Bobby Bonilla is known to baseball fans of a certain age as one of the best batters in the sport back in the 1980s and 90s. To grumpy fans of the New York Mets, he is known as the man who fooled the Mets into agreeing to one of the worst contracts in the history of baseball. And, thanks to an entertaining new guide to economics, Planet Money, he is known to me as a man who teaches us five essential lessons about risk and retirement.
The bare facts of the matter are these. In 1999, Bonilla was past his prime, but under his contract, the Mets still owed him just under $6mn. Bonilla agreed that instead of $6mn immediately, he would accept almost $30mn deferred. It would be paid in 25 annual instalments of over $1mn, every July 1, starting in 2011. Each July 1, Mets fans grumble or joke about Bobby Bonilla Day, the saddest holiday in the year. Bonilla retired a quarter of a century ago — and the Mets still owe him 10 more million-dollar-plus paydays.
It is not only Mets fans who hate this. Business Insider described it as “the worst contract in sports history”. Yet anyone with an economics training would shrug. As Planet Money points out, anyone who managed to invest $6mn at a 10 per cent rate of return in 1999 would have nearly $19mn by 2011. At that point, the investment pot would generate more than enough income to pay Bonilla his 25 annual instalments, leaving the principal sum to grow further. In other words, if the Mets could find a 10 per cent return on their money, they could shake hands with Bonilla, invest the $6mn, pay every penny of the $30mn they owe him, and have tens of millions of dollars left over in 2035 when the agreement expires.
So there was nothing stupid about the Mets agreeing to the deal. Maybe Bonilla was the one being stupid? Probably not. The deal with the Mets locked in an 8 per cent return for him at very low risk. Not bad; good enough, anyway.
The first lesson here is that most people do not understand the power of compound interest. Outraged Mets fans feel that their team got their faces ripped off by Bonilla and his agents; they didn’t. It just seems contrary to all logic and reason that $6mn now could possibly be worth $30mn later, but a few decades and an annual return in the high single digits will do wonders. (Many FT readers will already know the simple rule of thumb: divide 72 by the growth rate, and that is how many years your money will take to double. Seven per cent will double in about 10 years; 10 per cent will double in about seven. I mention this only because I am endlessly surprised at the number of mathematically gifted and trained people who don’t know this cognitive shortcut.)
The second lesson is about the psychological pain of debt. One of the reasons that Bobby Bonilla Day seems so egregious to the Mets fans is that Bonilla is still receiving cheques such a long time after he retired. This is, of course, literally how a pension works — but it also illustrates how annoying it can be when some shiny purchase-on-credit is gathering dust, yet the payments come through month after month. Some things are worth borrowing to pay for, but it’s also worth thinking ahead.
The third lesson is that even in what seems to be a zero-sum negotiation, there are often gains from trade to be found. The Mets wanted to pay as little as possible, and Bonilla wanted to be paid as much as possible, but there was still room to make both sides happy. The Mets urgently wanted the $6mn, while Bobby Bonilla didn’t. Professional baseball players are generally rich and young, have no particular skills in investing and are vulnerable either to sharks or to their own worst impulses. Bonilla didn’t want to bankrupt himself trying to invest his $6mn somewhere. He just wanted to retire and relax, knowing that he had a regular income locked in. It suited both Bonilla and the Mets to agree to defer the payments.
A fourth lesson is that some risks cannot be made to disappear, or are so costly to insure that few people would bother. Bonilla’s deal exposes him to three of those risks: longevity, inflation and counterparty risk.
Longevity risk is simply that while the payments expire in 2035, Bonilla probably will not. If he dies before the payments stop in 2035, he won’t get to enjoy the benefits of a contract that could have paid him in full in 1999. Conversely, he might easily live until 2045 (when he will be 87). That would mean scraping by for a decade without those nice cheques every July 1.
Inflation risk might not have seemed worth worrying about when Bonilla agreed the deal in 1999, but it is real. A cheque for $1mn today buys about as much as a cheque for $500,000 in 1999 — and that is after subdued inflation for (most of) the last quarter century. If the 2010s had been a rerun of the 1970s, with inflation typically between 5 and 10 per cent a year, the purchasing power of Bonilla’s annual cheques would have spectacularly shrunk by now. The moral of the story is that any long-term contract agreed in nominal terms contains a hidden bet on the inflation rate.
Bonilla also faces counterparty risk: the risk that the Mets somehow can’t or won’t pay. Thankfully, Bonilla has a plan B: he’s been collecting $500,000 a year from the Baltimore Orioles since 2004.
It’s good to see Bonilla being held up as a case study in retirement planning. Compound interest seems very abstract. What makes it real is seeing Bonilla turn $6mn into $30mn by the simple exercise of deferred gratification.
I must confess that the particular maths of Bonilla’s contract did strike close to home. He agreed to wait 12 years in exchange for receiving a further 25 years of annual income. I’m 52, so such a deal would pay me between the ages of 64 and 89, which sounds pretty much perfect as far as retirement plan timing goes.
Regrettably, nobody owes me $6mn. But if I could invest an extra £6,000 now — and earn an 8 per cent return somewhere — that would boost my retirement income by £1,000 a year. Fifty-two is later than ideal to be planning for retirement, yet still not too late.
What’s that, I hear you say? You were promised five lessons?
Here is the fifth: the Mets spent their $6mn on a new pitcher and reached the World Series; then they reinvested all the proceeds of their success. The fellow they put in charge of the investment was Bernard Madoff, the most famous Ponzi fraudster since Ponzi.
All that compound growth looks great in the spreadsheet, but in investment — as in life — nothing is certain.
Written for and first published in the Financial Times on 25 March 2026.
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