Will Your Signing Bonus Be Enough?

 

It is hard to be concerned about what will happen 20 to 30 years in the future while you are focused on performing at the highest level on the field today.

Especially, when you will just be starting your career!

However, it’s actually the best time because you still have the ability to do something about it. The overarching goal for most players is to have enough money at the end of their career that allows them to transition into the next phase of life without any change in lifestyle. This allows you to do what you want to do, rather than what you have to do.

Key Points

  • Your money may need to last longer than you expect.

  • You have fewer working years to build up your savings, and likely more retirement years to spend it, which increases the risk of running out of money.

  • Over a long retirement, even 3% inflation can cut your purchasing power almost in half over 20 years.

  • It’s your younger self’s job to look after your older self.

As a general rule, for every dollar of annual spending, you need 20 – 25 times that amount in income-producing investments. If your goal is to have a million-dollar lifestyle, you need $20 – $25 million to secure this lifestyle without having to spend your principal when you retire from baseball.

$1,500,000 SIGNING BONUS EXAMPLE

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Table 2. Monthly Budget Example

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Minor League Salary Structure

Until a minor league player is placed on a 40-man roster, monthly salaries are $1,150 for the short season teams, $1,300 for low A and $1,500 for high A. For players repeating a year at the same level, the salary goes up $50 each year. For AA, the monthly salary is $1,700 and it goes up $100 per month for subsequent years. For AAA, the monthly salary is $2,150 per month and it goes up to $2,400 the second year and $2,700 the third year.

A player must be placed on the team’s 40-man roster or be subject to the Rule 5 Draft at the end of his fourth season (if signed at age 19 or higher) or fifth season (if signed at age 18 or lower).

  • 2016 Salary for first year on 40-man roster: $41,400

  • If a player becomes a minor league free agent, higher salaries can be negotiated

  • Meal money is $25 per road day

Conclusion

Signing for a significant amount of money gives you a tremendous head start in life. The players who spend wisely and invest for the future can be set for life. However, it can quickly be squandered and like so many before you are left with regret of what could have been.

Don’t leave your future to chance. Before you sign your contract you should have a plan and team in place who will help you manage, protect and maximize your financial future. If you would like to discuss our Athlete Wealth Plan program we would love to hear from you!

 
AWM CapitalErik Averill