Bobby Bonilla, King of Annuity Holders – InsuranceNewsNet


Every July 1, for 25 years (2011-2035), the New York Mets pay Bobby Bonilla $1,193,248.20 – and for that reason, I’m a Bonilla fan.

I was never a fan of Bobby Bonilla the baseball player. First of all, he was a puncher. I preferred guys like Rod Carew, Pete Rose and Felix Millan, contact hitters who could cushion and hit behind the runner, play solid defense and be a good clubhouse presence.

But I’m definitely a fan of Bobby Bonilla, the financial wizard who chose an income annuity over a cash payment.

From 1986 to 2001, he earned his living as an outfielder. Six times he was all-star. From 1992 to 1994, he was the highest paid player in the league. He became the highest paid player in all team sports when he signed with the New York Mets. It was a five-year, $29 million deal signed in December 1991.

The Mets traded Bonilla in July 1995 but welcomed him in 1999.

In 1999, he only played 60 games and only hit 0.160, an insufficient number for someone earning a lot of money. The Mets released Bonilla after their 1999 playoff loss to the Braves. During this loss, Bonilla was reportedly in the clubhouse playing cards.

But the Mets still owed Bonilla $5.9 million for the 2000 season, as per his guaranteed contract. The Mets could have paid Bonilla the $5.9 million and wished him goodbye. Or, Bonilla could have insisted on payment and claimed the money.

Instead, the Mets and Bonilla offered a most unusual method of payment – a variation of income annuity.

The Mets would set aside the money, intended for Bonilla, but he would not receive a penny of it until July 1, 2011, when Bonilla would turn 48 and annual payments would begin. From 2000 until the end of the payment period – July 1, 2035 – the Mets guaranteed Bonilla 8% annual interest on the money.

Through the magic of compound interest, the interest rate itself, and the passage of time, by the time Bonilla receives the final payment – in 2035 at age 72 – the $5.9 million he has not insisted on grabbing will be increased to $29.8 million. .

A lot of people would have taken the $5.9 million and started spending left and right. Whether it’s a sports contract or winning the lottery, people tend to take the money and run away. And a few years later, they often scramble to get by.

Many lottery winners waste their money in a year and end up with nothing. Many artists and athletes make a lot of money, but spend it just as heavily. Those whose careers are cut short – the singer whose songs are no longer hits, the athlete who gets injured – end up broke.

Why did the Mets accept such an agreement? Principal Owner, President and CEO Fred Wilpon and his COO and son (and my former classmate) Jeff Wilpon thought they could make at least 10% a year by investing the money on their own . The idea of ​​paying Bonilla in deferred annual installments therefore seemed logical to them.

The Wilpons invested the money in a fund that “guaranteed” a double-digit return, so paying Bonilla 8% interest would still leave them with a nice profit. Over the term of the deal, which covered 35 years (10 years of waiting from Bonilla then 25 years of payments), and with (minimum) 10% interest expected, Mets owners would have benefited – even after paying in Bonilla its annual increases – of about 48 million dollars. So they handed over the money to their investment guru friend, a guy named Bernie Madoff. This money is gone.

Bonilla once offered these words of wisdom in an interview: “I would love to see more guys find the right financial advisor and put some money aside. A lot of guys have money thrown their way and they don’t don’t know how to handle it.. They lose their money or have their money taken away. There are a lot of horror stories, from athletes to movie stars to musical artists. They have people taking advantage of it. I was lucky to have Dennis, with people who really looked out for me. I would love to see more guys put him away, have that safety net.

Bonilla’s agent at the time was a guy named Dennis Gilbert, who once said that what matters most “isn’t how much you earn or how much you have, it’s how much you keep”. The goal is to be fixed for life.

More words of wisdom.

Bobby Bonilla hit a lot of home runs, which I don’t care about.

But he made a wise and disciplined financial decision when he could have taken the money and run away.

For that, I will always respect the man.


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