Honestly, if I was a high school All American, i would be on my way to Europe. College is fun, but when your family is in a tough financial situation like a lot of these guys' families are, it's very hard to turn down the money.
I am not sure if I agree or disagree.
If you family is in a tough financial situation... chances are that they have been dealing with it for your whole life (18-19 years). Therefore, what is another 4 years while you get your education (for free)
If your as good as everyone thinks you are... then in 4 years you will be educated and rich. Rather than uneducated and rich.... which will most uneducated kids just blow the money on cars, jewerly, etc.
On the other hand, he can always go back to school and pay for it himself if he takes the check now. But I only can name a few players who have done this.
And what if the kid blows his knee out? Waht if a family member of the kid, god forbid, is hurt or killed while still living in a rough neighborhood when the kid could've taken the money and gotten his family out of the situation? Very easy to downplay this stuff when people haven't walked a mile in those shoes.
I can understand that. Maybe the NBA can institute a policy that if the kid signs and takes a check... a lot of the money (something like 50%) is put into some type of deferred compensation plan. This way the kid cannot touch all of the money upfront and possibly blow it on unnecessary things.
For instance, if the kid makes 3 million in his first year, take 1.5 million and put it in a deferred compensation plan or some other type of plan that has a 5 to 10 year vesting schedule. The plan can have some kind of provision that if he is buying a house, he can take the proceeds. If not, he cant touch it. The other 1.5, he can take upfront to help his family out immediately.
I think this would help out kids who are too immature to manage such a huge amount of cash themselves... until they have grown up a bit.
Deferred compensation plans are now way too complicated under tax law. Couldn't withdraw money to buy a house without incurring an additional 20% tax. Also, why subject money that you could have today to risk of forfeiture? It's one thing to defer w/o adding any vesting conditions in order to delay income, but why would the kid want to add vesting conditions as well?
Q: Also, why subject money that you could have today to risk of forfeiture?
A: From my understanding, if invested prudently there wouldn't be a forfeiture.
Q: It's one thing to defer w/o adding any vesting conditions in order to delay income, but why would the kid want to add vesting conditions as well?
A: The kid wouldn't want to delay income or want a vesting schedule. But I think it would be in the best interest of the kid to prevent him from making financial mistakes. Let's face it, there aren't too many 18-21 year olds who would do the right thing with their money by becoming an instant millionaire. Under my suggestion, I was trying to say if the kid signed for 3 million. He would get 50% in cash. The other 50% would be in a deferred comp plan (let's say 10 years) where he would be able to take 20% per year, after year 5.
Contract: 3 million per year for 3 years (9 million total)
Year 1: 1.5 million cash (1.5 million in deferred comp; 20% vesting per year, starting in year 5)
Year 2: 1.5 million cash (1.5 million in deferred comp; 20% vesting per year, starting in year 5)
Year 3: 1.5 million cash (1.5 million in deferred comp; 20% vesting per year, starting in year 5)
Now let's just say the kid blows out his knee and never signs a contract again.
Year 4: Nothing
Year 5: 20% of the 1.5 million from year 1 = 300K (plus any interest in the deferred comp)
Year 6: 20% of the 1.5 million from year 1 = 300k plus 20% of the 1.5 million from year 2 = 300k
Year 7: 20% of the 1.5 million from year 1 = 300k
plus 20% of the 1.5 million from year 2 = 300k
plus 20% of the 1.5 million in deferred comp from year 3 = 300k (Total payout 900k)
year 8: Again... 20% of the 1.5 million from year 1 = 300k
plus 20% of the 1.5 million from year 2 = 300k
plus 20% of the 1.5 million in deferred comp from year 3 = 300k (Total payout 900k)
year 9: repeat of years 7 & 8
year 10: repeat of years 7, 8 & 9.
year 11: you get the idea....
In summary his cash payout would look like this:
Year 1: 1.5 million
Year 2: 1.5 million
Year 3: 1.5 million
Year 4: 0
Year 5: 300k
Year 6: 600k
Year 7: 900k
Year 8: 900k
Year 9: 900k
Year 10: 600k
Year 11: 300k
Year 12: nothing
Like I mentioned earlier this would assume he would blow out his knee in year 3/4 and wouldnt play a game of basketball ever again. It also assumes the kid didn't make any interest/gains from the money kept in the deferred comp plan. I think something like this would help the kids save their money until they grow up a bit and become more responsible. Additionally, under my scenario, if the kid did blow out his knee in year 3/4, he would (1) be older and hopefully more responsible (2) still have some money saved to live a good life afterwards for him and his family.