The Beauty of Compounding

In 1999, Bobby Bonilla was playing for the New York Mets…

And playing poorly.

He was suffering the worst season of his career. He batted a subpar .160 with only four home runs and 18 RBI. This was way below his career average of .279 with 22 home runs and 90 RBI per season.

Because of this, the Mets didn’t want to pay him the $5.9 million he was owed.

Negotiations ensued. Eventually, the Mets and Bonilla agreed to defer payment on his salary until 2011. His agent got the team to agree that the amount owed would increase at an 8% annual rate starting in 2000.

It wound up being a blessing for Bonilla. Thanks to the power of compounding, his $5.9 million payout turned into $29.8 million…

A 405% increase.

Now every July 1, the Mets pay Bonilla – a 53-year-old who hasn’t played ball in 15 years – $1.2 million. In fact, even though he’s retired, Bonilla is the 15th highest paid player on the Mets roster this season.

His final check will come more than 30 years after his last at bat.”

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