MLB: Happy Bobby Bonilla Day!

[CloneFanInKC]

I didn’t read the whole thread so maybe this was already mentioned but Bonilla got an 8% return on this deal. If he had instead just taken the lump sum on day 1 and put it in the s&p 500, he would have a lot more money today. Obviously 8% risk-free is a good deal, but that’s also what corporate bonds were yielding at that time.

The real benefit for Bonilla is he eliminated the risk that he would end up like so many other athletes that wasted their millions. But if he would have gotten with a good financial advisor at that time instead, he’d be wealthier today.

No. The original payout on the remaining contract was about $5.9M based on what I read this AM. Almost $1.2 a year over the term of this negotiation is way better for BB. At the time the Mets where involved with Bernie MaDoff(sp).

@CYdTracked post nails the details.

 

[CYdTracked]

No. The original payout on the remaining contract was about $5.9M based on what I read this AM. Almost $1.2 a year over the term of this negotiation is way better for BB. At the time the Mets where involved with Bernie MaDoff(sp).

@CYdTracked post nails the details.

And just how many athletes with an ego like BB had would have actually taken the lump sum payout and actually invested a good portion of it in a long-term investment and not just blown it like so many do. Even at his age now if he was taking that yearly payment and investing it now he still came out way ahead on this thing over the years.

 

[CtownCyclone]

I’m not trying to be that guy but if you understand the time value of money the Mets didn’t get “fleeced”

Show your work then.

 

[MountainManHawk]

No. The original payout on the remaining contract was about $5.9M based on what I read this AM. Almost $1.2 a year over the term of this negotiation is way better for BB. At the time the Mets where involved with Bernie MaDoff(sp).

@CYdTracked post nails the details.

You need to look at the details. The first payment wasn’t made until 11 years after the contract was signed. Do me a favor and ask your favorite AI chatbot if he would have more cash today if he had invested the lump sum in the S&P 500 at the time of the contract signing instead of the deal the Mets gave him. I’ll bet you a nickel I know the answer.

 

[CloneFanInKC]

You need to look at the details. The first payment wasn’t made until 11 years after the contract was signed. Do me a favor and ask your favorite AI chatbot if he would have more cash today if he had invested the lump sum in the S&P 500 at the time of the contract signing instead of the deal the Mets gave him. I’ll bet you a nickel I know the answer.

Nope. IDGAF and that’s an assumption that he would’ve invested it.

Simple math; $5.9<$1.19x#years+8%.

 

[MountainManHawk]

Nope. IDGAF and that’s an assumption that he would’ve invested it.

Simple math; $5.9<$1.19x#years+8%.

The piece you are missing is that the $1m payments didn’t start until 11 years later. That’s a really important piece that you are missing and it’s how the 8% figure is derived.

Like you said, it’s simple math but it requires understanding time value of money and compounding as opposed to simple interest.

Any deferred annuity calculator will help you.

Here’s a link if you want to see for yourself.

Just enter that the first payment is deferred for 11 years, the rate of return is 8%, the lump sum is $5.9m, and so on.

Or just google it yourself or ask an AI chatbot.

I promise I’m not lying to you.

Deferred Annuity Calculator

Use the deferred annuity calculator to find out how much money you can withdraw from your annuity or how long your annuity will last.

www.omnicalculator.com

 

[psycln11]

Seems like this thread gets resurrected once a year!!

 

[MountainManHawk]

Show your work then.

Have you ever heard of the Rule of 72?

It has to do with how quickly an amount of money can double at different rates of return.

Historically stocks have gone up around 10% per year (with obviously some large variations depending on the time period).

At that level of growth, your nest egg doubles about every 7 years.

Bonilla didn’t get a dime until 11 years after he signed this deal. At an 8% rate of return, by 2011 his initial $5.9m would have been close to $14m. That’s how the annual payments of $1m start to be possible.

But 8% returns in financial markets are a lot closer to “ordinary” than extraordinary.

There are tons of free financial calculators on the web if you want to play around with them and for instance see what a $10k investment can grow to over time. For instance $10k invested 25 years ago would be almost $100k today, and so on.