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NHL Draft To-Do List
With the 2023 NHL Entry Draft less than a month away, potential draftees should consider three important “To-Do” items. These tasks may vary depending on the round in which you’re selected, and they are worth addressing sooner rather than later. As of May 1st, 2023, 21 out of the 32 players selected in the first round of the 2022 draft have already signed their entry-level contracts. These contracts typically include signing bonuses, which involve cash payments to the players. If you anticipate being drafted in the first round, here are a few things to consider in preparation:
To-Do #1: Ensure You Have the Appropriate Banking Arrangements
If you’re Canadian and selected by a Canadian team, having an existing bank account (such as with RBC, TD, etc.) makes the process easier. You’ll simply need to set up a USD currency account with your bank since NHL teams pay their players in US dollars.
However, if you’re Canadian but chosen by a US team, you’ll need to open a bank account in the US, which is different from a Canadian account denominated in USD. Many Canadian financial institutions offer cross-border banking options to facilitate this process. For instance, RBC has specific options for Canadians banking with them in both Canada and the US.
In summary, ensure you have the appropriate bank accounts open to receive your signing bonus.
To-Do #2: Understand Your Earnings
If you sign a contract and receive a signing bonus, there are a few important factors to keep in mind:
The bonus will be paid in US dollars. For example, if your contract states a $95,000 signing bonus, considering the current exchange rate of 1.36, you would receive approximately $129,200 CAD.
Remember that the signing bonus is considered income and is subject to taxes. The tax rate varies across provinces, ranging from approximately 25% to 35%. Be mindful of the tax implications before making significant purchases.
Taxes will be withheld from your paycheck upfront. The government prefers receiving tax payments immediately rather than waiting until the end of the year, assuming everyone will comply. As a result, a portion of your paycheck will be withheld upfront. However, the amount withheld is unlikely to precisely match your annual tax obligation. Your accountant will determine the accurate amount during tax time. For example, they may withhold 30% initially, but when you file your taxes, it could be determined that only 25% should have been withheld, resulting in a refund. Conversely, the opposite could also occur, so stay aware. You can find more details on withholding taxes here for further clarification.
Your bonus will likely be paid out in two installments throughout the year, although this may vary among teams. This aspect is crucial to consider for budgeting purposes since you won’t receive the full amount upfront.
To-Do #3: Consider the Importance of Saving
While it’s essential to enjoy life and celebrate signing your first contract, it’s equally important to understand the value of saving early in your career. Countless stories serve as cautionary tales, where athletes regret not making better financial decisions during their younger years, assuming the money would keep flowing indefinitely. Don’t become a headline of an athlete with nothing to show for their career once it’s over. I recommend reading my article titled “How Much Should an NHLer Save” to gain a deeper understanding. Please consider the idea of investing 20% of your earnings early and consistently; it’s a decision you won’t regret.
There you have it, an NHL Draft to-do list for potential draftees leading up to the upcoming entry draft.
Sources:
Cross-Border Banking for Canadians in the U.S. – RBC Bank
2022 NHL Draft first-round pick signings tracker
Comparing NHL Player Contracts (oilersnation.com)
U.S. Bank Accounts for Canadians – RBC Bank
Withholding Tax Explained: Types and How It’s Calculated (investopedia.com)
2022 Personal tax calculator | EY Canada (eytaxcalculators.com)
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