The Major League Baseball (MLB) pension plan is a key component of the financial security offered to players. Established way back in 1947, it’s actually the longest-running pension plan in all of professional sports.
Because careers in MLB tend to be relatively short, understanding the retirement benefits available is crucial for players. Proactive financial planning is essential to make the most of those benefits.
In this guide, we’ll cover everything you need to know about the MLB pension plan, including eligibility requirements, benefit details, related retirement plans, and healthcare provisions. We’ll also cover some common misconceptions about the plan.
Qualifying for the MLB Pension
So, how do baseball players qualify for a pension? It’s all about service time.
Service Time Requirements
To qualify for an MLB pension, a player needs to have logged at least 43 days of MLB service time, which is equal to one-quarter of a year. Service time accrues in quarter-year increments, up to a maximum of 10 years, or 40 quarters.
But what exactly is service time? In MLB terms, service time is based on the number of days a player spends on the active roster. A typical MLB season has between 180 and 190 “duty days.”
Roster Status and its Impact
Your roster status also matters. Eligibility for benefits is tied to whether you’re on the 40-man roster and, even more importantly, the active roster.
What about injuries? Being on the injured list still counts toward accumulating service time, which is definitely good news for players sidelined by injury.
MLB Pension Benefits: A Detailed Look
The MLB pension plan is designed to reward players for their time in the major leagues. Let’s take a closer look at how it works.
Pension Calculation and Payouts
The amount of your MLB pension depends on how long you played in the majors. Here are a few examples of what players can expect to receive per year in 2024:
- 43 days of service: $6,875
- 1 year of service: $27,500
- 5 years of service: $137,500
- 10 years of service: $275,000
These figures are subject to change. The MLB pension benefits also receive a cost-of-living adjustment (COLA) each year, which is currently set at about 1.8%. So, for example, a yearly pension of $100,000 would increase to $101,800 the following year.
Early vs. Standard Retirement Age
Players can start accessing their pension benefits as early as age 45, but there’s a catch: the earlier you start, the smaller the payout. Waiting until the standard retirement age of 62 will get you the full benefit amount.
For example, a player with 10 years of service could get $275,000 per year by waiting until age 62. But if they start taking benefits at 45, they might only get around $86,636 per year.
Factors Influencing Retirement Plan
When planning for retirement, MLB players need to consider several factors, including the cost of living, the potential for annual COLAs, and the impact of accessing their pension benefits early. Careful planning can help players make the most of their hard-earned retirement savings.
The MLB 401(k) Plan: An Additional Retirement Savings Tool
In addition to the pension plan, Major League Baseball players have access to a 401(k) plan, which is another way for them to save for retirement and reduce their taxes. The MLB 401(k) plan works alongside the pension plan to give players a way to build up substantial retirement savings.
The teams make contributions to each player’s 401(k). The amount varies, depending on the player’s time in MLB and the luxury tax threshold. In 2023, the teams contributed $10,000 per quarter to each player’s 401(k).
Contributing to a 401(k) has major tax advantages. In 2024, you can contribute up to $23,000 to a 401(k) and reduce your taxable income by that amount. For example, if you earn a $1,000,000 salary and contribute $23,000 to your 401(k), your taxable income would be $977,000. Depending on your tax bracket, you could save more than $8,500 in taxes.
Players can choose from a range of investment options within the 401(k) plan. It’s always a good idea to talk with a qualified financial advisor about how to manage your 401(k) investments.
Healthcare Benefits: Before and After Retirement
Major League Baseball players have access to healthcare coverage while they’re on the 40-man roster and the active roster. If you’re added to the 40-man roster, it’s important to take the time to understand and manage your family’s healthcare coverage because the choices you make can have an impact on the benefits you receive.
For retired players, healthcare benefits are available to those who have put in at least four years of MLB service time. There are three different healthcare policy options available to retired players: active, base, and buy-down. The premiums vary depending on the policy you choose.
It’s important to know that you can only enroll in or make changes to your healthcare policy by Opening Day. Be sure you understand your options so you can make the most of the benefits you’ve earned.
Planning for the future
A career in Major League Baseball can be incredibly lucrative, but it’s also relatively short. That’s why long-term financial planning is so important for MLB players. Understanding the many factors that impact your retirement plan, including your pension, is crucial.
It’s a good idea to seek financial advice from experts who understand the unique challenges and opportunities that professional athletes face. A qualified wealth management expert can help you decide when to begin drawing your pension to maximize its value.
In addition to the pension plan, MLB offers other benefits and resources to its players, including educational programs and career transition assistance. These resources can help players prepare for life after baseball and ensure a secure financial future.
Frequently Asked Questions
What MLB player still gets paid after retirement?
Any MLB player who has played for at least one day in the major leagues is eligible for some level of pension or benefits after retirement, even if they only played a single game. The amount they receive depends on their years of service.
How much is a full MLB pension?
A “full” MLB pension, earned after 10 years of service, can be quite substantial. The maximum benefit for those who retired in 2023 is around $245,000 annually. However, the exact amount varies depending on when the player retired and other factors.
Does Pete Rose get an MLB pension?
No, Pete Rose does not receive an MLB pension. Due to his permanent ban from baseball following his admission to betting on games, he is ineligible for the pension benefits that he would have otherwise qualified for.
What is the 10 year MLB pension?
The “10-year” MLB pension refers to the maximum retirement benefit available to players. To qualify for this full pension, a player must have accrued 10 years of service time in the major leagues. This provides them with the highest possible annual payout under the current pension plan rules.
Key Takeaways
The MLB pension plan, along with other retirement benefits, provides a solid foundation for players’ financial security after their baseball careers end. However, it’s essential for players to remember that these benefits are just one piece of the puzzle.
Smart financial planning and professional guidance are crucial for maximizing long-term financial well-being. By taking a proactive approach and making informed decisions, MLB players can take control of their financial future and ensure a comfortable and secure retirement.