On August 12, Baltimore Oriole's first basemen Chris Davis announced he would be retiring from baseball. His deferred annuity payments make him the new Bobby Bonilla.
The Orioles signed Davis back in 2016. His 7-year $161 million contract made him one of the 10 highest-paid players in the league.
Doing the math on his contract: $161 million divided by seven years equals $23 million per year.
Except Davis received $17 million per year. Where did the money go? Davis chose to defer $6 million of his salary each year in exchange for a post-retirement annuity, just like Bobby Bonilla.
Even though he will not play a single game in 2022 Davis will still receive $17 million.
When you add it up Davis deferred $42 million. In exchange for deferring $42 million, the Orioles agreed to pay him an entire season's salary without playing. Plus, the Orioles are paying another $17 million in a deferred annuity with payments structured over 15 years.
According to Sportrac, Davis will receive $59 million of deferred annuity payments over 15 years, ending in 2037.
Here are the annuity payments:
- $9.16 million per year from 2023 to 2025 (totaling $27.48 million)
- $3.5 million per year from 2026 to 2032 (totaling $24.5 million)
- $1.4 million per year from 2033 to 2037 (totaling $7 million)
Davis will be 51 years old in 2037. By then, his deferred annuity payments will total $75.98 million.
The Smart Move
Davis and his family live in Baltimore. Maryland has an income tax rate of 5.75 percent. Davis also owns an estate in the Dallas Metroplex, and Texas does not have a state income tax. If Davis and his wife establish residency in Texas, they'll save $1 million in state income taxes on his $17 million 2022 deferred annuity payment. Through 2037, they'll save another $3.4 million in state income taxes. That's $4.4 million of tax savings by living in the Republic of Texas.