Understanding The “Net Signing Bonus” And Its Importance | Will McGuffey, Josh McAlister | MLB Draft #9

Episode Notes

MLB teams will be interested in your gross signing bonus. 

Your agent will be paid based on your gross signing bonus.  

You should be focused on your NET SIGNING BONUS. 

Your net signing bonus is what you will have in your pocket after taxes.  This is the amount of money that you will be able to invest in your career, grow your wealth, and spend on the things that are important to you and your family. 

To put into perspective why you should focus on your net signing bonus, you can look to a client we worked with in advance of the 2021 MLB Draft.  In the months leading up to the draft we proactively worked with the player, his family, and their agent to break down all scenarios, taxes, residency, and contract language so they were prepared and fully understood what different gross signing bonuses meant to them after taxes. 

The result ----- Even though this player had a gross signing bonus of more than $1,000,000 less than the highest bonus in the Draft that year, this player ended up with the highest after-tax signing bonus of any player. 

Whether the player would sign or not hinged on the language of the contract and how the player’s bonus would be taxed.  This was financial advice that they received before the draft that led to $700,000 more being put in his bank account after all taxes and agent fees were paid.  The family was educated and prepared for draft day and knew the decision they were making and why. 

They won; other players who were not as prepared permanently lost money.   

Educate yourself, hire the right team of experts, and maximize your opportunity!