Don’t Tell Bobby Bonilla Pensions Are Dead
Today, July 1st, is unofficially named “Bobby Bonilla Day”.
Today is the day that Bobby Bonilla gets his annual check for $1,193,248.20 from the New York Mets baseball team, just as he will every single year through 2035.
To catch everyone up:
The deal was signed by the Florida Marlins in 1996, but Bonilla was traded to the LA Dodgers in the 1998 blockbuster that involved Gary Sheffield and Mike Piazza. Bonilla was later flipped to the Mets. He then only played 60 games in 1999, hitting a dismal .160 batting average, so the Mets decided to release him before the 2000 season instead of paying him $5.9 million that year.
In buying out Bonilla before 2000, the Mets triggered a deferral that paid Bonilla the above figure annually from 2010-2035.
Call it one of the more fun pensions you’ll ever see.
Pensions are a close to extinct financial animal, but if you can find an employer that offers one, you should jump on the opportunity.
What is a ‘Pension Plan’
A pension plan is a type of retirement plan, usually tax exempt, wherein an employer makes contributions toward a pool of funds set aside for an employee’s future benefit. The pool of funds is then invested on the employee’s behalf, allowing the employee to receive benefits upon retirement.
Why are Pensions dead?
Retirement has taken a back seat to corporate profitability for more than 40 years as the United States has embraced the reduction of pensions, and now the U.S. economy is paying the price with lowered productivity.
Without pensions, older workers are being forced to work longer hours and stay in the workforce longer, and that means they’re squeezing out some of the most productive workers of all, known as core workers (ages 25-54).
Employers have now opted for retirement plans such as 401K’s, 403(b)’s and Simple IRA. In these plans, employers still contribute to their employee’s retirement, it is just not as much as they would contribute to a pension.
Salary Deferral
“Bobby Bonilla Day” is a joke that is discussed every July 1st on sports talk shows and all over the Internet. It is looked at as a joke because the Mets are still paying a guy on their payroll over $1 million a year…and he hasn’t played a game in 16 years.
My question is, why don’t more athletes defer salary. There are a few other notable players such as Ken Griffey, Jr that are also being paid after their playing days. Griffey is actually even receiving 4% interest on his money…what a great retirement plan.
A Sports Illustrated story ran last year and stated this:
“Reports from a host of sources (athletes, players’ associations, agents and financial advisers) indicate that: By the time they have been retired for two years, 78 percent of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.”
In an industry that sees former athletes trying to scrape together autograph signings and speaking engagements just to make a living after retirement, I ask this: Why not make salary deferral a priority for agents during negotiating contracts?
A glorified pension in an age where pensions are dead.
Figure out a way that you can support the lifestyle you want to live after you are done receiving a paycheck. This may no longer be through a pensions, but there are other ways to secure financial independence during retirement.
If you do not have a retirement game plan in place, or you think it can be improved, contact our office at 414-545-1890. Our Wealth Management division will review your current financial game plan and come up with a strategy to make your future retirement a success.
Have a safe and happy 4th of July weekend!
Nicholas Hammernik, EA
Nick is Talking Tax To Milwaukee. Combing the boring topic of tax with the latest news in pop culture and sports.
The post Don’t Tell Bobby Bonilla Pensions Are Dead appeared first on Talking Tax to Milwaukee.
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