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UnderGround Forums >> How I Look at Rampage's $15.2 Million From UFC


1/25/13 7:48 PM
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JasonRothman
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“Your main liability is providing for yourself after you retire. That’s your primary liability, and that is an enormous liability. And very few people make adequate provision for it.”
-Ben Stein

There was an interesting tidbit in Ariel Helwani’s pre-fight interview with Dana White yesterday. According to White, from 2007 to 2012 Quinton “Rampage” Jackson made a total of $15.2 million in the UFC. I do not know if this includes sponsorship money or other income sources, but according to White, Rampage made $15.2 million in the UFC from 2007 to 2012.

Let’s break this number down from an investing perspective. For the sake of this exercise, let’s just assume Jackson got paid an average of the total $15.2 million each year. And let’s also assume the “a third, a third, a third” rule, which states that if you can save a third of your income after paying a third to taxes and another third for living expenses, you will be ahead of the game in the long run.

2007 to 2012 is a total of six years. $15.2 million divided over six years is an income of $2,533,333 for each of those six years. One third of $2,533,333 is $844,444. So assume for each of those six years Jackson paid $844,444 in taxes and $844,444 on living expenses and discretionary spending (everything from movies to cars to vacations). That leaves him with the last third of his annual income to save and invest. If in each of the six years Jackson saved the last third of his annual income, which was $844,444, he would now have a lump sum of $5,066,666. Jackson turns 35 in June, so let’s look at what would happen to this lump sum of $5,066,666 if he was to invest it.

For nearly two centuries, stocks have generated an average return of 7% in real, inflation adjusted dollars. Bonds have generated average real returns of 3.5%. Remember, we are talking about inflation-adjusted real returns. We are talking about purchasing power, not nominal value. If Jackson invested his $5.06 million by allocating 70% in stocks and 30% in bonds, his money would generate an average real return of 5.95% of the long term. Let’s look at what would happen if Jackson retired at age 35 with his money invested.

If Jackson wanted to take out $250,000 each year to live on, and keep the rest of his money invested in stocks and bonds, his money would grow to $9,099,892 in real purchasing power when he was 65 years old. If he continued to take out $250,000 a year to live on, by the time he reached 80 years old, his money would have grown to $15,857,746 in real purchasing power. Jackson could do nothing for the rest of his life, live on a quarter million dollars a year, and end up with $9 million when he is 65 years old and almost $15.8 million when he is 80 years old.

An annual income of $250,000 will put you in the top 1.5% of household incomes in America. If Jackson saved a third of his income for the last six years and invested 70% of it in stocks and 30% of it in bonds, then he could never work another day in his life, earn more income than 98.5% of American households each year, and still end up with $9 million dollars in the bank when he was 65 years old.

According to Dana White, Quinton Jackson earned $15.2 million dollars from the UFC over the last six years. If he had saved a third of that money, he could invest it for the next 30 years, earn an annual income without having to work that puts him in the top 1.5% of households, and end up with $9 million at the standard retirement age of 65. This exercise shows the importance and power of saving money and investing it over a lifetime. What Ben Stein says it true; the young you’s job is to provide for the old you.

-Jason Rothman
1/25/13 7:53 PM
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Family Jules
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If only Jackson included a jew in his entourage, he would have gone down this route.
1/25/13 7:56 PM
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Family Jules
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BTW, you're hypothetical portfolio would need to include a portion invested in real-estate to fully diversify.

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