Money Smart Athlete Blog

The last contract of the retiring athlete

Mar 4, 2020 | Financial Psychology

By Andreas Themistocleous, APC Sports Consulting Ltd

Professional athletes in the National Basketball Association and Major League Baseball were studied for a ten-year period, by researchers at the University of Missouri, who established that the so called “contract-year effect”, in the sport world, can actually be proven scientifically. In other words, athletes do tend to have a performance boost in the year leading to contract negotiations, with a decline in performance, once the contract is secured and once they can reap large financial rewards. For soon-to-retire athletes, entering their last contract, this effect should definitely be a contra-indication. Common belief is that an athlete’s last contract is a passport to a large cash out, on the way to retirement, or an investment in life after sports; I am here to tell you otherwise and please bear with me.

If you are a professional athlete, past your thirties, you should already have begun preparing for life after sports. This preparation should definitely include medium- and long-term life and financial planning, contingency plans, future employment, entrepreneurship, or investment opportunities and so on. Don’t wait till your last contract, as obviously it will probably be too late.

Let’s examine some useful parameters, affecting the last contract of a retiring athlete. In terms of performance, connecting with my opening statement, a professional athlete should pursue such performance as to safeguard his/her playing legacy and go out in style. You don’t want to be seen as the old and ill wolf, who’s being carried by the younger ones, while maintaining all the pack privileges. Your last contract’s performance should be as good as your career average and should solidify, if not expand, your sporting legacy. The late Kobe Bryant scored sixty points in his last game. Michael Jordan won his sixth championship ring in his last career game, while hitting the game-winner. 

From a legal stand point, your last contract is expected to be a bit more complicated than any previous one, and one could expect it to resemble your first contract; performance based contingencies, perhaps buy-out clauses and so on. Remember that it’s normal to be more prone to injuries and time away from games; discuss with the front office, how you can utilize more time to focus on recuperation and rehab instead of overloading on team activities of corporate and business nature, as this might help further improve performance or even slightly prolong your retirement, if it’s something you are willing to leave open for later discussion. You should look to safeguard your interests in terms of image rights that will relate to this contract but utilized post retirement, as well as discuss how this last contract can be linked with an employment contract post retirement, in a different position, if you are ready to stay close to the Game without actually playing.

Do take in consideration the fact that financial merits, especially those arising from commercial exploitation, are not only awarded based on legacy, but also based on current form and performance, so don’t only rely on what you did in the past to demand financial benefits; which brings us to the financial aspect of your last contract. Of course, you want to go out with a big pay day, but is it just about that? Are you willing to sacrifice, so that you will enjoy the success of a championship? Are you willing to earn more money if you perform as well as you did in earlier years? Are you looking to pave the way for the team to rebuild while utilizing your presence? These are philosophical questions that do not necessarily imply that you will suffer financial losses, but are geared towards helping you reach a frame of mind that will assist the team and yourself reach a more conclusively favorable agreement.

If you have waited till your last contract to plan for retirement, then you probably are in trouble, as I said before. If you are a younger pro athlete reading this article, you better start thinking about the fact that your day will eventually come too. Saving, investing, managing risk, exploiting your commercial interests/brand, developing skills, acquiring knowledge and preparing your financial future away from sport, should be among the top priorities of pro athletes.

Now pause, as I have saved the best for last. Is your legacy only going to be about your performance, or do you want to be remembered as something more? Have you considered your potential impact on younger players? Have you envisioned how you can shape the future of your team, community, and the overall Game itself? You get to decide how you will be remembered years from now and not only on a collective basis, but also from each and every individual with whom you react and encounter.

Most importantly, if this is the last go around, remember to have fun with it. Surely you will miss it, we all do. Enjoy!