The Colorado Rockies, Sports and Retirement
Only a tiny, tiny percentage of young baseball players make it into professional baseball. Our local home team is the Colorado Rockies, they’ve just now, moments ago, made their way into the playoffs vying for the position of representing their league in the World Series. What continues to amaze me in all of this is the salaries of the players. The players are signing multi-million, multi-year contracts that should allow them to retire at whatever age they choose and take up coaching, broadcasting or sitting on their backsides. I was just looking on the CBS sports site at the Rockie’s Roster and salaries for their players.
For example if Matt Holliday had no endorsements, no external cash flow from bonuses resulting from post-season playoff action, he would make $4,400.000.00 this year. With a salary that big you know he has to be paying a lot in taxes (though maybe a smaller percentage than we would think) , but after taxes he’s got money that he can put into investments that should help him clear a good chunk of interest every year until his grand-kids inherit a piece of the action. Assuming a 10% investment of that money ($440,000.00) at 12% interest for the year that would earn Matt$52,800.00 in interest. Ten years, without adding any more money to the investment (at 12%) would give Matt a compounded value of 1,366,573.21. Now, lets assume that he adds $100,000.00 to that every year between now and his retirement in ten years (which may or may not be reasonable… but we’re just playing with numbers) that would have him earning a grand total of $3,332,031.54 in his investment account. The good thing is that the number is going to continue to grow. Assuming that he makes 12% from that point forward from interest for do years, but lives off of 4% of that interest (effectively only earning 8% in compound interest) he’d end up with $15,530,456.21 at the end of 30 more years. Living off of the four percent interest the first year he’d get $133,281.26 to spend on whatever he wanted. Assuming he’s already got a paid for home and set of vehicles that’s a lot of money to do whatever you want with - and its also assuming he’s not working for a salary as a coach or as some sort of public personality.
Sports is amazing world to look into, a tiny percentage of the players make it big, a smaller percent can demand such huge salaries, but if you look at players like Alex Rodriguez who got paid $22,708,525.00 for this last season (again, just for the regular season and without any endorsements or other bonuses) it jumps to even more astronomical numbers. Ten percent of that salary is $2,270,852.50. That is to say that one tenth of A-Rod’s salary covers more than 50% of Matt Holliday’s salary. In essence the same assumptions made earlier about Holliday’s income and investment potential can be multiplied five times to represent A-Rod.
To set it all into a greater contrast evaluate this: The best paid team in the Major Leagues is the New York Yankees. They get paid a collective $189,639,045.00 a year to play professional baseball. The lowest paid team in the league is the Tampa Bay Devil Rays who get paid $24,123,500.00 collectively. One player on the Yankees gets paid almost as much as the entire team of the lowest paid players. The three best paid Yankees make a collective $67.7 million. The Devil Rays paid their top three paid players a collective 8 million dollars for the season.
All of that is to say: don’t sweat your income in contrast to others: even in the big leagues there’s a disparity. Get your job done right, get your job done well and look for opportunity. You never know when someone may be looking for a professional in your arena to pay a quarter of a billion dollars for the next ten years 
Related posts
