Most professional sports leagues have very generous retirement plans for athletes. In the NFL, for example, each player can put more than $40,000 a year in their 401(k) when the team match is factored in. But golf’s PGA Tour seems to enrich athletes the most: Over 600 pro golfers currently have more than $1 million in their retirement plans, and some have significantly more.
There are two ways golfers can earn retirement money. One is by making the cut at a tournament, as long as they play in at least 15 events. Typically 144 golfers try to make it into a tournament and the 70 with the lowest score after 36 holes make it. Each time a golfer made a cut this year, it was worth $4,800 into their retirement account, and each one they made over 15 was worth double that.
The other way is by finishing as one of the top 150 golfers of the year, which will get them FedEx Plan bonus money. This year the No. 1 golfer will get a $15 million bonus — $14 million in cash and $1 million in deferred retirement income — and golfers get less as their ranking gets lower. For example, the No. 150 golfer will get a $70,000 bonus, all as deferred income. Here is the leaderboard for this year, and here is how it ended up in 2018. For golfers who come in places 31 to 150, all of the bonus money is deferred into their retirement funds.
Currently over 600 golfers have more $1 million in their retirement funds, and 114 have over $3 million. These include golfers on both the PGA Tour and PGA Tour Champions, a senior golf tour.
There are 46 tournaments this year and there will be 48 next year. Since only 70 golfers usually make the cut for each event, those who are good enough to vie for a spot but who don’t always get one won’t have as much in their retirement accounts as the top golfers.
“Everything we pay out has to be earned, including retirement money. It’s our longstanding objective that if a player makes a career on the PGA Tour, they should have a secure retirement. We make sure we’re always funding adequately for everyone. But there has to be a competitive element,” Ron Price, the chief operating officer of the PGA Tour, told MarketWatch.
Price says the “cuts” plan has been around since 1983, and the bonus plan since 1999. The latter changed its name to the FedEx Player Bonus Plan in 2007. The amount of money available to players changes each year; it’s determined by a policy board, which has players and independent directors on it.
Table: PGA Tour & PGA Tour Champions player retirement plans
|Players with account balances over $3 million||106||114|
|Players with account balances over $2 million||171||188|
|Players with account balances over $1 million||339||345|
|Players with account balances over $500,000||500||510|
|Source: 2018-2019 PGA Tour Annual Report|
Because golfers on tour are considered independent contractors, the PGA Tour can’t just put money into a retirement account for them, and has to use deferred compensation plans, Price says.
Similar to how 401(k) plans often work, the golfers can choose among 17 core mutual funds and 6 target-date funds. Price says that Charles Schwab is the PGA Tour’s record-keeper, so the funds are primarily from companies on its platforms.
The PGA Tour provides financial education to golfers by having both PGA Tour employees and people from Schwab at tournaments to assist players with retirement plan questions, Price says. The PGA Tour also has educational sessions on site for players — primarily about the plan’s investment options. He adds that a lot of players have their own financial advisers who help them invest their PGA Tour retirement money. “We encourage them to consult their advisers on decisions,” Price says.
Echoing the thoughts of many younger people about how far off retirement can seem, Tiger Woods quipped in 2007 (at age 31): “I may be dead by the time my retirement fund comes around for me to be able to utilize it.”
But luckily for Woods, now 43, golfers can potentially access their retirement fund at an earlier age than the average Joe. Golfers can begin taking the “cuts” money after age 50, and the FedEx Bonus money after age 45 — or a year after they play in fewer than 15 PGA Tour or PGA Tour Champions events. Also, Woods likely has a lot more money in his retirement account than $3 million. Golf Digest in 2016 estimated that Woods had over $20 million in deferred retirement income from the PGA Tour.
Price wouldn’t confirm the number and says he can’t talk about the amounts any individual players have in deferred income. But when asked how the PGA Tour’s retirement plans compare to those in other sports, he said: “We’ve had many people describe these as the best retirement plans in sports.”
View more information: https://www.marketwatch.com/story/hundreds-of-pro-golfers-have-over-1-million-in-their-pga-tour-retirement-accounts-2019-04-24