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MLB Player Retired For Over 17 Years Gets Annual $1.19M From Mets

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Happy Bobby Bonilla Day, America!

On July 1, a day when our neighbors to the north celebrate their national day with poutine and maple syrup and when most of America gets a watch-what-you-wish-for moment with the blazing summer heat, Mets fans get to commemorate the most pants-on-head stupid contract in baseball history.

And Bonilla gets to go to the bank, as he will every July 1 through 2035, and cash a check for $1,193,248.20.

The check is a result of a deferred-compensation deal signed in 2000 that took a $5.9 million contract buyout the Mets owed the slugger and stretched it out over 25 years starting in 2011 at 8 percent interest. Using some feats of financial derring-do that the accountants call discounting to present value, that meant a future value of $29.8 million; it’s the same principle behind how lump-sum lottery jackpots work.

As it turned out, interest rates plummeted and still hover right around zero even today, so not only is Bonilla getting a chunk of change every year, he’s getting a better return relative to risk than anyone short of Bernie Madoff could’ve offered him (the same Bernie Madoff who was “giving” the Mets and owner Fred Wilpon 12 to 15 percent in completely made-up fictitious returns from the Ponzi racket that collapsed around the time the Great Recession was getting up and running).

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In theory, Bonilla’s buyout was a win for the Mets. The team would keep the money invested at 12 percent then pay it out at 8 percent.

Imagine having an investment account with a better interest rate than your home mortgage and you begin to see the genius in this. But look at it with an ounce of common sense — if someone is offering a rate of return greater than the stock market during boom times, that person is without exception running a con, as anyone who spends five minutes in a collegiate-level finance course can quickly figure out — and the whole thing falls apart.

Meanwhile, as ESPN’s Darren Rovell pointed out, Bonilla makes out like a bandit on multiple levels.

For one thing, he turned $5.9 million into $29.8 million and got his retirement guaranteed — unlike the countless other athletes who end up broke after their careers are over with no way to earn the levels of income they made during their sporting days, ending up in poverty or, at best, getting courtesy jobs for low wages on their name alone.

Would you take a 35-year deferred payout over money up front?

For another, when Bonilla played for the Mets, he had to pay New York state income tax on his earnings, which at baseball salary levels run up to 8.82 percent plus a 3.85 percent city tax for the Big Apple, where the Mets play.

Bonilla moved to Florida after he retired, and the Sunshine State has no state income tax.

Plus, where is anyone going to get an 8 percent return over 25 years?

On July 1, 1993, the Dow Jones Industrial Average closed at 3,510.54.

On June 30, 2018, the Dow closed at 24,271.41.

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That’s a return of 8 percent (almost exactly, compounded annually), but you’d have had to survive two major recessions, and it’s only because the stock market has been booming lately that the 25-year return is that good. During the next recession, you’re back down to the Dow’s historical (since 1926) average return of closer to 6 percent.

Bonilla gets his 8 percent risk-free. And, if he’s so inclined, he can also invest it. Even if he just sticks it into a high-yield dividend fund giving him 5 percent, that beats the market as his total return rises to 8.4 percent overall.

Bonilla ought to send a Christmas card to Madoff every year, because unlike jailbird Bernie — but thanks to his machinations and Rasputin-like influence on the Wilpon family and the Mets — Bonilla just made off with one of the greatest heists of all time.

Happy Bobby Bonilla Day, and may we all someday find someone dumb enough that we can snooker them for millions.

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Boston born and raised, Fox has been writing about sports since 2011. He covered ESPN Friday Night Fights shows for The Boxing Tribune before shifting focus and launching Pace and Space, the home of "Smart NBA Talk for Smart NBA Fans", in 2015. He can often be found advocating for various NBA teams to pack up and move to his adopted hometown of Seattle.
Boston born and raised, Fox has been writing about sports since 2011. He covered ESPN Friday Night Fights shows for The Boxing Tribune before shifting focus and launching Pace and Space, the home of "Smart NBA Talk for Smart NBA Fans", in 2015. He can often be found advocating for various NBA teams to pack up and move to his adopted hometown of Seattle.
Birthplace
Boston, Massachusetts
Education
Bachelor of Science in Accounting from University of Nevada-Reno
Location
Seattle, Washington
Languages Spoken
English
Topics of Expertise
Sports




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