What If The NBA Legend Who Blew Through $154 Million Had A Savings Plan?

May 17, 2015
Index Funds, Investing, Stocks, Current Events, Activities, Excel Activities

Time has a recent article claiming that NBA star Allen Iverson is broke (which he denies):

Poor Allen Iverson: the 11-time NBA All-Star, who earned over $154 million during his 15-season career, is reportedly in deep financial trouble.

I thought it would be fun to take a look at his salary (excluding his endorsement history) and have students run a few scenarios (using Excel) assuming that Allen put in a “pay yourself first” process and saved a certain percentage of his earnings, invested them in a “boring” S&P500 fund which could focus his mind on playing basketball.

First his salary history (from Basketball Reference):

Screen Shot 2015-05-17 at 8.06.21 PM

This becomes an excellent Excel skill builder to see if students can structure and solve for the question being asked:  What if Allen Iverson had a regular savings plan (saved a certain percentage of his salary each year) and placed his savings in an S&P500 fund?  How much would he have in that portfolio today?

The data elements in the spreadsheet (AllenIversonSavingsPlan) include:

  • Savings rate: Try 1%, 5% and 10%.  This is the only input required and the spreadsheet will do the rest.
  • S&P500 Returns for the period of his career:  I have embedded them in the spreadsheet (from NYU dataset)
  • Each year his account balance needs to be adjusted based first on Additional Savings (assume they occur at the end of the year) and the return of the S&P500 return for that year.  So, investment returns will only apply to starting balances in a given year.

Note the simplicity of this approach.  It basically requires two actions:  1) Direct a portion of your salary into an investment account  2) Use an S&P500 Index Fund as your investment vehicle.  Total time required to set-up:  probably less than an hour.

So, what if you had whispered this simple idea in his ear when he was an NBA Rookie, here is where he would be today:

  • if he saved only 1% of his salary = portfolio value at end of 2014:  $3.3 Million
  • If he saved 5% of his salary = portfolio value at end of 2014:  $16.5 Million
  • If he saved 10% of his salary = porfolio value ”   ”      ”    ”    :  $33.0 Million

That should not be too difficult now, should it, especially in the fat years when he was earning upwards of $20 million?

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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