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<ul class="summary-list"><li>Every July 1 the <keyword id="11984587" type="UNKNOWN" weightage="60" keywordseo="new-york-mets" source="Orion">New York Mets</keyword> must pay Bobby Bonilla $1.2 million they still owe him.</li><li>The date has jokingly become known as "<keyword id="14343003" type="UNKNOWN" weightage="60" keywordseo="bobby-bonilla-day" source="Orion">Bobby Bonilla Day</keyword>" since he hasn't played since 2001.</li></ul><p>Happy Bobby Bonilla Day! </p><p>Bobby Bonilla is 59 years old and hasn't played major league baseball since 2001. But the Mets will pay Bonilla $1.2 million today in the latest installment of what many consider one of the worst deals in <keyword id="11893855" type="UNKNOWN" weightage="100" keywordseo="sports" source="Orion">sports</keyword> history.</p><p>The deal is so infamous that July 1 is now known in the sports world as "Bobby Bonilla Day."</p><p>Following the 1999 season, the Mets wanted to buy out the final year of Bonilla's contract. But instead of paying him the $5.9 million he was owed, the two sides <a href="https://affiliate.insider.com?u=https%3A%2F%2Fwww.wsj.com%2Farticles%2FSB10001424052748703426004575339013108198050">agreed to a deferred compensation deal with the Mets paying Bonilla 25 annual payments of $1.2 million starting on July 1, 2011</a>.</p><p>On the surface, the payments look laughable for the Mets as they will total $29.8 million. However, it is not nearly that simple, and the deal was actually a good one for the Mets.</p><p>Or at least it could have been.</p><p>If Bonilla had accepted the $5.9 million in 2000 and invested the entire amount at 8% interest, the original investment would have grown to $104.1 million by 2035* (blue line in the chart below). However, if Bonilla took his annual payment and invested it with an 8% return, he would have $95.2 million by 2035 (orange line in the chart below).</p><p>In other words, Bonilla lost nearly $10 million in potential earnings by taking the payments instead of the lump sum. Anybody who plays the lottery knows the best deal is the lump-sum payment.</p><p>But more importantly for the Mets, if they invested the $5.9 million at 8% interest in 2000, that money would have grown to more than $14 million before they had to make a single payment to Bonilla. That money would continue to draw interest even while they are making payments.</p><p>By 2035, the Mets would still have $8.9 million left over (red line in the chart below).</p><p>Of course, this assumes that both sides would have invested the money wisely and, considering <a href="https://espn.go.com/blog/new-york/mets/post/_/id/97275/wilpons-madoff-settlement-down-to-75-1m">the Mets' history</a>, that is certainly questionable. And as others have noted, the money saved in 1999 <a href="https://ftw.usatoday.com/2015/07/new-york-mets-bobby-bonilla-contract-2035-deal">likely helped the Mets win the National League in 2000</a>. </p><p>But the deal itself was smart, and if the money were invested wisely, the Mets would have profited from Bonilla's generosity, and the contract wasn't so dumb after all.</p><div type="image" title="Bobby Bonilla Day Contraxct" height="600" width="800" msid="92602831" hostid="261" sizebytes="26124"></div><p>* <em>These amounts do not consider taxes that would have to be paid.</em></p><p><em>This story was originally published in 2013 and has been updated. </em></p>

The Mets have to pay a player who retired in 2001 $1.2 million today — why Bobby Bonilla Day was a smart deal

<div style="float: right; margin: 15px 0 20px 20px;"><table border="0" cellspacing="0" cellpadding="0"><tbody><tr><td colspan="2"><a href="https://static-ssl.businessinsider.com/category/chart-of-the-day"> </a></td></tr><tr><td><a href="http://www.businessinsider.com/chart-after-25-years-of-rapid-growth-rise-of-mlb-salaries-has-slowed-in-past-decade-2013-7"></a></td><td><a href="http://www.businessinsider.com/chart-60-of-espns-11-billion-in-revenue-comes-from-cable-subscribers-2013-7"></a></td></tr></tbody></table></div><p>Bobby Bonilla's contract of deferred payments from the <keyword id="277141" type="ORGANIZATION" weightage="60" keywordseo="New-York-Mets">New York Mets</keyword> is considered a laughing stock amongst baseball fans as the Mets chose to give Bonilla 25 payments totaling $29.8 million (starting in 2011) instead of the $5.9 million they owed him in 2000.</p>
<p>But to criticize the deal is to not understand that Bonilla gained nothing and the Mets actually came out ahead in the deal.</p>
<p>If Bonilla had accepted the $5.9 million in 2000 and invested the entire amount at 8% interest, the original investment would have grown to $104.1 million by 2035* (blue line in chart below). If instead, Bonilla takes his annual payment and invests that with an 8% annual return, he would have $95.2 million by 2035 (orange line in chart below).</p>
<p>In other words, Bonilla lost nearly $10 million by taking the payments instead of the lump sum.</p>
<p>But more importantly to the Mets, if they invested the $5.9 million at 8% interest in 2000. That money would have grown to more than $14 million before they had to make a single payment. And that money would continue to draw interest even while they are making payments.</p>
<p>By 2035, the Mets would still have $8.9 million left over (red line in chart below).</p>
<p>In other words, if invested at a standard rate, the Mets would have actually profited from Bonilla's generosity and the contract wasn't so dumb after all...</p>
<p><div class="image-container display-table"><div><div class="image"><p class="source">Data via BaseballProspectus.com</p></div></div></div></p>
<p>Note: This is simply a look at whether or not the original deal for deferred payments was a good idea. Whether or not the money was invested wisely is a different story.</p>
<p>* <em>All of these amounts do not consider taxes that would have to be paid. </em></p>

CHART: The Crazy Contract The Mets Gave Bobby Bonilla Was Actually Incredibly Smart

<p class="headline-regular financial-disclaimer">Our experts answer readers' investing questions and write unbiased product reviews (<a href="https://www.businessinsider.com/personal-finance/investing-rating-methodology" class="not-content-link" target="_blank">here's how we assess investing products</a>). Paid non-client promotion: In some cases, we receive a commission from <a href="https://www.businessinsider.com/personal-finance/our-partners" class="not-content-link" target="_blank">our partners</a>. Our opinions are always our own.</p><ul class="summary-list"><li>Shohei Ohtani has deferred 97% of his salary for 10 years with a new Dodgers contract. </li><li>Ohtani may be able to save millions in taxes by deferring a large portion of his salary. </li></ul><p>Pitcher Shohei Ohtani agreed to defer 97% of his salary for the next 10 years in an atypical annuities contract with the Los Angeles Dodgers. Rather than receiving his full contracted $70 million annual salary, reported Fabian Ardaya at <a href="https://theathletic.com/5129506/2023/12/11/dodgers-shohei-ohtani-contract-deferrals/" target="_blank" rel="noopener">The Athletic</a>, Ohtani will get only $2 million per baseball season over the next decade.</p><p>Starting in 2034, the baseball player will get $68 million each year for the following 10 years, which will grant the Dodgers increased cash flow and payroll flexibility.</p><p>Aside from freeing up cash for the team, why would Ohtani structure his contract this way? And what should regular investors learn about annuities? </p><h2>Most annuities aren't for deferred compensation</h2><p>An annuity is an insurance product that provides people with a reliable, fixed income stream that prevents investors from blowing through their savings with unlimited access. Although retirees most commonly use annuities, anyone aged 18 or older can invest in one. With an annuity, you'll receive periodic payouts for a predetermined number of years — maybe even the rest of your life. </p><p>Annuities for deferred compensation, however, aren't common for people whose income doesn't reach the millions. </p><p>"There have been some athletes that have done something similar, but not on the same scale," Kevin L. Matthews II, founder of <a href="https://www.buildingbread.com/" target="_blank" rel="noopener">Building Bread</a>, told Business Insider. "Bobby Bonilla is perhaps the most famous one who has done something like this." Bonilla agreed to a deferred annuity contact with New York Mets back in 2011. He's received more than $1.19 million each year since then, which will continue until 2025. </p><p>Some corporations may offer CEOs or high-level employees a form of deferred salary compensation, Matthews said. Sometimes this comes in the forms of shares for the company.</p><h2>Why Ohtani might be willing to wait for millions</h2><p>Annuities also provide certain tax advantages, such as tax-free growth. Similar to a <a href="https://www.businessinsider.com/personal-finance/what-is-a-traditional-ira">traditional IRA</a>, you won't pay tax on your annuity income or any investment gains before payouts. You'll only pay tax when you start receiving money. </p><p>"There are several advantages here. The most clear to me is the tax advantages," Jordan Gilberti, a financial planner and senior lead planner at <a href="https://facet.com/" target="_blank" rel="noopener">Facet</a>, told Business Insider about Ohtani's deal. "Although he's only getting $2 million per year from the contract for the first 10 years, he's still getting that endorsement money that will shoot up his tax bracket." While the exact amount Ohtani has earned in endorsements is unconfirmed, speculation is up to the tens of millions.</p><p>Ohtani currently resides in California, the highest-tax state in the US, but he would have the freedom to move out of California after his Dodger days and reside in a low tax or tax-free state, Gilberti said. "He could save more than 14% of those earnings after he's actually done with his contract."</p><p>Deferred annuities have a slightly more complicated tax situation than most other annuities. Ohtani's contract, for example, allows him to receive the initial principal sum tax-free. And he'll only pay tax on any investment gains when he receives a payout. </p><p>In Ohtani's case, he may be able to capitalize on tax-deferred growth by investing in a deferred annuity. Although he'll start earning payouts earlier than most investors, his estimated age of retirement is also younger than other occupations. </p><p>"But the bottom line is this is going to likely significantly help with his tax burden by deferring it until a later date," says Gilberti. "If managed wisely, it could save him tens of millions of dollars in taxes, if not more, which is a pretty sweet deal."</p><h2>Should regular investors consider annuities?</h2><p>Investing in an annuity is not always the best idea for regular investors. As an independent <a href="https://www.businessinsider.com/personal-finance/best-online-financial-advisors">financial advisor</a>, Gilberti doesn't recommend annuities for regular people for reasons like the investment vehicle's complex structure, lack of flexibility, and lack of investment options.</p><p>"Frankly, in today's retirement environment with the uncertainty around <a href="https://www.businessinsider.com/personal-finance/what-is-social-security">Social Security</a>, and American savings rates so low, it's important to be targeting vehicles that are going to give you the highest odds of success in retirement," Gilberti said. Those include retirement plans like the <a href="https://www.businessinsider.com/personal-finance/best-ira-accounts" rel="">best IRA accounts</a>, an employer-sponsored 401(k) or 401(b), or even an HSA. </p><p>Matthews agrees that in most cases, younger investors shouldn't invest in annuities, as contributing to retirement savings accounts, paying off debt, and additional living expenses take precedence. Plus, he added, annuities can come with high fees. </p><p>Another drawback: You may be charged a 10% penalty on annuity withdrawals if you're younger than 59 1/2, so you shouldn't put money in an annuity that you'll need before you reach that age. Typically, people who invest in annuities are much closer to retirement age. </p><p>If you're unsure whether or not investing in an annuity is right for you, consult with a <a href="https://www.businessinsider.com/personal-finance/cfp">CFP</a> or financial advisor for professional financial advice. </p>

Shohei Ohtani's unusual deal with the Dodgers could save him millions, but that doesn't mean regular investors should follow suit

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"></div><p></p></div></div>The New York Mets are paying one of the best pitchers in baseball less money this season than a guy who hasn't played in nearly 15 years.</p><p>Bobby Bonilla, 52, will collect $1.2 million this season from the Mets while ace Matt Harvey, 26, will earn just over $614,000.</p><p>The retired ball player's earning power comes from a brilliant contract decision he made with the team during the waning days of his career.</p><p>Instead of paying him $5.9 million in 2000, the two sides agreed to defer his salary <span style="line-height: 1.5em;">and then make annual payments of $1.2 million for 25 years, according to the </span><a href="http://www.sportingnews.com/mlb/story/2011-05-16/mets-will-be-paying-bobby-bonilla-for-next-25-years" target="_blank">Sporting News</a><span style="line-height: 1.5em;">. </span></p><p><span style="line-height: 1.5em;">That turned a relatively paltry sum, for a pro athlete, into about $30 million.</span></p><p>According to Major League Baseball salary records, Harvey will earn $614,125 this season and is not eligible to become a free agent until after the 2018 season.</p><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"></div><p></p></div></div></p><p>Bonilla has not played for the Mets since 1999. He last set foot on the field in 2001. But, with the payments starting in 2011, he might be collecting an MLB paycheck long after even Harvey's career is over.</p><p>The ace struck out nine batters and allowed only four hits in six shutout innings Thursday afternoon in his first start since 2013, when he had Tommy John surgery to repair torn ligaments in his pitching elbow.</p><p>Bonilla was somewhere counting down the days until <a href="http://espn.go.com/blog/new-york/mets/post/_/id/90512/morning-briefing-bobby-bonilla-check-day" target="_blank">July 1</a>.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/baseball-diversity-statistics-economy-2014-9">Here's One Theory To Explain The Declining Numbers Of Black Baseball Players</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="4xbHE5cDoE76qi3lKurXpOqTjIie4Kc1" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

The Mets are paying a player who retired in 2001 more money than Matt Harvey this season

<p><table class="image-container float_right" width="200"><tr><td><div class="image"></div><p class="source">AP</p></td></tr></table>Despite the owner's claim that the team is no longer suffering financially, the Mets will likely have an opening day roster that will make just $64.5 million in 2013 (<em><a href="http://www.thebiglead.com/index.php/2013/02/19/bobby-bonilla-will-earn-more-than-any-mets-outfielder-in-2013/">via TheBigLead.com</a></em>). And of that, $36.5 million (57%) will go to just two players, Johan Santana and David Wright.</p>
<p>In all, just ten players will make at least $1 million this season. That number jumps to 12 if you include Jason Bay, whom the Mets paid $21 million to buyout his contract, and Bobby Bonilla, who hasn't played in the big leagues since 2001.</p>
<p>In another buyout, the Mets agreed to pay Bonilla $1.2 million per year, for 25 years, starting in 2011. That is more than any outfielder currently on the roster. The top four outfielders listed on the Mets depth chart all have less than three years of big league experience, meaning they will make close to the league minimum ($480,000).</p>
<p>Earlier this off-season, Mets owner <a href="http://espn.go.com/new-york/mlb/story/_/id/8943949/2013-spring-training-fred-wilpon-says-new-york-mets-financial-woes-past">Fred Wilpon said the team was no longer burdened by his family's financial problems</a>. He added that the team is once again in a position to spend big money in the free agent market "if that were appropriate." Well, apparently it was not appropriate this winter.</p>

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