What Should Fernando Tatis Jr. Do With His $340 Million Padres Contract?

Disclaimer: The statements made in this post are the opinion of the author. They should not be viewed as financial advice. Please consult with a financial specialist before making any financial decisions.
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If you follow baseball at all you’ve probably heard about Fernando Tatis Jr. getting the record breaking $340 million dollar 14 year contract with the Padres.

If you also follow finance you might know that a professional baseball player is four times more likely to declare bankruptcy than the average American.

So that begs the question, now that Tatis has his $340 million contract, what should he do with it? How can he use his massive income over the next 14 years to live comfortably for the rest of his life?

Photo by Tim Gouw on Pexels.com

Fernando Tatis Jr., Padres Contract Breakdown

First, let’s figure out what this contract means. For simplicity sake, I’ve taken 340 million and divided it by 14 because baseball contracts change drastically over the course of the contract and doing a year by year breakdown would be exhausting and repetitive.

So we’re looking at $24, 285, 714 per year.

Since he’ll be making enough money to be well within the top tax bracket every year, taxes won’t change much on him so the total amounts taxed and so forth with be basically the same.

Important First Moves

There is one thing that anybody can and should do when they are coming into a lot of money.

Try to pay less in taxes.

Since Tatis is getting a huge amount of earned income avoiding taxes will be incredibly difficult and mostly impossible.

But even with millions of dollars coming in paying less taxes is worth it.

So the first step is to max out his 401(k). The current maximum contribution (2021) is $19,500. That might seem like a tiny amount to put in a tax deferred account compared to $340 million, but if he needs it in retirement he will be glad he did.

And that is $7,215 he isn’t paying in federal taxes each year, so it is worth it.

The second thing that he should do is to get a fee only fiduciary financial advisor.

This is a person who is paid a fixed amount to give you advice on how to use your money and plan for the future. They aren’t paid on commission to sell you life insurance, and they are a fiduciary which means they have taken an oath for their job to put their clients best interests first.

A good fee only financial advice can be moderately expensive. If he keeps a financial advisor on retainer that will probably cost about $5,000 a year. But compared to his salary that is totally worth it.

If Tatis does these two things he will be well on his way to living in style the rest of his life and never having to work again after his 14 year contract expires.


As Benjamin Franklin said, “nothing can be said to be certain, except death and taxes.” So as surely as Tatis has this contract he will be losing a large portion of it to taxes.

First, federal taxes take their cut. This is a very complex graduated system that you can find out more about on Nerd Wallet. But the end result is of the $24, 285, 714 per year he will owe $8,942,926 in federal taxes.

Keep in mind that $19,500 of his income is sheltered in a tax deferred account, which is included in the total income but not taxed.

Next, he is playing for the San Diego Padres, so he is subject to California state tax. Unfortunately for him California has a very high tax bracket system as well. More can be found out about that system on Nerd Wallet as well.

With such a high tax rate in California Tatis is looking at $2,969,256 in state taxes.

That is a total of $11,912,182 owed in taxes right out of the gate. That is a 49.05% effective tax rate. Ouch.

So that leaves Tatis with $12,354,032 to work with which, as far as yearly salary goes, is way more than many people will see in their lifetime. So I guess he can’t complain too much.

With that we can section off that money to achieve financial goals that will allow Tatis to keep living as if he were making his huge contract every year for the rest of his life.

Spending Money

I don’t expect a 22 year old MLB player to live like a college student for the next 14 years, so I would expect him to want to spend as much of his money as he can each year.

With $12,354,032 available we can be quite generous. After subtracting the $19,500 that went into his 401(k) and $5000 paid to the financial advisor that leaves $12,329,532.

To make our math easy Tatis can spend half of his $12 million each year as well as the $329,532. So he has $6,329,532 as spending money. What he blows this on is inconsequential as long as he stays under that six million and some change line.

That leaves us an even 6 million to invest for his future with.


With six million to invest Tatis is automatically an “accredited investor“. The most important result of this distinction is that he will be allowed to invest in things, usually riskier things, that have a higher return potential.

But to keep a well balanced and diversified portfolio we’ll have Tatis invest in many different asset classes.

If he does he should have stable cash flow for the rest of his life.

Emergency Fund

Before investing it is important to become financially secure. You do this by building an emergency fund.

People calculate emergency funds differently, but the easiest way to do it is in terms of months of expenses. So if you spend $4,000 a month and you have $4,000 in your bank you have 1 month of emergency fund.

A lot of people recommend having 3 to 6 months of emergency fund. For most people I think that is perfect.

For someone who is putting their money into incredibly risky investments, I would say that 1 year of expenses is probably safer.

So, over the course of his 14 year contract Tatis should build an emergency fund of about 1 year worth of expenses.

$500,000 a year will do just that.

At the end of 14 years he’ll have put $7,000,000 aside (which is slightly more than one year of expenses for him) plus the piddly interest rate of say 0.1% and he’ll have $7,045,683.

A whopping $45,683 in interest on 7 million dollars, but the money is in the bank so it is safe. This lets him make riskier investments.

Stock Market

Now for the first investment. You may think that the best option for a multi-millionaire is to hire a huge investment company to actively manage their portfolio. But you’d be wrong.

In fact, actively managed portfolios tend to perform worse than passively managed funds.

So unless Tatis plans on becoming really involved with learning the stock market, his best option is to invest in a passive index fund.

Index funds mimic the market almost perfectly because you are invested in basically everything. On average most total market index funds have returned about 10% over the long term which is amazing.

But an even safer assumption than 10% is a 6% rate of return since that will account for if it is a down year when Tatis retires.

With 5.5 million left to invest we don’t want to put all of our eggs in one basket. So a cool 2 million per year invested in stocks should do it.

Over the course of 14 years then he’ll have invested $28,000,000 and that will have produced $14,030,215 in interest.

That means his ending total after 14 years of investing in an index fund should be somewhere around $42,030,215.

It could be higher if the market has returned higher than 6% over those years, but it could be lower, though that is unlikely.

Real Estate

To have a more diversified portfolio an important investment is real estate. Now I don’t expect Tatis to become a sophisticated real estate investor.

But if he was able to find a reliable real estate investment partner he could easily build an investment empire.

Or he could invest in turnkey rental properties.

Or he could join syndications as a junior partner.

Regardless, getting into real estate can be very lucrative and it goes a long way to diversify your portfolio.

It would be impossible to go through all of these scenarios. So I’ll choose one.

Buying turnkey rentals will be the easiest to grasp.

A turnkey rental is basically a property that you buy that is all ready to go. That makes this an easy way for someone with a lot of cash to get involved in real estate.

If Tatis took 1.5 million and used 20% down financing he could buy 75 properties a year!

It is not out of reach to assume that after all expenses he could be pulling in $200 per month per property. That’s $15,000 a month for a total of $180,000 a year in real estate income. No including appreciation.

Over 14 years he would have invested 21 million in real estate and had $18,900,000 in rental income for a total of $39,900,000.

Please note that with $500,000 less per year invested he would nearly match the total end amount for investing in stocks.

But once again, the point of diversifying is to protect yourself in the event that one of your asset classes goes down. Real estate and index fund investing balance each other out.

Venture Capital

Now for the investing option open to Tatis as an accredited investor.

Venture capital is investing in risky start up businesses in return for stock in the company.

It is not for the average investor because the chance of losing your money is very high. But, the returns can be astronomical.

Out of 10 investments in venture capital 3 will fail and you’ll lose your money. 3 will return your money. And 2 will give an above average return.

In general, if you can afford to lose a lot of money you can hope to get a 25% return on the money you’ve invested.

So if Tatis semi-wisely invested his remaining 2 million a year in venture capital he could hope to get $198,747,224 by reinvesting the profits again and again.

This is the main vehicle for Tatis’s comfortable retirement.

End Result

So we have Tatis blowing through 6 million and some change each year however he pleases. Probably nice cars, fancy vacations, big houses and so forth.

And we have Tatis wisely saving and investing another 6 million a year over 14 years.

His savings and modest interest would leave him at $7,045,683.

His stock market investing growing at 6% per year will give him $42,030,215.

Buying turnkey real estate will bring him massive cash flow amounting to $39,900,000 available to him not to mention additional equity pay down.

And venture capital investing is the cream on the cake that will bring him $198,747,224 if invested well.

So after 14 years Tatis could have $339,909,928 in the bank!

Not really in the bank, but you get the idea.

Now it would be difficult to calculate exactly how much this would bring in each year since a lot of it is in equity, and we didn’t even mention dividends. And he could refinance houses he owns to pay less each year increases his overall cashflow, etc.

But, according to the very basic and loose 4% rule Tatis should be able to use 4% of that money every year and never run out of it if it stays invested.

4% of $339,909,928 is 13,596,397 he has per year!

Now of course this money has to be taxed, so assuming the same 49% effective tax rate he will be able to spend $6,662,234 per year in retirement, which is more money than he has to spend while playing baseball!

And that doesn’t include the $545,892 ish he’d have in his 401(k) which will grow to $7,872,305 by his retirement age.

If Tatis plays his cards right he can live like a professional baseball player for the rest of his life.

Who else has come into a lot of money recently that we could analyze? How would buying a baseball team impact Tatis’s finances? Tell me about it in the comments below.

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A list of definitions used on this blog can be found here.

Accredited Investor: An SEC distinct that is needed to qualify to invest in certain things. The distinction is person who has a yearly income exceeding $200,000 ($300,000 ir couples) or over $1,000,000 in net worth.

Diversified Portfolio: Putting your investments into different groups of assets so that if one of them drops the rest of your portfolio stays up. It is a protection against a recession and other economic downturns. This is the investing principle of don’t put all of your eggs in one basket.

Cash Flow: Money coming into your pocket from investing (either through stocks, real estate, or other assets). This is NOT the same as income because it doesn’t necessarily require you to work for it.

Turnkey: A property that has been bought, fixed up, and rented out with a property management company in place so that a person can purchase that property from the turnkey company and start cash flowing almost immediately.

Syndications: A group of investors that comes together to purchase a large investment property such as a large apartment complex. Usually it consists of partners and junior partners. The partners usually handle the day to day operations of the investment while the junior partners provide the funds to purchase the investment but don’t have a say in the operation of the project.

Asset Classes: Another way of saying different categories of assets. So things that depend on different sectors of the economy usually fall into different asset classes. So stocks, bonds, real estate, and oil and gas would all fall into different asset classes.

Venture Capital: Investing in risky start up businesses in return for stock in the company. This is reserved for accredited investors.

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