The Margin: What is Bobby Bonilla Day? It is the beauty of compound interest

This post was originally published on this site

Bobby Bonilla was trending on Twitter Thursday morning because July 1 marks an annual payday for the former third baseman that has increasingly attracted interest from average Americans, who don’t know anything about baseball.

That is because Bonilla and his agent Dennis Gilbert engineered a contract payout that has become one of the more talked about feats of finance in the sporting world.

On Thursday the 58-year-old Bonilla will collect a check for $1,193,248.20 from the New York Mets, as he has and will every July 1, from 2011 through 2035, as ESPN describes it.

Some have described Bonilla’s payout as one of the great examples of compound interest because the baseball player opted to defer a $5.9 million payment in 2000 in favor of spreading the payments out over 24 years, starting in 2011, with an 8% annual interest rate. Compounding is when you earn interest on your earned interest and it can have a powerful impact on money over time.

The net payment for Bonilla (and his agent) will be about $30 million when the baseball player hits 72. That amounts to a heck of a retirement plan if you can get it.

To be sure, we have written about this time and time again but it is worth reiterating because it is one of the key concepts that MarketWatch tries to drive home to its readership who invest in stock benchmarks like the Dow Jones Industrial Average
the S&P 500 index

and the Nasdaq Composite
or other areas of the market.

Read:Bobby Bonilla Day: This retired baseball player’s contract is the perfect example of the power of compounding

Compounding holds true regardless of whether you are a Mets fan or love or hate Bonilla.

See:Opinion: Money lessons from Bobby Bonilla’s steal of a multimillion-dollar deal

Check out: The Mets are paying Bobby Bonilla over $1 million a year because of Bernie Madoff