MLB vs College - Crunching the Numbers

It not only "means something different to everyone" is actually is different to different people.  Take a player who comes from a wealthy family and what would be "life changing" would be very different from a player who comes from a family on the very low end of the economic scale.

 

So, first you have to define what is "life changing" for any particular case and whether or not that really has any meaning in that particular case.  

 

I have wondered the same thing.  For example, if a player received $500,000 as a signing bonus. Lets say half goes to taxes.  If the player then needs $25,00/year(?) in addition to his pay to live.  And that goes on for 5 years, if he was cut or left at the end of 5 years, he would have $125,00 left.  

 

So then, the decision needs to be made to take it or go to collage.  If the player received a $100,000 bonus, that would be gone in three years.  

 

Receive a million, much better :-)

 

So, for those that have been through this.  Is it a valid assumption that the player ends up with about half of his bonus?  Could most players get by on an extra $25,000 per year?  (More/less)   Is 5 years a good horizon?  (Either you made it to a higher pay scale, or it is time to move on.)

 

-I agree that the family financial situation makes a difference.  So does the players college potential.  (We play with a kid who wants to be a heart surgeon, and could be.  It will take a lot of $$ to change his mind.)  But for those that have been there, what other financial issues came into play?  Many take the offer far below what I call "life changing".

 

 

Great points!  Another aspect of this scenario could be does the player go to college after that 5 years when cut?  Being a 24-25 year old freshman doesn't seem like too much fun.  From those with experience, any statistics on if players go to college after their luck at baseball runs out?  Longer term earning power is greater with a college degree in most cases.  It would seem easier to complete 1 remaining year of college later in life after baseball as a result of getting drafted after your junior year than trying to do all of college if drafted out of high school.

 

 

I don't remember if it was last year or the year before, but I do remember reading an article the talked about this and a study done just a few years before that showed that few college players drafted as a Jr. ever returned to college.   And as one might expect, those drafted earlier you find even fewer.  Also, very few MLB player ever finish college.

 

Yeah, you'd thing that with only 1 remaining year of school (and particularly if the player's contract has a provision for that year being completely paid for) that it would be easy enough to finish.

 

But then. . . .life does have a way of getting in the way of such plans. 

I think two big factors are position and where in the draft you go.  If you are a late 1st round pitcher you are north of $1.6MM bonus and you are betting that you can be a top 30 pick 3 years latter.  That means no arm issues, no drop off in performance (drop from 94 to 91) and not having better talent out there the year are eligible again.

 

That is a lot of ifs so should you come out three years later and fall to a mid 3rd round pick (50-60) draft positions you just cost yourself +/- $1mm dollars.  Come out of college at 23 and earn $50k and you are staring at 20 years to make the same money in near absolute terms.  And that assumes you can find a $50k job.  Make it 35K and you are at 30 years to make you 1st million that you could have had in your pocket the whole time.

 

Take the cash...set aside $150k for school give and invest a bunch and give it a 5 year run.  If it doesn't work out you can go back to college and have plenty of money as a 23-24 year old guy that should not have a lot of money pressure. 

This years first round pick turned down life changing money, FWIW his parents are very wealthy.

So was last years #1 who turned down the offer the year before, wealthy parents.

 

So it does mean different things to different people.

 

FYI, the government takes 25% off the top of a players bonus. The government made this madantory a while back.  The larger bonuses are paid out in two season or more if negotiated. Mostly because many teams just do not have that cash on hand that time of year.  

A player unless he has a lot of expenses needs his bonus money most in the off season. Once again you can make the milb salary work.

Since son had a great college scholarship he walked away with less than 10K in college debt. So although his bonus wasnt as big as he would have liked, he had 3 years of school paid for.

 

Here is my advice. The chances of anyone reading this will not have a son who will be a first pick in the draft. Dont worry about this stuff, concentrate on getting a good college scholarhship or acadeimc money to leave you not in too much debt. Juniors get money to finish their school, this is negotiable.

 

Everything else is icing on the cake.

As far as finishing school, most do, mine has money waiting in the MLB college scholarship and HE IS going to use it.

There are many players who take online courses as well so that it wont be too overwhelming when the day comes to hang up the cleats.

To answer the question, there are taxes and also an agents fee that lower the taxes.  Many invest in property asap.

There are investment guys that work with athletes and you can turn what you have into $$$. They make a plan for you, and then invest in that plan according to your needs. They also help prevent the player from buying things that they dont need, at least my sons did and still does.

 

 

TPM,

 

Great grounding perspective!  Personally, if my son does get drafted out of high school, my assumption at this point is he wouldn't go high enough for what I would consider life changing money.  Although my threshold for life changing may be higher than others.  But I am a very analytical person by nature and love to crunch numbers!  Not an exciting hobby!  So at some point, I would take a stab at what is the magic number just for the hell of it.  So all perspectives, advice and your guidance are greatly appreciated!

You may want to do some homework. Going pro at a young age
is not for everyone, no matter what the bonus may be.

 

Do you have reason to think that your son will be a high draft pick out of HS?

IMHO, I feel "life changing money) for a draftee out of HS with family of average income would be amounts you see for 2nd rounders. . . and keeping in mind that the federal government will want about 36% and depending on what state(s) are involved, it can easily be a total taking better than 50% of these bonuses. And for HSer, negotiations should include paying for 4 years of college (amount equal to amounts for the colleges that player would go to if they didn't sign).

 

Now, there are many players coming out of HS that really have no interest in going to school (they may change their mind about that at some later date as they mature).  Some don't have the grades to get into college.  So, "life changing" would likely be something less, like money one would see as low as the 5th round.

 

You can crunch numbers that are more specific to your son and one needs to keep in mind that if your number is is viewed too high for what the scouts see as their potential, then he may be viewed an "not signable" and therefore not picked as high in the draft as one might have expected.

Don't focus on the money. Life in pro ball is hard and not for everyone out of high school ..there has to be no doubt thats what you want.. If your not ready you could blow the opportunity, lose the bonus money and not play in college

My son was drafted out of high school played for 9 yr. he's been out for 2 seasons... Has an assoc. degree and bachelors degree.    Don't use statistics to determine if a player will use his MLB scholarship , people will do what they want.

Great post njbb!
Truman brought up a good point. Since son lived in FL and no state tax it worked out well. And once you fall within a certain tax bracket and you have no desuctions uncle sam will get a lot of it.

 In a non-state income tax state, I would just use a flat rate of 40% to compute net (if bonus is high enough). Also, agents fee may not be entirely deductible due to limits on some deductions, etc. 

 

the comments on this topic are great. Keep them coming. 

Spoke to a D1 Head Coach on the NC College Bus Tour last week that brought up a great point.

 

I found a link that discusses exactly what he said.

"A person with a bachelor’s degree can expect to earn about $1.2 million more, from ages 22 to 64, than someone with just a high school diploma." 

 

The way he looks at it a $1.2 million bonus just gets you to "even" if you are signing out of high school.  Something to think about.  Especially, as someone pointed out above, what 28 year old wants to go back to being a college freshman?

 

http://www.navytimes.com/artic...ing-power-study-says

 

Rich

www.PlayInSchool.com

One of the issues I discussed with my son when he was in HS was the risk one takes where injury so easily ends one's athletic dream and it often hit home when he saw players ahead of him having injuries taken them out.  So he set a rather high price to keep him from getting the college experience he felt he wanted too (though playing pro-ball was his top priority).   "Life Changing Money" might be defined by some as assuring that a college education (4 years that can cost over $250,000) is paid for. . . ???

 

College is negotiable. So a high profile prospect with an good scholarship at a better program should have nothing to with deciding bonus $$$.

Then there are the non-financial considerations.

 

I read somewhere the head coach at Stanford had a deal-clinching line he would use on mothers of recruits who were trying to decide between attending Stanford and going pro out of high school:  "Ma'am, would you prefer your son meet the woman he will marry on the campus of Stanford University . . . or at a minor league ballpark?"

 

We have a couple members here who can verify this.  Is this true?

Back in the day, I looked at this whole thing as a HS math problem from my youth.

 

How much money do you make to play baseball versus how much money you would make going to college. It actually becomes a very complicated math problem, because if you take the baseball money, what are the chances you make it versus what are the chances you come back to get your degree? How much money is made initially, yet forfeited along the way. If you promise mom you'll come back and get that degree, but get married and have kids in MiLB, can you really commit to giving up four years of income when the whole thing is over?

 

I created a spread sheet for my son out of HS. He's currently in college pursuing an engineering degree. Basically, I calculated the lifetime cost of delaying entry into the work force as an engineer by five years and being behind as a professional. I then figured in taxes that reduce the bonus, even calculated the effect of spreading the bonus over multiple years.

 

Some scout said, what will it take? I said (the exact number is lost to posterity) but it was something like $784,519.13. He asked how did you come up with that? I told him.

 

That was the day I realized scouts can't do math.

 

My son is in college, which I truly believe is the best path for most players. If somebody wants to give you $1m, take it, but be smart enough to know that about $7-10m is required to retire comfortably if you are currently in your late teens - early 20's and plan to live into your late 80's after retiring in your early 60's. Figure out how much you need to retire and find the highest probability way to get it.

It starts out as a HS word problem, but it is realy way more complicated.

 

JMoff  -  Thanks for sharing your math!

 

Stumbled onto this article that shows the probability of "making it" in the MLB broken out by draft spot.  Interesting numbers as well.

 

http://www.crawfishboxes.com/2...-mlb-draft-part-deux

This is a hard subject because who you would think help you with it has a vested interest in what you decided. So really the family has to sit down talk it over and just go with what they decided. 

One factor that seems to be left out is what does your child want to do when his playing days are over? If he is smart enough to be a surgeon you may want to take that ball out of his hand. Now. If he wants to be a baseball lifer, coach at xyz level, playing pro ball is like having a doctorate in baseball. You will get hired over non players to start your career.

That last part about baseball lifers ... I think is the exact thing that happens to way too many -- and it's not good. No matter when it ends, unless someone finds true joy and fulfillment in continuing in 'baseball' after baseball, my hope for all young men is that they move on to the next phase of their lives. 

I know a kid from a wealthy family who was a projected first round pick. Before the draft he stated if not offered 1.5M he was headed for the ACC. A team with a bunch of compensation picks drafted him in the third round. They offered 1.3. He held out for 1.5. On 8/15 at 11:55pm he signed for 1.3. He's in AAA now. He played in the Futures Game last year.

"That last part about baseball lifers ... I think is the exact thing that happens to way too many -- and it's not good"

 

I guess we will have to agree not to agree. I know a lot of scouts and coaches that wouldn't trade it for anything.

Some really great comments and points here. I know what my advice to my son is. Go to school. I don't think he is mature enough for pro ball. He has a great scholarship at one of the best SEC schools, as well as one of the best in the nation. I'm not sure I could even put a price on that opportunity. He will be coached by a pitching coach that was in professional baseball for over 20 years. But, it is his life. I give my opinion when he asks, but I'm trying to let him work through this on his own as much as possible. It has been a great life and learning experience. He had some arm issues toward the end of the high school season, so we shut him down as a precaution. It is amazing how pro scouts disappeared once word got out about his arm soreness. He was talking to at least half a dozen scouts weekly, but then nothing. I can tell you that plays on a young man's psyche. Professional baseball is a business and it is not for the meek!  I hope everyone understands this. I tell him God has a plan and he just has to focus on the process and not worry about the results.

       
       
Agreed.  Getting some free tix for a game tonight from one of my former players who is a BP pitcher among other duties after a short minor league career.  Loves the game, loves what he's doing.  In fairness though he was drafted out of college and has his degree so he always has that to fall back on too.  But a guy I went to high school with went in the draft right out of high school and played minor league ball for 10 years explicitly hanging on to make contacts and get into coaching.  Last I knew he was still involved.  At one point he was a AAA manager.  Nothing wrong with being a lifer and loving what you do.

I do agree with you Doughnutman. I don't get what is not good.

I am not sure people realize the doors that open for you when you are involved in any sport. Being involved in baseball doesnt end when you hang up the cleats.

http://m.mlb.com/news/article/...signingbonus-tracker

Over the past several years MLB scouting departments have hired about 12 PG scouts. The interesting part of that is that every one of those scouts have a college degree.

 

Obviously you don't need to have a degree to be a MLB scout.  It's not what would be considered a high paying job.  I doubt that many young people head off to college thinking they will be a scout someday.  Baseball gets in your blood.  Those that truly love the game are happiest when they are around the game.

 

College is always a good choice when considering the future.  It can create the most opportunities.   At the same time, IMO, the most important thing in life is happiness.  So I totally understand when a young person chooses baseball. Also believe those young people should have some kind of secondary plan if things don't work out.

 

Daron Sutton did a recent interview with Mike Trout.  Mike's parents were in education.  Mike is a big believer in education.  He did have a back up plan.  Of course, things have worked out well and he is happy.  BTW, I don't really believe athletes should be role models, but this kid, Mike Trout, is one of the best role models in all of sports.

My thought is, once a reasonable bucket of money is offered, one has to look at the maturity level to determine if that kid can "survive" low level pro ball for a few years.  I would argue that if they are mature enough, then they will have options in working towards a degree.  Not a huge fan of online degrees, but over the next 3-5 years, this type of delivery, especially from reputable schools, will be much more common.  I've read about "online" courses being offered to on-campus students (would have loved this back in the day).  I'm guessing an average college ball player will be lucky to get a full three years worth of courses under his belt before being drafted after junior year.  Compare that to knocking out the initial 2 years of common coursework online and then perhaps finding an onsite institution where you can work towards finishing up if you start to see your professional life in baseball coming to an end.

We all know stories of off-the-charts talented people who were in too big a hurry to achieve greatness to spend four years in college.  We admire the decisive confidence of people like Ray Bradbury, who knew he would be a writer and got busy being one without wasting time in school.  We similarly respect Bill Gates and Michael Dell and other tech geniuses who dropped out of school because they couldn't wait to put their ideas into practice.

 

These stories are inspiring--when they work.

 

I feel the same way about baseball and college.

 

If coaches and scouts affirm your sense that you really are good enough and you know baseball is all you want to do, I'd be the last person to tell you to defer your dream or hedge your bets with a college back-up plan.

 

Just be sure you really are good enough and you really are totally committed.  Life plans that work for obsessed geniuses and magically gifted athletes usually don't pan out when less exceptional people try to follow them.

 

Appreciate your math, but the idea that, at minimum (using your $7m number), a 20-year-old needs to expect to average $175k+/yr to retire comfortably by 65 scares the sh&t out of me. Especially being my age and not having made anywhere near that over the past 30+ years.

Keep in mind the kid who does choose college and leaves with a degee in Art History. We're in a different world now where a college degree doesn't open the doors it used to unless it's the right degree. I have a philosophy degree, so it was either law school or McDonald's.

This is so true.  I was lucky enough to end up with an engineering degree. I don't see my son being able to do that.  Even without playing baseball.  In reality, he may end up with a business degree.  Sure, that is better then no college, but there is a wide range of salaries for "college educated" people.  

Anyone can be a role model. It's about how the person carries themselves and what they accomplish. Not what profession they're in.

Isn't "philosophy" Latin for what grad schools have you applied to? One of my cousins got his BA/MA in intellectual history. His goal from the start was go to law school. So he chose a major he considered to be interesting to him. He wrote his theis on the writings of Kahlil Gibran. It didn't hurt his research the Gibrans are friends of the family.

 

When I graduated I interviewed with computer companies. They were interviewing people with business, mathematics and economics degrees. Once in I was pushed to get an MBA.

Lol! very true. I also chose my major based on the idea that I was going to law school. I did look in the paper's help wanted ads after graduation and, sure enough, not a single ad for "sophist" or philosopher."

The replacement for Socrates was already filled?

Didn't like the retirement plan.

The Hemlock Plan didn't float my boat.