Thursday, March 22, 2001
For Woods and others, the real
payoff is when they're done
ORLANDO, Fla. (AP) — The $9.1 million
Tiger Woods earned last year on the PGA Tour in his record-setting
season could turn into an additional payoff of nearly $13 million
when he turns 60 under the PGA Tour's retirement plan.
In a comprehensive study of the PGA Tour's
pension plan, Golfweek Magazine also projected Woods' total deferred
compensation package from the tour at about $200 million, and
as much as $300 million if he were to become fully vested.
That's not counting investments from Woods'
earnings outside the PGA Tour, money from worldwide tournaments,
appearance fees and the $54 million a year from contract endorsements.
His father and financial overseer said Woods'
net worth could eventually exceed $5 billion.
“If things continue and he remains
healthy, there's no limit,” Earl Woods told Golfweek, adding
that $5 billion “might be on the short side.”
Woods isn't the only player to benefit from
the PGA Tour's performance-based pension plan.
According to tour projections obtained by
Golfweek, a 26-year-old player who begins his career in 2001 and
plays 17 seasons could stockpile an account of nearly $43 million,
just by averaging 75th on the money list. He could reach that
amount without ever winning.
For better players, the future gets even
brighter.
The deferred compensation plan features
three programs. One rewards players for making the cut, another
program contributes money based on how much players earn during
three separate segments of the season, and a third deals with
overall earnings for the year.
Tour officials said they expect to add $27
million to the retirement plan, which has quietly grown to more
than $200 million in total assets since its inception in 1983.
“A few years ago, a player could come
out and play his entire career, his life, and still struggle financially,”
PGA Tour commissioner Tim Finchem said. “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. The retirement
plan helps us move in that direction.”
Some financial analysts, however, caution
that tour projections are unrealistic. For example, some projections
include players making at least 12 cuts a year between the ages
of 45 and 49, which few players have done.
Projections also assume a 5 percent annual
increase in plan funding by the tour, an 8 percent average annual
interest return on a player's account, and the plan is based on
benefits that are not paid out until 60, which skew the numbers.
“It's by far the best pension plan
in sports, but the assumptions used in the projects are ridiculously
overaggressive,” said Dave Lightner of McCormack Advisors
International, a branch of IMG.
Cuts are the lifeblood of the original retirement
plan, launched by former commissioner Deane Beman in 1983 and
crafted by Victor Ganzi, a former tax attorney and longtime member
of the PGA Tour policy board.
Last year, each cut made was worth $3,253
to a player's plan, and the value doubled to $6,506 after 15 cuts.
The arrangement favors a young, successful player such as Justin
Leonard, who made an average of 23.8 cuts from 1995 to 2000.
“I've seen the projections of what
I'll do, and it's impressive,” said Leonard, who estimated
his overall tour retirement package between $60 million and $100
million, counting his segment bonuses and yearly earnings.
The incentive plan, based on earnings over
three segments each year, was designed to encourage players to
enter more tournaments. Woods likely never will be fully vested
because he only plays about 20 tournaments a year. He is projected
to become vested at 62.5 percent, which would make his payout
about $200 million, the magazine said.
“We know Tiger has big numbers and
the tour does a fantastic job with the pension plan,” said
Mark Steinberg, Woods' agent at IMG. “But Tiger will not
play events with the pension plan in mind. He will continue to
do what he's doing — that's building a schedule with being
the best golfer ever.”
Woods also will be the richest, even after
he stops playing.
“His great, great, great grandchildren
will be juiced up over this,” Brandel Chamblee said. “They'll
all be lobbying to get rid of the inheritance tax.”
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