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The “Athlete Tax” Explained: Why Playing One Week in California Can Cost $250,000 · Retire and Thrive

• 0:00
  Sam Darnold, who just won the Super Bowl, he's getting paid
• 0:02
  35,000,000 bucks a year, but because he spent eight days in
• 0:06
  California, well, he has to pay taxes on those days.
• 0:10
  On that $35 million contract, that's equivalent to about
• 0:14
  quarter $1,000,000 just in taxes.
• 0:16
  Is there any type of tax implications on some of these
• 0:18
  Olympians and how does that look?
• 0:20
  Well, if you win and you're overseas for this, an Olympic
• 0:24
  event, you're actually exempt on the federal level from taxes.
• 0:27
  But Shohei Otani, his contract is literally $700 million and
• 0:32
  how he structured it and how his agent helped structure it is
• 0:35
  over the next seven or eight years, he's only getting paid
• 0:37
  2,000,000 bucks a year. Welcome back to another edition
• 0:42
  of Retire and Thrive where we help you build your life with
• 0:47
  purpose, wealth and confidence. Cami is off for a couple of
• 0:51
  weeks, so we've got another Co host here, Cody Schaefer.
• 0:56
  Cody is one of our advisors here.
• 0:59
  Cody's been with us coming up on five years.
• 1:03
  You know, it's gone very, very quick.
• 1:04
  It feels like it was just yesterday that we were actually
• 1:07
  at a different location and now we've gone to a couple different
• 1:09
  ones. But yeah, five years.
• 1:11
  Not to get too personal with you, but it's interesting when I
• 1:14
  think about when you first came to me, you know, Cody was, you
• 1:19
  know, single guy seeing a gal and how life is just totally
• 1:24
  come full circle for you. And again, we don't have to go
• 1:26
  too deep into that, but share, share a little bit about your
• 1:29
  journey here at Fortress and then maybe just your life in
• 1:32
  general just so we can have the audience here a little bit about
• 1:34
  you. That's fair.
• 1:36
  So to go all the way all the way back to the beginning, a lot of
• 1:39
  people actually don't know. I was born in Colorado and so
• 1:42
  being in Minnesota, I actually didn't make the decision to come
• 1:46
  up here. It was actually when I was three
• 1:47
  years old, my parents said, you know what, I think we should go
• 1:49
  to Minnesota to be closer to family.
• 1:52
  So that was, that was not my choice, but I love it here.
• 1:55
  But I'm actually from Dodge Center, a town, a small town
• 1:59
  just West of here, which you're familiar with.
• 2:01
  I've heard of that. You've heard of it.
• 2:02
  I I think there's some stories about you.
• 2:04
  But the, the, the back story to that is actually Dan grew up a
• 2:09
  couple houses down from where I grew up.
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  And so we came from the same town and now we're at the same
• 2:15
  place working on the same stuff. So it's kind of exciting.
• 2:17
  And must have been the avenue we lived on that created the
• 2:20
  advisor right. Must be in the water.
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  And we were only a couple classes different.
• 2:24
  I think you were just a couple grades above me.
• 2:26
  But but anyways, yes, starting at Fortress, my life was
• 2:30
  definitely different when I, when I started here, my, my
• 2:34
  fiance or I guess my girlfriend at that point in time, we had, I
• 2:39
  think 14 different weddings that we attended, none of them ours.
• 2:43
  But I just remember talking to, to Dan and it was just always a
• 2:46
  wedding every single weekend, which was great.
• 2:47
  And it was kind of that season for us.
• 2:50
  But then actually four years ago yesterday, we got engaged and
• 2:55
  then we, we've been married for three years now.
• 2:57
  We've got a house, we've got a dog, as everybody typically
• 3:00
  does. They, they go ahead and buy the
• 3:01
  house, they get the dog fenced in backyard.
• 3:03
  Now we've got a little 15 month old at home and so she's a
• 3:08
  absolute blessing and she's she's keeping us on our toes.
• 3:12
  Definitely sleep a lot more, believe it or not, because we're
• 3:16
  just more tired. But yeah, it's, it's been great.
• 3:19
  And again, been with Fortress for about 5 years now and just
• 3:22
  seeing the change in Fortress over those years is just, it's
• 3:26
  been a joy to be a part of. So I'm glad that not only now I
• 3:29
  can be a part of that, but you're letting me join the
• 3:31
  podcast, which is very much appreciated.
• 3:34
  There's a lot that's going on. It's been a great journey and
• 3:37
  and we're just getting started, quite honestly.
• 3:39
  I mean, Cody's just, I look at him as a kid, which he could be
• 3:41
  my kid and we kind of joke about that a little bit, but
• 3:45
  definitely a student of the business.
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  And I think that is one of the criterias that we look for is
• 3:48
  somebody who wants to continuously improve and be the
• 3:51
  best version of themselves, certainly as an advisor.
• 3:54
  But today isn't necessarily the Cody Schaefer show and it's not
• 3:57
  the Dan Language show. I thought we would kind of pivot
• 4:00
  a little bit today. You know, often times we, you
• 4:03
  know, with Cammy and I, we talked about the book and some
• 4:05
  of the lessons and it was just, it was less than two weeks ago
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  we saw the Super Bowl. And you know, there may be
• 4:11
  debate whether it was exciting or not exciting.
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  But probably, I don't know if it was 3-4 weeks ago I had talked
• 4:16
  about this thing referred to as the jock tax.
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  I know it seems a little bit harsh kind of in the terms, but
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  share a little bit about, you know, sometimes people don't
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  really realize and I just really touched on it and I know that
• 4:30
  you're, you know, probably look at Cody and you'd know that he
• 4:33
  is he is athletic, right? So he's played a lot of sports
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  and so he follows sports And so know certainly more about the
• 4:39
  sports and and some of the intricacies.
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  And when you get to that professional level, some of the
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  nuances and some of the tax side of it, I think it's kind of just
• 4:47
  fun to hear some of the implications.
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  I'm going to just kind of turn this around and, and put it on
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  your shoulder and say talk maybe specifically, you know, in, in,
• 4:56
  in recent terms with the Super Bowl.
• 4:58
  Tell us what that's like. You know, and again, we talked
• 5:01
  about the jock tax about, you know, somebody maybe maybe
• 5:03
  having the residency in one state and playing another state
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  and paying taxes. But but if you don't mind, go a
• 5:08
  little deeper on that for us. Absolutely.
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  And, and kind of going back to your previous question, you
• 5:12
  know, what do you specialize in or what do you spend a lot of
• 5:14
  time? And I, I like to focus a lot on
• 5:16
  the tax because I know your question wasn't about retirement
• 5:19
  planning, but retirement planning is very, very heavy in
• 5:22
  tax planning. We're not tax preparers.
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  Of course, we're not going to do the taxes, but we're going to
• 5:26
  help kind of solidify strategy and incorporate opportunities
• 5:29
  for clients around taxes. And so I, I get, I geek out a
• 5:33
  little bit when it comes to taxes because again, nobody
• 5:35
  likes paying taxes, but it's really hard to avoid.
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  And we're going to do what we can to kind of minimize that if
• 5:39
  possible. And sort of the jock tax like
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  you're talking about, one of the things people typically talk
• 5:45
  about is how much these people get paid, these professional
• 5:48
  athletes, which which they've gone through grueling work to,
• 5:50
  to get to the point where they're at.
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  But at the end of the day, you talk about a Sam Darnold who
• 5:55
  just won the Super Bowl, he's getting paid 35,000,000 bucks a
• 5:58
  year. It's a lot of money.
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  A common misconception is, you know, professional athletes,
• 6:05
  football players in general, they're typically getting paid
• 6:08
  on those 18 games that they're paying playing throughout the
• 6:11
  regular season. The playoffs is a little bit
• 6:14
  different, right? Obviously amazing.
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  Everybody wants to get to the playoffs, but you're not really
• 6:18
  given that much more of an incentive other than building a
• 6:22
  legacy for yourself through the play offs because you're only
• 6:25
  getting paid. For example, I think that first
• 6:27
  game of the play offs is like 50,000 bucks.
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  Doesn't matter if you're the quarterback, doesn't matter if
• 6:31
  you're the kicker or the backup center.
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  Whatever the case may be, you're getting paid the same if you win
• 6:35
  that game. So all players get the same for
• 6:37
  that then? Everybody gets the same it's,
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  it's unique. And, and so you get all the way
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  up to the Super Bowl where Sam Darnold, they won it.
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  And I think the winning prize for that was each individual
• 6:49
  player got about 180,000 bucks. But what's unique about the the
• 6:54
  professional athlete industry is he might be getting paid 35,000
• 6:58
  or $35 million rather for a calendar year.
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  But because he spent eight days in California, well, he has to
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  pay taxes on those days on that $35 million contract.
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  And so if you look at 8 days in California with a $35 million
• 7:15
  contract, that's equivalent to about quarter $1,000,000 just in
• 7:20
  taxes. So he'll have to pay roughly a
• 7:22
  quarter million bucks just for the time he spent in California,
• 7:25
  not the game day, but for the time he was in and.
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  That's just state tax. That's not federal, but that's
• 7:29
  the state of California and it's called the jock tax.
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  It started 35 or so years ago, I think, when Michael Jordan
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  actually was with the Bulls and played in California and beat
• 7:42
  the the Lakers in the championship or in the yeah, in
• 7:46
  the in the championship. And ultimately California came
• 7:49
  back and said, you know what, we're going to start billing and
• 7:52
  charging the the Chicago Bulls who just came in and beat us.
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  We're going to make them pay us in state taxes.
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  And so that's kind of how this whole thing started back in the
• 8:00
  90s. But anyways, yeah, so Sam
• 8:04
  Darnold, you're right. He, he won, gets paid $35
• 8:07
  million a year. He got made another 180.
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  But he's actually negative because of the amount of time he
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  spent in California. He's actually paying more in
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  state taxes for that time frame than the what he won.
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  Let's shift for just a minute. This is maybe a little bit
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  controversial and so I don't want to go too deep into this.
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  But you know, a few years ago, this this concept that these
• 8:27
  college athletes, you know, these colleges were bringing in
• 8:31
  10s of millions of dollars in alumni fees and all this other
• 8:34
  stuff and building massive stadiums.
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  And these players were really the ones responsible for all of
• 8:39
  that. And so then this whole NIL
• 8:41
  concept came out where players could make some money.
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  And I've, I've heard both sides of it.
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  Again, I'm not a deep follower of sports like like you are to
• 8:50
  touch on this NIL, not necessarily your opinion whether
• 8:53
  they should or shouldn't do it, but again, kind of parlaying
• 8:55
  that into some taxes. How how does that work for
• 8:57
  college players? Yeah.
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  Again, a lot of a lot of this world, when you talk about
• 9:01
  money, it's all based on taxes. A lot of people immediately go
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  to taxes and say how do I avoid it?
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  How do I pay the least amount or whatever the case may be.
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  So I just get fascinated by that.
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  However, I think it's changed the game a little bit.
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  Obviously you're just you're buying likability and then these
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  people are going to these well known colleges and the best of
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  the best go to the best of the best.
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  And it kind of creates a little bit of a challenge.
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  But to your question, if I'm 18 years older, if I'm giving
• 9:25
  advice to somebody who's 18 years old and we're talking nil
• 9:28
  money, that's a lot of money. I mean, it's millions and
• 9:32
  millions of dollars that are offered to these 18 year olds
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  that ultimately don't know what to do with that money, nor nor
• 9:38
  would maybe most 50 or 60 year olds.
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  And so if it's my advice to say, hey, Mr. 18 year old or misses
• 9:45
  18 year old, you got this awesome opportunity.
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  But the first thing that I recommend you do is get a team
• 9:51
  together. That's not mom and dad, but they
• 9:53
  can be involved. But ACPA, an accountant, a
• 9:57
  financial advisor, somebody that's going to give you
• 10:01
  professional advice to say you need to take this money but also
• 10:05
  shelter it from yourself too because you're going to have to
• 10:07
  pay taxes because it's recorded as income.
• 10:10
  And you need to be prepared to not just say, hey, I'm 18.
• 10:13
  I got 1,000,000 bucks. I love cars.
• 10:15
  I'm going to go buy some. But have intention around it and
• 10:17
  have a strategy to say, hey, how can this now benefit me over the
• 10:20
  next 40 years instead of just saying, well this is fun, I get
• 10:24
  a lot of money. Yeah, I mean that that that
• 10:26
  does. It's very fascinating when you
• 10:28
  start thinking about that. And the thing that popped into
• 10:30
  my head, Cody, was these college athletes, they're getting this
• 10:33
  NIL money. I mean, one of the risks is they
• 10:35
  get injured. I mean, and so, you know,
• 10:37
  they're a junior in college and they get whatever, 1,000,000
• 10:40
  bucks and all sudden, you know, they, they get some kind of
• 10:42
  injury that prohibits them from getting into the professional
• 10:45
  level. And so your advice about
• 10:48
  surrounding your people that basically have your back and
• 10:51
  then know what they're doing. I I think is is very sound.
• 10:54
  Yeah, the the brain's still developing and so it's usually
• 10:58
  the best decisions aren't made at 18 when you get a big check
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  and it I use 1,000,000 bucks as an example, there's people
• 11:04
  getting paid a lot more than that at that age.
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  So it's just crazy. It is very crazy.
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  So it's just being intentional with it.
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  We'll, we'll keep to the sports theme here.
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  And obviously the, the, the other thing that's going on in
• 11:15
  in the world, quite frankly, is, is the Olympics in Italy.
• 11:18
  So again, I don't really know how to ask the question.
• 11:22
  I'm going to just kind of put it in your lap and say, you know,
• 11:24
  it's a little bit different than NIL.
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  It's a little bit different than, you know, professional
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  athletes because these are Olympians.
• 11:29
  And it's just, it's fascinating to me to see the talent and
• 11:32
  people that spent their entire life getting to this level.
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  But is there any type of tax implications on some of these
• 11:38
  Olympians? And how?
• 11:39
  How does that look? Yeah, it's unique.
• 11:42
  It doesn't matter what sport you watch, everybody tunes into the
• 11:46
  Olympics because again, it's it's represent your country.
• 11:49
  You're you're fighting for legacy.
• 11:51
  And it's just the average person out there who's worked their
• 11:54
  entire life to get to this point to say, Hey, you know what, I'm
• 11:57
  going to go compete for this country.
• 11:59
  So the Olympics are very, very fun.
• 12:02
  I was just talking to somebody this morning about the two man
• 12:05
  luge, which again, it's interesting, very interesting.
• 12:10
  But I promise you going at 70 mile an hour down a ice slide,
• 12:15
  not for me and there's danger there.
• 12:17
  So anyways, to your point, they're certainly playing for or
• 12:22
  competing for legacy. They want to be an Olympian
• 12:24
  who's won a gold medal, but you sometimes forget they also get
• 12:28
  paid when they win gold medals. And so there's income that's
• 12:31
  received if you win these things, which is great.
• 12:34
  Can I just interrupt you for one minute?
• 12:35
  When you say there's income received, you're not even
• 12:37
  talking endorsements then you're just talking about there is
• 12:39
  money involved, just just. To clarify, if you stand on that
• 12:42
  podium, you're going to get paid a bonus essentially from your
• 12:45
  country. At least I know that's how it
• 12:47
  works in the US. And obviously the higher up on
• 12:50
  the podium, you're going to get paid more, let alone the actual
• 12:53
  value of that gold medal you receive.
• 12:55
  So this isn't even talking about the bonus you received from the
• 12:58
  US. It's, hey, here's this award.
• 13:01
  But this award, this physical medal is worth value too.
• 13:05
  So you have to pay income tax on that because it's a Prizy 1.
• 13:08
  So that's a unique aspect too. But what's unique is typically
• 13:15
  it's federal tax exempt. So, you know, you start talking
• 13:19
  about how you taxed on a lot of this money.
• 13:21
  Well, if you win and you're overseas for this, an Olympic
• 13:24
  event, you're actually exempt on the federal level from taxes.
• 13:28
  The US level. The US level now on the state
• 13:32
  side of things, typically states ignore that and they say, well,
• 13:35
  too bad, we're going to have you pay it.
• 13:37
  And there's certain thresholds where these things come into
• 13:39
  play where if you make too much money or your adjusted gross
• 13:41
  income is too high, then you can't have any exemption on the
• 13:44
  federal level. But just going back to some of
• 13:48
  the cost of winning these prizes, I mean, you look at that
• 13:52
  medal of, of let's, let's call it a gold medal.
• 13:55
  You, you, you did the best, you won first place, which is
• 13:58
  awesome. You win a, a big bonus check
• 14:00
  from the US 'cause you won. But now the implications are,
• 14:04
  how am I going to be taxed on this?
• 14:06
  The medal itself, gold. I don't know if you've seen gold
• 14:09
  lately. 2025 is very, very unique year for gold and it's
• 14:15
  gone up to almost $5000 an ounce, which is just, it's all
• 14:18
  over the media. People are talking about it.
• 14:19
  So people are like, well, what's the impact of now the cost of
• 14:23
  that metal that you're winning? Well, if you go back, you know,
• 14:26
  I, I can't remember when it changed, but they actually used
• 14:28
  to be pure gold. They're not anymore.
• 14:31
  They're actually they're. Not pure gold anymore.
• 14:33
  They're not pure gold. So it says gold medal and
• 14:35
  there's some gold in it. About 7% of those medals are
• 14:37
  actually gold. The balance of that's mainly
• 14:40
  silver. So even though gold has gone up
• 14:44
  substantially, it really doesn't have a major impact of what that
• 14:46
  prize money or that that melt value of that gold medal would
• 14:50
  actually be. It actually only be about $3000
• 14:52
  to to sell that then for the actual commodity pricing.
• 14:56
  But if it was all gold, it would actually be about $85,000.
• 15:00
  So kind of help The Olympian in that aspect, so.
• 15:05
  I do want to kind of circle back around and, and talk about these
• 15:08
  professional athletes. And, and I don't think today's
• 15:10
  the day to have this discussion, but you know, we've all seen and
• 15:14
  read about stories about these athletes that have made 10's and
• 15:17
  some of them, you know, north of $100 million of their career and
• 15:19
  they end up broke. And so it's, it's kind of a sad
• 15:22
  thing, quite frankly. And, and I don't, you know, I
• 15:25
  don't care to know the answers to this, but you know, when you,
• 15:29
  when you're not surrounding yourself, as your advice was,
• 15:32
  you're not surrounding yourself by people that maybe understand
• 15:34
  some of this, most of these professional athletes are in
• 15:38
  unions, right? Is, is, is that not right?
• 15:39
  And, and I have to believe that if you're in a union, part of
• 15:42
  the benefit of the union is that you're going to have a, a
• 15:45
  guaranteed, I don't know if they call it a pension or, or how
• 15:47
  that works, but you want to touch just briefly on that.
• 15:49
  Is that kind of a way to protect them so that they do have some
• 15:52
  income for the rest of their life?
• 15:54
  Yeah, there's certainly some benefits that obviously income.
• 15:56
  We we talk about this with our clients a lot.
• 15:58
  You know, it's not a, the game of retirement is not how much
• 16:01
  money do you have, it's how much money do you spend and how much
• 16:04
  money do you have coming in? And so that's a huge part of it.
• 16:06
  So when you solidify yourself in a group that ultimately is a
• 16:09
  little bit protected and it does have income that will be
• 16:12
  generated for you in the future, it has a huge benefit.
• 16:15
  But you still have to try to protect yourself from yourself.
• 16:19
  And a lot of these professional athletes, not all of them, I
• 16:24
  know a lot of them are very intelligent and they actually
• 16:28
  use advisors. They, they have these strategies
• 16:30
  with estate planning that they implement to limit a lot of
• 16:34
  potential downfall. But again, you're talking young
• 16:38
  brains. A lot of these professional
• 16:39
  athletes are young still and they're talking millions and
• 16:41
  millions and millions of dollars.
• 16:44
  And again, they have this bulk of, of wealth that they came
• 16:47
  into you or, or worked hard for, but they ultimately came into
• 16:51
  you. And the question is, well, how
• 16:53
  fast do they spend it? Because ultimately they create
• 16:55
  this habit, the lifestyle creep. What we consider is now you're
• 16:58
  getting paid more so you can spend more and enjoy more.
• 17:01
  And ultimately, whether it be baseball, football, basketball,
• 17:04
  the, the longevity in a professional athlete sport isn't
• 17:08
  very long. And so you live this lifestyle
• 17:10
  of spending and having a lot of income and enjoying the, the
• 17:13
  riches that you work so hard for.
• 17:15
  But then that stops when you retire or you leave because of
• 17:18
  injury or whatever the case may be.
• 17:21
  It's really hard for that lifestyle to then change
• 17:23
  dramatically to say, hey, now I'm just going to spend less
• 17:26
  because you've just, you've strengthened the muscle of I
• 17:28
  enjoy spending money. And again, it's not all
• 17:30
  athletes, but a, a fair amount of them.
• 17:32
  The stories you hear on the street, unfortunately, when
• 17:35
  they're the, the, you know, the rich become the, the people on
• 17:39
  the street predominantly because they just didn't have a plan in
• 17:42
  place. They didn't talk to somebody and
• 17:44
  they really enjoyed spending money and they didn't understand
• 17:47
  how to defer that gratification and say I want to get paid
• 17:49
  later, too. I, I also, again, this just kind
• 17:52
  of popped in my head. I, I read years ago and, and,
• 17:55
  and I don't want to quote statistics I'm not familiar
• 17:58
  with, but specifically football. I think that's one of the bigger
• 18:01
  uncertainties to all the sports, quite frankly, hockey or
• 18:04
  basketball or or baseball too, that, you know, I look at you at
• 18:08
  your age and I look at your career and your trajectory for
• 18:12
  the next 20-30 years as a, as a professional athlete.
• 18:16
  And again, I don't remember the numbers, but like lineman, I
• 18:19
  can't even remember what the numbers is.
• 18:20
  Maybe, you know, but like professional NFANFL lineman have
• 18:24
  a very short period of time that they're actually making money
• 18:29
  like they're, they're done in, you know, a very short period of
• 18:31
  time. So I think that's part of the
• 18:32
  challenge too, is I mean, we we're we're very analytical.
• 18:35
  Like we project out when can you retire and how much and where's
• 18:38
  all the income coming from? Whereas these athletes, they,
• 18:42
  they don't know how long they're going to work.
• 18:43
  And so I think that challenges things too in terms of trying to
• 18:47
  project out a financial plan. So I just I mentioned that just
• 18:50
  popping my head on if you have a comment on.
• 18:51
  That Well, yeah, I mean, it's it's very true, like I said,
• 18:54
  that the longevity in a professional sport is very
• 18:56
  short. You talk about lineman, those
• 18:59
  are big boys and they are butting heads with big boys.
• 19:03
  And, and a lot of the times you see these lineman with knee
• 19:06
  braces, right? I mean, it takes one play to all
• 19:08
  of a sudden fall over and having a knee injury.
• 19:11
  And not only could you be out for six months, but you could
• 19:14
  have somebody replace you in two weeks and you're not coming back
• 19:16
  and you're looking for a new job or new team or whatever.
• 19:19
  And so it's a rough, rough sport.
• 19:22
  And we start talking millions of bucks and Super Bowl and
• 19:24
  35,000,000 bucks. That's great.
• 19:26
  But that can come crashing in a second too.
• 19:28
  So it's tough. And if you don't plan for the
• 19:31
  uncertainty like that, I mean, it's kind of like retirement
• 19:33
  planning. You got to just delay some
• 19:35
  gratification and say, hey, I want to have money right now,
• 19:38
  but I also know I need it in the future.
• 19:40
  So what? What's the best strategy for me?
• 19:42
  This has been a great episode for me because I'm learning a
• 19:45
  lot about these professional athletes.
• 19:47
  I, I, I want to kind of wrap this up.
• 19:50
  I had seen recently, I, I, again, I don't follow sports
• 19:54
  like you do. There's a player for the LA
• 19:57
  Dodgers, and he had kind of a unique.
• 20:00
  Compensation package, I mean, a lot of times these professional
• 20:03
  athletes, they get big signing bonuses and everything else, but
• 20:06
  this guy kind of did the reverse.
• 20:08
  And I don't know if you want to touch on him a little bit,
• 20:12
  specifically what he did, why you think he might have elected
• 20:17
  that? And is there risk or is there
• 20:20
  benefit for so, yeah, Sheriff, just shut some like, 'cause I'm
• 20:22
  not 100% familiar with it. Yeah.
• 20:24
  No, it's interesting and I don't follow baseball to a tee
• 20:28
  certainly as much as football, but Shohei Otani is definitely
• 20:32
  one that is talked about. For those of you that don't know
• 20:36
  his, his contract is literally $700 million getting paid out to
• 20:40
  him over a long period of time and how he structured it and how
• 20:43
  his agent helped structure it is over the next seven or eight
• 20:46
  years or whatever the balance of that is.
• 20:48
  Now he's only getting paid 2,000,000 bucks a year.
• 20:51
  Only. I do.
• 20:53
  I do feel bad for him. Exactly.
• 20:55
  Maybe wrong word verbiage, but relatively speaking to the 700
• 20:59
  million bucks, $2,000,000 a year, that's really peanuts in
• 21:03
  that conversation, which at the end of the day is a lot of
• 21:06
  money. And I think there is some logic
• 21:08
  behind it. And again, I don't understand it
• 21:09
  completely because it when I think about it, I think of you
• 21:13
  know, let's call it seven years, he's getting paid 2,000,000
• 21:16
  bucks, that's $14 million over the next, you know, 7 years, a
• 21:19
  lot of money. But compared to $700 million,
• 21:23
  what's that 2%? And we're deferring 98% of it
• 21:27
  into the future where where again, I, I always like to focus
• 21:30
  on taxes because again, it's just such an uncertainty.
• 21:34
  We're at historically low tax rates right now.
• 21:37
  And when he starts receiving some of this money now down the
• 21:40
  road, whatever the balance is, 700 million bucks, he's going to
• 21:44
  have to pay taxes on that. We don't know what the tax rates
• 21:46
  will be at that point in time. And I don't want to go back to
• 21:49
  1960s where the highest tax bracket was 91%.
• 21:55
  So you think about that $700 million, that's a lot of money.
• 21:58
  But all of a sudden, if we get into a situation where this
• 22:00
  country now needs to adjust tax rates, which is potential, what
• 22:04
  if they go up substantially and now he's having to defer or, or
• 22:07
  or or distribute, call it $30 million a year, He's no question
• 22:12
  going to be in that highest tax bracket.
• 22:14
  And if they if they increase it back to what they did in the
• 22:16
  60s, he has no control of that. So that's tough.
• 22:20
  So there's some risk there for him, obviously.
• 22:22
  There's some risk, absolutely, and I'm sure there's some
• 22:24
  benefit to I, I don't know all the benefit to that and I wasn't
• 22:28
  part of the structuring of it. It disrupted the industry
• 22:30
  because everyone mine just blew up and said holy cow.
• 22:35
  But it shows that he's willing to kind of create that core
• 22:37
  value of I'm just going to delay some of this, right?
• 22:40
  I don't want to just take all this money today by the biggest
• 22:43
  mansion and I have the nicest car.
• 22:46
  But he's saying I I can live within my means with 2,000,000
• 22:48
  bucks a year, which after tax is probably close to 1,000,000
• 22:52
  bucks. So and.
• 22:52
  He's in California and. He's in California, not cheap.
• 22:56
  So there's, there's intentionality around it.
• 22:58
  I just, I, I get a little uneasy when I think of the, the
• 23:02
  uncertainty of the taxes down the road.
• 23:04
  And I will say one thing on him too.
• 23:07
  I don't know him personally, of course, but one of our clients
• 23:09
  actually made a trip down there and he was elected to sing the
• 23:14
  national anthem at one of their spring training games in
• 23:17
  Arizona, actually a couple of years ago.
• 23:20
  So he got to meet him, shake his hand, and obviously there's a
• 23:22
  little bit of a language barrier there, so there wasn't too much
• 23:25
  conversation, but he was very respective to our client.
• 23:31
  They literally, they got a picture together, shook hands,
• 23:33
  had a lot of fun laughs with whatever laughs they could have.
• 23:37
  But just kind of a fun little nugget of of one of our clients
• 23:39
  went down and actually sang at the national anthem or at the
• 23:42
  ball field, the national anthem for their spring training game.
• 23:45
  So I want to wrap up this episode.
• 23:47
  I I could literally talk here for an hour or longer.
• 23:50
  This is fascinating, Cody. And I think as I kind of wrap up
• 23:55
  these questions that one of the things that dawns.
• 23:57
  I mean, I'm not trying to throw any state under the bus here,
• 24:01
  but it almost sounds like, you know, we're talking about, you
• 24:02
  know, the NFL and then we're talking about Major League
• 24:05
  Baseball and we're talking about and IO money and we're talking
• 24:08
  about, you know, the Olympics. So everything centered around
• 24:10
  taxes, but it's all around the athleticism and athletes.
• 24:14
  It almost seems like, you know, this goes back 35 years when
• 24:18
  California attacked Chicago. And so it's like you kind of
• 24:21
  started out the conversation with that's how that happened
• 24:24
  when the Chicago Bulls went and beat the Lakers.
• 24:26
  And it's like now everybody's got their hand out saying, hey,
• 24:28
  we want a piece of your paycheck.
• 24:31
  And so it's kind of interesting, so.
• 24:33
  Yeah, it's, it's unique and I think the people it affects the
• 24:35
  most probably is like the professional golfers.
• 24:38
  You know, I, I think of Scotty Scheffler, everyone knows
• 24:41
  Scotty, you know, he's continued to just dominate the league
• 24:44
  almost in a tiger like fashion. And so you look at Scotty, who
• 24:48
  lives in Texas, which is a state, has zero state income
• 24:51
  tax, but he goes anywhere else and wins the tournament, whether
• 24:55
  it be Minnesota, Arizona, you name it.
• 24:58
  He's going to pay state income tax for that victory, whether it
• 25:01
  be 2 million or 3 million or whatever.
• 25:03
  He's got to pay state income tax for being there, even though he
• 25:05
  doesn't live there. So I think they get affected
• 25:08
  almost the most 'cause they're going all over the the country
• 25:11
  and playing in all the different states in that capacity.
• 25:14
  Yeah. Anything else you want to wrap
• 25:16
  up? I mean, I didn't even think
• 25:17
  about the whole golf thing, but yeah, you're right on the PGA
• 25:19
  there on the tour and. No, I, I.
• 25:21
  The only thing I would say is taxes are literally 80% of what
• 25:26
  people focus on when they, when they think of money, or at least
• 25:28
  myself, whether it be retirement planning or distribution
• 25:32
  planning or gifting strategies. But these athletes who make
• 25:35
  millions and millions and millions of dollars, you know,
• 25:37
  their Achilles heel right now is taxes.
• 25:40
  And, and, and even worse, what will taxes be down the road?
• 25:42
  So, yeah, the the amount of money these people make, these
• 25:46
  professional athletes make is just continuing to get bigger
• 25:49
  and bigger and bigger. But they're also paying more and
• 25:52
  more and more and more in taxes too.
• 25:53
  So it's not it's not as easy as people make it sound.
• 25:57
  But again, after tax return on that $35 million contract is
• 26:02
  still a pretty penny. Yeah, but you do.
• 26:04
  You do look at it, though. And and, you know, I'm the guy
• 26:06
  who's sitting there on a Sunday just looking at these athletes
• 26:09
  saying, I know you guys make too much money, but you brought in a
• 26:11
  whole new element about the complexity of this.
• 26:13
  It's not, you know, it's not necessarily cut and dry.
• 26:16
  And obviously, a lot of these people aren't knowledgeable
• 26:18
  about tax strategies and so on so forth.
• 26:20
  So that goes back to your advice of surround yourself.
• 26:23
  And I think it could go to advice to anybody.
• 26:25
  Doesn't matter whether you're a business owner, you're a retiree
• 26:27
  or whatever it might be. But obviously, the numbers are
• 26:29
  much, much bigger for the professional athletes.
• 26:31
  So, yeah, well, thank you for tuning into this unique episode
• 26:35
  of Retire and Thrive. We will be back next week with a
• 26:38
  different episode. And until then, have a great
• 26:41
  day. Fortress Financial Group, LLC is
• 26:44
  a registered investment advisor. Advisory services are only
• 26:47
  offered to clients or prospective clients where
• 26:49
  Fortress and its representatives are properly licensed or exempt
• 26:52
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• 26:54
  material are for general information only and are not
• 26:56
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• 26:59
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• 27:02
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• 27:04
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