Bobby Bonilla Hasn’t Played For Over 2 Decades. Why Do The Mets Still Pay Him? – Financial Freedom Countdown
On July 1st, Mets fans wish each other Happy Bobby Bonilla Day.
Why?
Because on July 1st, Bobby collects a check of $1.19 million every year from 2011 to 2035. And he has not played for the Mets since 1999.
Instead of receiving a one-time payment for $5.9 million, Bobby negotiated one of the best deferred payment deals in professional sports history.
This quirky financial arrangement has become legendary among baseball fans, but it also holds surprisingly valuable lessons for retirement planning, compound interest, and smart negotiating.
Bobby Bonilla Day Explained
Why does Bobby get the $1.2M paycheck each year? Let us dig into the Bobby Bonilla Contract.
In 2000, Bobby and the management realized that they were not a great match. The Mets wanted to substitute Bobby Bonilla. But they still owed him $5.9M on his contract. The Mets agreed to buy out the amount on his contract.
But the Mets also needed the money to bring a new player. So instead of paying Bobby the $5.9M in 2000, the Mets agreed to defer the payment to the future. They would make annual payments of nearly $1.2 million for 25 years starting July 1st, 2011, including a negotiated 8% interest.
Bernie Madoff and the Mets’ Gamble
Why would the Mets agree to such a deal?
At the time, the team’s ownership was heavily invested with financier Bernie Madoff and believed their investments would generate returns far exceeding the cost of the deferred payments.
Even with a low 10% return from Bernie Madoff, they expected to end up ahead.
Of course, that backfired spectacularly when Madoff’s Ponzi scheme collapsed in 2008, exposing massive losses across the board; including to the Mets.
The Power of Deferred Payments
In 2000, the Mets wanted to part ways with Bonilla, who was still owed $5.9 million. Rather than paying that amount upfront, they agreed to defer payment until 2011, with 8% annual interest. From 2011 through 2035, Bonilla will receive 25 years of annual payments—totaling nearly $30 million.
Deferred compensation, when structured properly, can provide reliable income well into retirement. For retirees worried about outliving their savings, this strategy mimics the function of an annuity; spreading payments out over decades.
Magic Of Compound Interest
That 8% interest turned a modest buyout into a windfall. The Mets assumed their investments; especially those tied to Bernie Madoff would yield even higher returns.
Instead, they lost big.
Bonilla, however, locked in guaranteed income that outpaced inflation.
Compound interest works both ways. When you’re the recipient, it builds wealth over time. When you’re the payer; especially without solid returns to back it up, it can become a financial drag.
Predictable Income Beats Volatility
By accepting annual payouts rather than a lump sum, Bonilla insulated himself from market downturns, bad investments, and even personal spending missteps.
His income is predictable and guaranteed.
Many seniors can benefit from consistent income streams, whether from pensions, Social Security, or structured retirement drawdowns.
Predictability reduces stress and the temptation to gamble on risky investments late in life.
Have A Trusted and Knowledgeable Advisor
The fantastic deal was put together by Bonilla’s agent, Dennis Gilbert.
He was an insurance agent at the time, so he was more uniquely prepared to understand deferred compensation type payouts than other agents.
Besides Bobby Bonilla, Gilbert also represented Barry Bonds, Ricky Henderson, Mike Piazza, George Brett, and Jose Canseco.
Financial details are complex and messy. All of us have a day job. Make sure you have someone on your team who understands the nuances. This is the reason to seek professional advice from licensed professionals and preferably get a second or even third opinion before investing your hard earned money.
Negotiation Matters More Than the Headline
Most fans remember Bonilla for his deferred contract, not for the final years of his baseball performance. The lasting legacy wasn’t built on home runs; but on smart financial negotiation.
One good financial decision can have more impact than years of hard work. Whether you’re negotiating a severance, a pension payout, or a business sale; how the deal is structured can define your financial future.
Opt for Annual Payments Instead of a Lumpsum
Taxes are calculated on annual income; If you make $1 Million in a year, then you will lose almost half of it to taxes. The IRS doesn’t care if you earn no money for the rest of your life.
One of the best tax strategies is to spread any income over several years.
Instead of the $1 million, you would hardly pay any taxes if you opt for a $50,000 annual payment over 20 years.
Also, it helps you in setting a default budget for a year instead of receiving a lump sum, spending it on a boat, and then living broke for the rest of your life.
Although we may not be baseball players, most employers have some form of the deferred compensation plan. The concept is similar to the Bobby Bonilla Day plan.
A considerable risk in deferred compensation plan deals is that the organization paying you should be solvent.
Run the numbers but also be mindful of bankruptcy risks. After all, large corporations like Enron and Lehman suffered a worse fate.
Tax Planning Flexibility
Playing for the Mets, Bobby Bonilla lived in New York. From a taxation standpoint, New York is not great because they have city taxes and state and local taxes.
If Bobby would have collected the $5.9M in 2000, he would also be paying New York state and city taxes. But by deferring the payment to the future, he got tax flexibility.
He is receiving the annual payments now living in Florida, a state with no income tax.
Of course, some states now will try to recoup taxes on money you made while living in the state even if you get paid after you have moved out. It is imperative to work with a tax advisor to legally defer paying taxes to a future date.
Cut Your Losses
A huge reason for the deal is that the Mets were paying Bobby but could not utilize his skills with the current team structure. The Mets decided to cut their losses and get their front-line starter. With the savings created by the deal, the Mets could trade for Houston Astros ace Mike Hampton.
The deal worked beautifully for the Mets. It was one of the franchise’s savviest and most successful transactions. It paid instant dividends, triggering moves that led to a World Series appearance in 2000. After Hampton left for the Colorado Rockies, the Mets could pick team legend David Wright.
Often we land up with losers in our portfolios. Sometimes when our investment thesis is no longer valid, it might be better to cut our losses and move to other winning strategies. Note that this is not the same as panicking every time the stock market falls and selling stocks.
Cutting losses is more applicable in individual one-time investments.
Investment Returns Are Not Guaranteed
Another reason the Mets jumped on the deal because the Wilpons assumed that they could invest the $5.9 million with Bernie Madoff. In 2000 Madoff promised a conservative 10% annual return. If they could earn 10% and pay Bobby 8% in the future, they would still come out ahead.
Of course, the Madoff returns weren’t realistic.
The applicable financial lesson is when anyone offers a guaranteed return, run!
Based on historical data, we know the average returns of each asset class. Nothing is safe and guaranteed besides the Treasury bonds. Or FDIC insured accounts as long as you stay within the FDIC limits
Life Is Unfair. Make Lemonade Out of Lemons
The biggest financial lesson which everyone overlooks is how Bobby Bonilla got to the MLB.
Bonilla grew up in NYPD’s 40th Precinct, notorious for its crime. He played sports for several hours a day and taught himself to switch-hit by pretending to be the Yankees’ Chris Chambliss from the left and the Mets’ Tommie Agee from the right side.
That’s how he got out of his neighborhood.
Here is Bobby talking about his experiences “I mean, people talk about the pressure of playing in the big leagues, but where’s the pressure compared to growing up in a ghetto and looking for ways to get out? I’m talkin’ about houses burning and people starving, and I’m supposed to be tremblin’ playing the first-place Mets or [the] Dodgers? I’m having the most fun I’ve ever had. Sports has always been my release. I’d turn on the news as a kid and couldn’t wait for [sportscaster] Warner Wolf.”
All of us will have some unfortunate situation holding us back. Instead of complaining about it, figure out a way to use it to overcome. I am sure Bobby must have overcome worse adversity by continuing to focus on improving his skills.
Did Bobby Bonilla Get A Great Deal, Or Did The Mets?
Now for the $30M question, based on what we know, who got the better deal? Did Bobby Bonilla or the Mets reach the better part of the deal?
The deal seems like a perfect win-win on both sides.
On the surface, the $30M he would receive over a period of time seems like an massive amount compared to the $5.9M he was supposed to receive in 2000. But that is the beauty of compound interest. Applying compound interest can increase our net worth exponentially as well.
The Mets needed to cut their losses and get another player to help them win the World Series. The Bobby Bonilla Day deal enabled them.
Did Bobby Bonilla get more money in the long run with the deferred compensation payment compared to just receiving a lump sum of $5.9 million in 2000? Not really.
The Moody’s Seasoned AAA Corporate Bond Yield is at 7.55%, which is close enough to the 8% Bobby Bonilla receives.
Of course, relying on the Mets still being profitable enough to continue to pay is the risk Bobby took, which can be accounted for by the additional half percentage over corporate bonds.
Lottery winners also have an option to opt for periodic payments instead of lumpsum. There are tiny but not zero risks of payment defaults.
Astute readers may ask if it was wiser for Bobby Bonilla to take the $5.9 million lumpsum in 2000 and invest in the stock market. After all, the stock market has had fantastic returns since 2000. But that would not be the correct comparison. Stocks are classified as medium to high for risk, return, volatility, and liquidity.
The Takeaway for Everyday Retirees
Bobby Bonilla’s deal shows how time, interest, and patience can turn a modest sum into a multi-decade financial cushion. Most Americans won’t sign a baseball contract, but they can still:
– Invest in yourself and grow your skills
– Defer certain payments for guaranteed growth
– Consider fixed guaranteed income to reduce uncertainty
– Avoid large lump-sum withdrawals that create tax burdens
– Negotiate severance or buyouts with long-term planning in mind
– Work with licensed professionals and get expert advice before making any major moves
Whether you’re approaching retirement or already in it, think beyond today’s bills. Build a strategy that pays you back; year after year. You don’t need to be a ballplayer to get paid long after you leave the field.
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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Personal Capital: This is a free tool John uses to track his net worth on a regular basis and as a retirement planner. It also alerts him wrt hidden fees and has a budget tracker included.
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