All That Glitters Isn't Gold for Some Olympian Parents
What do Olympic athletes Gabby Douglas, Ryan Lochte and Lolo Jones all have in common? Sure, London called and they all hopped the pond in search of Olympic glory, but it's their parents' financial misfortunes that connects the dots between these seemingly superhuman marvels.
American hurdling sensation Lori (aka "Lolo") Jones was once homeless and has said her family was raised on government cheese. Swimmer Lochte's recently divorced parents are facing foreclosure on their Florida home and, according to court filings, his mother is trying to dismiss a lawsuit from CitiMortgage seeking to recoup $250,000. And Natalie Hawkins, mom of gold medal gymnast Gabby Douglas, was forced to file bankruptcy in January 2012, after trying to raise four children on $30,000 a year.
The price of glory
It is expensive to be the parent of a world-class athlete, or even an elementary or high school level one, says Eido M. Walny, an attorney and accredited estate planner with Walny Legal Group whose clients include both professional and Olympic athletes. Natalie Hawkins publicly acknowledged the high cost of her daughter's training, which involved the gymnast living away from home for two years. And during the games, U.S. men's gymnast John Orozco said he went to London with dreams of earning a medal to help his parents offset the costs associated with his rigorous training.
"Outside of gear, which can be very expensive to purchase, a parent has to pay to register the athlete for events, travel with the athlete, buy special food and vitamins in mass quantities, hire coaches and trainers and so on. The list of expenses is seemingly endless," says Walny, who is also the father of a youth hockey player. For young athletes at the top of their game, such as Douglas, that list can top $100,000 a year or more, financial adviser Eric Flaim told U.S. News and World Report. Flaim should know: His skills as a speed skater took him to four Olympics and two silver medals.
Since a world-class athlete usually doesn't have spare time to flip burgers or bag groceries to help offset the costs, the financial burden of paying for the training and equipment falls on parents' shoulders. Often those shoulders find it tough to work, too. Walny says he's seen parents of athletes sacrifice careers, give up the chance to earn overtime or even get additional part-time jobs. "It's common for parents to lose their jobs or have to go part time because of their child's training or competition schedule," he says.
"Parents want to help their child realize their dreams, whether it's trying for the Olympics, a travel hockey team or to be a prima ballerina. And if you have an athletically gifted child, it's easy to feel like you need to do everything possible to ensure a child reaches their potential," says Beverly Harzog, a credit card expert and mother of a high school athlete.
So to fund the pursuit of a young athlete's dream, parents may forgo paying a bill or two to free up cash for extra face time with a coach -- or even go into debt to afford the best coach.
A golden parachute?
The silver lining to years of financial strife? A gold medal. However, medals and Olympic honorariums might not provide parents of premiere athletes any financial relief.
Making it to the podium earns U.S. athletes more than a shiny new necklace. The United States Olympic Committee (USOC) hands out bonuses to athletes who bring home Olympic hardware. They score $25,000 per gold medal, $15,000 per silver and $10,000 per bronze.
For the 2012 games, the USOC will award Lochte $90,000, Douglas $50,000 and mega-medaler swimmer Michael Phelps $130,000.
But oftentimes, even that bit of compensation comes too late. Douglas' mom filed for bankruptcy months before the games. Lochte's mother has very publicly stated she wouldn't accept financial help from her swimming sensation of a son. And even if she did, Lochte and other U.S. winners will be facing their own go 'round with the IRS.
Under the current U.S. tax law, Olympians have to pay income taxes on those USOC bonuses and the value of the precious metal in their medals, says Xavier Epps, a financial adviser and founder of XNE Financial Advising, a financial service company in Washington D.C.
"Currently, a gold medal is worth about $675; silver is worth about $385 and bronze is worth about $5," says Epps.
Normally, winnings would be taxed in the host country according to that country's tax laws, and the athletes could take a credit in the U.S. for taxes paid to the host country, says Wray Rives, owner of Rives CPA and president of the virtual accounting services company NeedaCFO.com. But Britain waived the tax that would be due to Her Majesty's Revenue and Customs (Britain's equivalent to the IRS) for the 2012 games so all the winnings accrued by U.S. winning athletes will only be taxed by Uncle Sam.
The amount of tax each athlete will have to cough up depends on their total income for 2012, says Rives. "Tax rates vary from 10 percent to 35 percent. If a gold medal and $25,000 prize money is all a U.S Olympian earned in 2012, they would owe about $1,900 in tax."Physical discipline transcends other areas Despite financial struggles, parents of Olympians and sporty kids often sacrifice financial security so their kid can pursue their passions. And now and then, that sacrifice pays off. It's been reported that America's newest sweetheart, Gabby Douglas, could score around $10 million in endorsement deals. Commercials featuring Ryan Lochte started airing minutes after he captured his first gold of the 2012 games.
And, according to a survey of 254 U.S. Olympic athletes released July 25, 2012, by TD Ameritrade (an official sponsor of Team USA), the physical and emotional discipline needed to succeed on an Olympic scale transcends to financial habits and attitudes.
The survey revealed that 65 percent of the U.S. athletes of the Olympic games say the discipline needed to get them to the games helps them to be more disciplined with managing their money.
When asked how they'd spend a financial windfall, 42 percent said they'd invest or save it, 32 percent would pay off debt from credit cards, student loans or debt related to training for the games, and 18 percent said they'd offer financial support to family and friends or charities.
The best news? Sixty-six percent of the athletes surveyed say they are financially secure and stable and don't have to rely on credit cards to cover expenses. And a majority stated that they have their athletic expenses under control.