Retire Like Bobby Bonilla

Transcript

Mike:

Hello again, it’s Mike on money and I of course am Michael Reese certified financial planner. And today, oh, this has given me so much fun. It is all about Bobby Bonilla day. And if you don’t know what that means, I’m going to tell you what it means. This is great. This is a classic classic story in the sports world, and it comes along early July every year. It’s fantastic. So remember before I dive into Bobby Bonilla day, what we can learn from it. If you like this video, click the like button, click the subscribe button, share the video with friends, neighbors, countrymen. And of course all the enemies as well. What the heck? We got to make them a little smarter with their financial planning, just like you. Okay. Let’s go ahead and dive right in Bobby Bonilla day. So here’s the story.

Mike:

It is the year 2000, the New York Mets. Oh, Slugger Bobby Bonilla roughly $6 million in his co- they still own 6 million to buy him out of his contract. And so they go to them, they say, okay, Bobby, have we got a deal for you? So we’re going to give you an option. We’re going to buy you out of your contract. And we’ll either give you a lump sum check for like $6 million. Now, remember, this is 2000, so you get a check for $6 million, which heck I don’t know about you. I’d take that check today. That’d be cool. Or here’s the kicker or tell you what? We will give you $1.1 million every year for the next 25 years. Now think about that, right? Do you want 6 million today or do you want 1.1 million for 25 years? And I know what you’re doing right now. I know what you’re doing.

Mike:

You’re like doing a little math, right? Carry the one and oh, luck. 1.1 million a year for 25 years. That’s like 27 and a half million or something. Right? That’s heck I’m taking that number over the 6 million upfront. Oh, whoa. Slow down though. Slow down. If you do the math though, I know it sounds like a lot more, but it’s over a long time, like 25 years. What’s the rate of return? Like if you took the 6 million upfront, what rate of return would you have to earn to get the same outcome? And when the math was done back in those days, they came up to, I think it was right around 8% or something like that. Now again, I know what you’re thinking. You’re thinking, okay, let me get this straight, Mike. Here’s what you’re saying to yourself. You’re saying, okay. Huh? Let’s see, I can take 6 million today.

Mike:

Or I get 1.1 million a year for 25 years. And if I are in the six minute, as long as they’re an 8%, I get kind of the same deal. But gosh, if I take the income, that’s like 8% guaranteed. Wow. I’ll take the income. I’ll take the million dollars a year. Yeah. Today that’s an easy thing to do. Why? The last 20 years, the markets are like 8% a year. Heck bonds right now fixed income. It’s earning like one or 2% a year. But remember this was not offered today. It was offered back in 2000. In 2000, the stock market had average get this 14% a year, 14% for 20 years, 14% a year for 20 years. In fact, in those days, if your advisor, if your financial advisor, wasn’t getting 15, 20% a year, you fired him. That’s how good the market was doing.

Mike:

You could go to the government guaranteed bonds and they would pay you five, 6% a year. So if all you got to do is earn 8% a year in that environment. And you’re thinking, well, gosh, you know, do a little bit of stock, a little bit of bond. I can get 10% easy peasy. I’m taking the lump sum. And in fact, everybody told Bobby dude, take the lump sum. What are you crazy? You can earn way more than 8%. This is like the biggest no-brainer in the world. Take the lump sum. But what Bobby do. Yeah. In this article, what did he do? He’s like, no, no, no, no, no, no. I’m not taking a lump sum. I’m going to take the end gum. I want the shirt thing. Cause you know what he was thinking. He was thinking, gosh, you know, I’m going to be retiring soon.

Mike:

It’d be real nice to have some kind of guaranteed payment coming out over the next 25 years. That’d be real nice. That way I don’t even have to think about anything. And so that’s what he did. He took the payment now, fast forward, 20 years, you look back. You’re like, holy cow, Bobby, that was a brilliant move because the market crashed. He wouldn’t have earned that 8% from 2000. Not a chance in the world. The market crashed all kinds of bad things happen. He was, you know, at the time they’re laughing at him today, he’s laughing all the way to the bank right today. He’s like the most brilliant guy ever. Well, what do you learn from that? Be like Bobby, when it comes to your retirement planning, be like Bobby, think about not necessarily lump sums. Think about what are those streams of income, those guaranteed streams of income look like for you during your retirement years, start building up those streams of income and you like Bobby can enjoy a great retirement, right?

Mike:

Bobby’s been living large. He’s in great shape. Now, by the way, here’s the fun kind of wrap up to this little story. This is my favorite part about the whole story. So the New York Mets, they were so excited that Bobby didn’t take, they loved what he did. They’re like, yay. He didn’t take the lump sum. We’re so excited. We’re going to invest the money said the New York Mets. And we are going to make way more than 8%. And that way this is going to be awesome for us. We’re going to keep all the extra money for ourselves like member, because they’re super smart. Right? So that’s what they did. They’re so excited. So they took the money and they gave it to this well-known money management firm in New York run by none other than Bernie Madoff. Yeah. They came to money to Bernie. And so when Bernie turned out to blow up and you know, basically the big Ponzi scheme, not only did the Mets lose all their money, they ended up still on the hook with Bobby Bonilla for that 25 year payout. So there you go. Even supposedly smart people can really mess up their planning when they get greedy. So there you go. Moral of the story, don’t be greedy. Be like Bobby, create streams of income and retirement. All right. That’s today’s topic. Hope you enjoyed it. If you liked it, go ahead and click the like button, click the subscribe button if you haven’t already. And of course share this with all your friends, neighbors, family, and countrymen. All right. That’s it today. Talk to again soon.

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