Professional Sports Pension Plans – How Much Do Retired Sports Stars Earn?

In my recent post, I wrote about how much professional athletes earn. Not the star players, but the role players. Most of the professional athletes in major sports earn millions of dollars per year after only a few years of service time.

On the other side of the equation are Olympic athletes, which often get by on much less (sometimes barely earning a five-figure income each year).

This post covers how much these athletes earn during their pension years. A note about this information: Some information is not readily talked about by various players associations and was taken from varying sources.

Some sources contradicted each other, but I tried to give the most accurate data I could find.

How Much Do Retired Sports Stars Earn?

Many of these athletes do very well after their playing days are done, and some are comparatively lacking. Here is how it breaks down in the major American sports:

• Baseball (MLB) – $1,000/mo. to start; increases with service time.
• Basketball (NBA) – Current players will receive $12,400 per year for each season played, maxed out at $124,000 (assuming a retirement age of 62).
• Football (NFL) – Starts at $200-425 per month depending on how many seasons played and during which years they played.
• Hockey (NHL) – Each player has an individual pension account. The amount in each individual pension account differs based on the total number of games played and a prorated contribution if a full season is not played.
• Pro Golf Association (PGA) – Performance-based pension; A very complicated process!
• NASCAR – None

Baseball – MLB Pension Value

MLB was the first pro sport to set up a pension (1947). It originally offered $100/mo depending on the number of years played. The original requirement was 5 years service time, then it was reduced to 43 days for a full pension (1 day for medical).

There are even players who have been called up to the big leagues, sat the bench for a few weeks, never got in a game, and will still receive a pension (The plan only requires the player to be on the roster, not appear in any games). Sweet Deal!!!

MLB has also done the right thing by extending pensions to some former Negro League players. However, even though I could not find absolute dollar values for their pensions, there is no dollar value for their contribution to the game.

Basketball – NBA Pensions

The basketball pension began in 1965 after years of negotiations between the league and the players union. The players union finally threatened to boycott the 1964 All-Star game if they didn’t get a pension agreement. They won.

Players who played at least 5 years before 1965, or 3 years after 1965 were eligible. The eligibility requirements were recently changed so that those who only played 3 years before 1965 are now eligible. Pensions begin at age 62.

Football – NFL Pension Plan

The NFL pension plan began in 1959 and covered every eligible player from 1920 on. To be eligible, the player only has to play 3 seasons after 1992, or 4 seasons before 1992.

There are other benefits for disability for those whose injuries forced immediate retirement. In my opinion, the NFL players need this pension due to the beatings their bodies take on a weekly basis. Pensions begin at age 55.

Jeremy Staat, a former NFL player and college roommate of Pat Tillman, retired from the NFL and joined the US Marine Corps. He went on to serve in Iraq. Staat initially wanted to join the Marines following the attacks on September 11, 2001, but Tillman advised Staat to gain his retirement benefits from the NFL first.

Tragically, Pat Tillman made the ultimate sacrifice for his country and lost his life in Afghanistan in April 2004. Tillman and Staat are two athletes who decided there are more important things than playing a sport for a lot of money. I salute them and everyone else who proudly wears the Uniform.

Hockey – NHL Pensions

The NHL pension began in late 1947 and is the second oldest pension of the major sports. The new agreement came as a result of the cancellation of the entire 2004-05 NHL season.

Players with less than 160 games receive the maximum pension benefit under Canadian law; players with more than 160 games receive the maximum pension benefit under US law (currently $45,000 per year). Read the NHLPA Collective Bargaining Agreement for more information (pg 101 for pension benefits). The plan’s normal retirement age is 45.

PGA Tour – A Performance-Based Pension

This is a performance-based pension based on the number of tournaments entered, the number of cuts the player makes, total yearly earnings, and several other factors. As long as a player appears in 15 events per year, he gets a certain amount of money per cut.

Last year, the cut was worth $3,658 toward his retirement. It doubles for each cut made above the 15 mark. A second tier to the retirement system is based on player rankings in the FedEx Cup.

The winner will receive $10 million in deferred compensation. Golfweek magazine once estimated Tiger Woods could possibly receive $300 million in pension benefits alone! Pensions begin at age 50 if the player is no longer competitive, or 60 if they still compete. Read more about the PGA pension plan.

NASCAR – No Pension Plan

None. And it’s a shame! NASCAR is a sport designed to mint money. NASCAR itself is valued at over $50 billion. The cars are moving advertisements, merchandising alone brings in over $2 billion annually, and each live event brings in millions of dollars ($35 t-shirts, $150 to rent a radio tuned to the pit frequency, $8 beer, etc.). TV contracts are insane!

And these guys are in one of the most dangerous sports in the world. Some drivers have even been left to cover their own medical bills after serious accidents, and some have faced financial ruin as a result.

In how many other major sports do the athletes have to consider the real possibility of dying every time they compete? It’s not common, but it does happen more often than it should. These guys should get some financial consideration from NASCAR when they retire.

Create Your Own Pension

You may not be a professional athlete, but did you know you can create your own pension plan? Anyone who has self employed or small business income can open up a SEP IRA.  SEP stands for simplified employee pension.

Here is how it works. You can place 25% of your self-employed or small business income into the account tax-deferred. Over the course of the year the amount deposited cannot exceed $56,000. You can then invest that money how you want inside your brokerage account.

SEP IRA Providers

There are many online brokerage accounts where you can start your SEP IRA. A few of our favorite online brokerages include:

• M1 Finance – M1 offers free trading for any stock or ETF available on their platform. M1 Finance includes more than $6,000 fee free investment options for their clients.
• Betterment – Betterment will do all the investing for you. All you have to do is answer a short questionnaire and Betterment will take care of the rest based on your risk preferences.
• Ally Invest – Ally is one of the larger full service online brokerages. You can make investments in stocks, ETFs, mutual funds and more with an Ally Invest brokerage account.

Pro Athlete Pensions Final Thoughts

It is great to be a pro athlete during their playing days, but for many athletes, it’s just as sweet in retirement. 🙂