The Babe, The Great Depression, and Annuities.

Posted by Annuity Reserve on April 27, 2012

Babe Ruth is arguably the greatest major league baseball player of all time.  Babe was such a draw for the New York Yankees that the Yankees made Babe the highest paid player in baseball in 1922, at a salary of $52,000 per year. The Babe spent the early part of the roaring 20’s blowing through his prodigious salary.  Babe was well on his way to going down in history as one of the many athletes who lived lavishly but spent their retirement in bankruptcy.  The history of sport is littered with former greats losing it all such as Johnny Unitas, Scottie Pippen, Dorthy Hamill, Evander Holyfield, and most famously Mike Tyson who squandered away earnings in excess of $300,000,000.  At the urging of his business manager Babe met with future Hall of Famer, Harry Heilman, of the Detroit Tigers in October of 1923.  Harry Heilman worked in the off-season as an insurance agent for The Equitable.  Babe purchased a deferred annuity from Harry with his World Series winnings and a portion of his annual salary.  Babe continued to make additional annuity purchases through 1930.

When Babe began making his annuity purchases, he had no idea the roaring 20’s would come to a crashing halt with The Great Depression taking hold in 1929.  Babe was forced to retire from baseball during the 1935 season as he was no longer able to physically withstand the toll the game took on his body.  Once the highest paid player in baseball, Babe was now unemployed during the heart of The Great Depression.  Due to the planning Babe and Harry Heilman had done previously, Babe was able to begin receiving payments starting in 1934 of over  $17,500 a year in annuity payments.  $17,500 a year in 1934 is the inflation adjusted equivalent of $290,578.22 in today’s dollars.  While other athletes and celebrities of the time found themselves in bread lines and destitute, The Babe lived comfortably in retirement never having to worry of running out of money. The Babe was so impressed with the power of annuities in creating financial security that he directed his estate to purchase a lifetime payment annuity for his wife at his death so she would always be taken care of also.

While the Babe can’t teach any of us to hit home runs in the manner he did, he left behind a lesson that all can benefit from.  With wise planning and using the safety of annuities, one can retire with security no matter what happens in stock markets.