Playing Baseball
Retired baseball player Bobby Bonilla will continue to receive a check from the New York Mets every year through 2035.

Allen Iverson

Former NBA superstar Allen Iverson was one of the most popular basketball players in the world during the early 2000s. He is considered to be an all-time great by many and he was paid like one, too.

But Iverson eventually ran into financial struggles during retirement after running through much of his career earnings early on. An annuity has helped keep him afloat in later life.

According to NBC Sports, Iverson put away $32 million from shoe endorsement deals back when he was still playing. He can’t touch the principal until he turns 55, but it has paid him out $1 million annually, helping him maintain his finances even after some struggles.

Rick DiPietro

Hockey star Rick DiPietro hasn’t played for the New York Islanders since 2013. But thanks to a deferred contract, they are set to continue paying him for another seven years from today.

DiPietro signed a massive contract during his playing days, and in 2013, a buyout deal was reached. According to USA Today, DiPietro struck a deal to convert his salary into a stream of annual payments worth $1.5 million that he is set to receive each year until 2029.

By the time the payments end, he will be 48 and retired for 16 years.

Kevin Garnett

Former Boston Celtics superstar Kevin Garnett is well into his retirement life. In fact, the Celtics weren’t even the last (or second to last) NBA team that he played for. But that hasn’t stopped Boston from securing Garnett financially years into his retirement.

While Garnett was still with the Celtics, he made the decision to defer a sizeable chunk of his salary until after he retired, according to NBC Sports. The result was that he would receive $5 million annually for the first seven years of his retirement.

That means Garnett will end up having earned $35 million total after retirement.

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Annuities Offered Through League Players’ Associations

Major U.S. sports leagues and their respective players’ associations typically offer financial advice, guidance and plans to current and former players. For some leagues, this includes options to set up annuities.

According to Sports Illustrated, the NBA Players Association launched a bridge annuity program over a decade ago, set up to leave $70 million to be distributed into the program and to retired players. Current players can also put up to 10% of their salaries into the annuity.

The NFL Players Association also offers an annuity program to any players who were in the league for at least three seasons. Players who set up a non-qualified account can take money out starting five years after they retire. Players with a tax-qualified account can begin to take installments or monthly lifetime payments once they turn 35 and have been retired for at least five years.

Proposals in Other Sports

There is a growing chance that annuities will play a role in an industry where players are practically brand new to making money: collegiate athletics.

For essentially all of college sports’ modern history, the NCAA had rules against athletes being compensated for their play in any way. 

But that all changed in 2021 when several laws passed by states and changes to NCAA rules gave students the ability to profit off of their name, image and likeness (NIL) in any sport.

While they still can’t receive a salary or get paid directly from their schools, they are free to explore the endorsements side of being a successful athlete. For example, a popular college football player could get paid to appear in a local car commercial or to show up at a sports bar and sign autographs for a few hours.

A baseball or softball player could host a camp for high school players and charge admission. There are numerous possibilities.

But the real place where annuities may have an impact is with collectives: organizations that have been set up by boosters and alumni of dozens of schools to pay significant money to collegiate athletes.

According to The Athletic, one 2023 high school recruit signed a $8 million deal with an NIL collective. In addition, the Action Network found that several of the top quarterbacks in college football were bringing in millions in a given season.

Considering the relatively short earning window of a collegiate athlete (most careers last only three to four years), it may make sense for annuities to begin to play a role in this space.

Purchasing an annuity could help stretch payments that would normally only last a couple of years, and would benefit college athletes for the rest of their lives.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: November 21, 2023
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