Golf's Generous Pension Plan

[kepiblanc]

Question: How much will Tiger Woods' 2001 $9.1 million earnings translate to under his retirement plan when he's 60 years old?



(You can find the answer at the end of the article.)



When Tiger Woods descended upon the Professional Golf Association (PGA) tour, it sent shock waves throughout the traditional circuit. After all, the perception that golf was a private boys club for the rich and elite was not exactly false. Yet surprisingly, when it comes to the actual professionals on the circuit, "just a few years ago, a player could come out and play his entire career, his life, and still struggle financially," according to PGA Tour commissioner Tim Finchem. In 1983, the PGA decided to get serious about protecting its athletes once their careers came to an end.

two kinds of green

"There is no reason why world-class athletes in our sport shouldn't be compensated in the range of world-class athletes in other sports. [Our] retirement plan helps us move in that direction," continues Finchem. The only problem is that the current pension plan has skyrocketed golf past all other sports and given it "by far the best pension plan in sports," according to Dave Lightner of McCormack Advisors International, a branch of IMG. The problem is that, according to Lightner, the assumptions are "ridiculously overaggressive." As you can imagine, golfers fail to see the forest through the trees.

While Woods was originally seen as a precursor to getting more African-American and lower income children interested in the game of the golf, his tremendous success on and off the green has ironically widened the gap between rich and poor. Surely no one can blame Tiger for this. He is a class act who deserves everything he gets, but at this rate, he is on pace to being worth at least $5 billion when he retires, this according to his trusted advisor and father, Earl Woods. The $5 billion may even be an underestimation, given his endorsement deals that are pegged at over $50 million a year, his PGA earnings, appearance fees, as well as his pension.

can i please retire?

Ah yes, his pension. Golf's generous pension has set Woods on track to having a deferred compensation package ranging between $200 to $300 million. Not too shabby. And what is more shocking is that Woods will not be alone to reap the benefits. Justin Leonard is looking at a pension ranging from $60 to $100 million.

If you're wondering how this is possible, keep in mind that golf's pension plan works in three main ways:

The first one rewards players for making the cut;
The second one is based on how much players earn during three separate segments of the season;
The third one deals with overall earnings for the year.



As you can imagine, this is favorable, as one method or another is bound to offer a considerable upside for players. If you were to play devil's advocate, you would point out that at a time when corporate employees are seeing their pensions evaporate, average golfers stand to walk away with millions. But hey, they are athletes so this is nothing new. If you are unhappy, hit the greens and practice your putt.

what about other athletes?

The problem is that when you compare golfers to other athletes, there is a growing disparity. According to Golfweek, a 26-year-old golfer can begin his career in 2001 and play for 17 seasons, eventually stockpiling $43 million by finishing 75th on the money list and never even winning a tournament.

Will all of this materialize? Probably. But many say that the assumptions in the financial model are flawed, or at least unrealistic. Under one plan, the pension assumes that a player will make 12 cuts a year between the ages of 45 and 49, which is unlikely in some cases.

The plan is the brainchild of former PGA Tour Commissioner Deane Berman and is orchestrated by Victor Ganzi, a former tax attorney and member of the PGA policy board. Perhaps Mr. Berman and Mr. Ganzi should have read up on another ill-planned form of compensation: the stock options that saw many employees in corporate America overspend and save too little in the late 1990s.

Golfers are probably not the best financial planners, and telling them that they stand to hit the jackpot with tens of millions of dollars in deferred pensions will only make them spend more, not save enough, and ultimately find themselves in a precarious financial position once retirement hits.



Question: How much will Tiger Woods' 2001 $9.1 million earnings translate to under his retirement plan when he's 60 years old?
Answer: An added $13 million.

so why I leaves the golf?

[kepiblanc]

nice pension plan!!!!

[MACTANK]

First off, Tiger's 9 mil earnings includes endorsements, which is outside (even though because of) Golf.

Second: Where in the hell does the PGA think they are going to get the money to support this pension?