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Monday, June 28, 2010
Being Rasheed Wallace: Would you Walk Away from $12 Million Guaranteed?

In the wake of the Lakers defeating the Celtics in the NBA finals, Celtics center/power forward Rasheed Wallace surprisingly retired. Though he played in 79 of the 82 regular season games and all of the Celtics' playoff games, the 35-year-old Wallace has battled an assortment of injuries in recent years, including foot and ankle problems.

So he decided to call it a career.

In doing so, Wallace will walk away from more than $12 million in guaranteed salary over the next two years [note: there is a possibility, though not a certainty, that the Celtics will give Wallace a portion of the salary in a buyout]. With his playing career over, it seems unlikely he'll ever come to close to earning that kind of salary doing anything else.

Why would somebody walk away from so much money when there's probably no source of income that will ever come close to being a substitute? Hasn't Wallace seen the startling research by Sports Illustrated's Pablo Torre showing that "Within five years of retirement, an estimated 60% of former NBA players are broke"?

To be sure, Wallace could have bucked saving/spending trends of not only pro athletes but Americans in general. As has been reported for many years, we are really, really bad at saving money, but maybe Wallace proved to be an exception. It's also certainly possible that Wallace's agent, Bill Strickland (who's about to lose his 3 or 4% commission on the $12 million), and financial advisers gave him good advice during the 14 years he played and, according to Basketball Reference, earned $150 million in NBA salary.

Still, I find it surprising, and on some level admirable, that someone would walk away from such a huge amount of guaranteed salary. That's especially the case when you think about how easy it would have been for Wallace to get the money. He could have simply gone through the motions for a couple of years or lingered on the injured reserve while collecting paychecks that exceed what most earn in a year (NBA players are paid twice a month and only during the season).

Not sure how many people in Wallace's position would do the same thing, but I can't imagine it's a high percentage. I guess this shows that it's not always about the money.

Update: as Brian mentions in the comment section, former big league reliever Keith Foulke did a similar thing a few years ago, but it didn't work out so well, at least not money-wise. In January 2007, a then 34-year-old Foulke passed a physical with the Cleveland Indians and signed a guaranteed 1-year, $5 million contract with the team. A few weeks later, however, he decided to retire because of recurring elbow problems, thereby walking away from the $5 million. He would never pitch for the Indians. But a year later, Foulke changed his mind, unretired, and signed a 1-year, $700,000 contract with the Oakland A's. That was his last big league contract. Hopefully Wallace isn't making the same mistake here.


Because he's crazy.

Anonymous Anonymous -- 6/28/2010 1:44 PM  

Keith Foulke did something similair a few years ago with the Cleveland Indians. He retired a few days after guarenteed money kicked in and gave it back.

Blogger Brian -- 6/28/2010 2:28 PM  

Professor McCann,

I'd have to think that if Sheed would go broke after racking up $150 million, he'd probably face the same fate if his total were instead $162 million. I doubt that increasing his total salary earned by less than 10% would make the difference between financial ruin and lifelong stability.

That being said, $12 million is obviously a huge sum of money that the average non-professional athlete probably can't imagine walking away from, and you make a good point. I hope that Sheed has saved wisely!

Anonymous Leah -- 6/28/2010 2:36 PM  

Brian, great point about Keith Foulke. I looked it up: he walked away from a $5 million with the Indians in 2007 by retiring. A year later, however, he apparently changed his mind and unretired and signed with the A's for $700,000. So he lost about $4.7 million in that process.

Leah, that's also a great point -- if Wallace didn't save his money to date, it is unlikely he would do so going forward (unless the recognition that his career was coming to a close changes his spending/saving habits).

Blogger Michael McCann -- 6/28/2010 3:27 PM  

Foulke was crazy too.

Anonymous Anonymous -- 6/28/2010 3:59 PM  

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