By Jake Withnell, CFP®
There’s a never-ending supply of financial advice out there. One person may tell you to open a Roth IRA and max it out. Another may tell you to open 529 college savings plans for all your kids. At the end of the day, you may not even know which advice applies to your situation and which doesn’t. It can feel completely overwhelming.
Luckily, we at JGP Wealth Management specialize in working with Nike leaders. Over the years, we’ve found that there are five key financial actions every Nike leader should take to maximize their wealth and prepare for a secure future. Promises aside, if you follow these steps, you’re on your way to setting yourself up for financial success.
1. Establish a Cash Contingency Plan
Every good Nike leader knows the importance of a solid contingency plan, whether you’re over sales and revenue, technology, or the next big marketing campaign. When you have a contingency plan in place, all of those little unknowns that could derail your success suddenly become known. By planning for the unknown variables ahead of time, they’re not nearly as scary or overwhelming when they actually happen.
The same is true for your finances.
Just as you create contingency plans in your job, you also need a cash contingency plan for your personal life. Similar to an emergency fund, this pot of money is there to sustain you should something unexpected happen, such as a job loss, a recession, a major medical emergency, a natural disaster, and so on.
Most experts recommend keeping six to twelve months of expenses in your cash contingency plan, but you may need more or less depending on your circumstances. If you need help figuring out how much you should keep on hand, please reach out to me. I can help you calculate your target number.
2. Maximize 401(k) Contributions and After-Tax Roth Conversion
One of the easiest ways to lower your tax bill for the current year is to max out your before-tax 401(k) contributions. For 2021, you can contribute up to $19,500 or $26,000 if you’re at least age 50. (1) Nike also matches your contributions, up to 5% of your eligible pay.
Once you’ve maxed out your 401(k), you should consider using the after-tax Roth conversion. As a Nike leader, you likely don’t qualify for a regular Roth IRA contribution due to income limits set by the IRS. You can bypass this restriction using an after-tax Roth conversion within the Nike 401(k) plan.
- After-Tax Roth Conversion: In addition to 401(k) Before-Tax Contributions, the Nike 401(k) also permits you to elect After-Tax Contributions up to 3 percent of your pay for a max $8,700 in 2021. With this strategy, you can contribute additional after-tax dollars to your 401(k) (2) and subsequently convert the after-tax dollars to the Roth 401(k) bucket. We recommend processing an annual in-kind transfer to the Roth 401(k) bucket at the end of each year. The conversion allows high income earners to save additional funds into the Nike Roth 401(k) and participate in the tax-free growth and tax-free withdrawals at retirement associated with Roth retirement accounts.
3. Optimize Your Nike ESPP Benefits
As a Nike executive, you get a 15% discount on any Nike Stock you purchase through the employee stock purchase plan (ESPP). You can optimize these benefits by funding up to $25,000 for the year (the current maximum), and splitting it between two purchase dates.
Nike’s ESPP benefits are a great way to build long-term wealth, but there are some tax implications to be aware of when you go to sell. If you’re unsure how these benefits work, coordinate with your CPA and financial advisor before you buy.
4. Diversify Your Portfolio
Over time, your wealth will likely become concentrated as the Nike stock you’ve accumulated through ESPP, stock options, and restricted stock begins to grow. That’s why it’s critical to have a coordinated and consistent restricted stock award and stock option liquidation plan that outlines how you’ll help lower your risk and keep your portfolio diversified over time.
For example, some Nike leaders use the proceeds from their Nike stock to diversify their portfolios. This could be a good strategy for you too, depending on your situation. The most important thing is that your diversification strategy matches your risk tolerance, retirement timeline, age, liquidity needs, and tax situation.
Selling stock almost always triggers a taxable event, so you’ll want to coordinate with a professional to determine when you should sell to keep your overall taxable income low.
5. Take Advantage of the Nike Donation Match Program
Nike has an incredible charity program where they’ll match up to $25,000 of any contributions you make to qualified schools and organizations. Historically, Nike has matched just cash charitable contributions, but recently they have decided to match gifts from employee directed Donor-Advised Funds (DAF’s). This is significant news as DAF’s accept appreciated stock. This allows Nike Employees to implement best practices around all their gifting strategies and accomplish a number of goals at once.
Donor-advised funds work like this:
- You make a lump-sum contribution to a donor-advised fund. (This contribution can be cash or appreciated assets, such as stock and mutual funds.)
- You receive an immediate tax benefit for the full amount.
- Your contributions get invested where they grow tax-free.
- You donate the assets to various charities and organizations over time. (3)
Need Help Executing These Steps?
As a Nike leader, you have a lot of really awesome benefits at your fingertips. Taking the step to optimize these benefits and lower any associated risk is key to creating sustainable wealth for you and your family.
At the same time, we at JGP Wealth Management know you’re busy and may feel overwhelmed by how to put this advice into action. That’s why we’d love to sit down with you and chat about how we can help. To get started, reach out to me at 503-446-6450, email email@example.com, or schedule an introductory phone call online.
Jake Withnell is a financial advisor at JGP Wealth Management, an independent, fee-based financial advisory firm in Portland, Oregon. Jake is known for going the extra mile for his clients and for his passion for working tirelessly to help his clients find solutions to their financial concerns so they can confidently live out the life they want. He prioritizes listening and understanding as the foundation of his relationships with his clients, and his highest hope is that they can spend more of their time and energy on their passions knowing he is watching over their financial future. Jake specializes in serving business owners, Nike executives, and retirees, and plays a key role in JGP’s portfolio management process, building and analyzing financial models, and conducting client cash flow analyses.
Jake graduated from Eastern Washington University with a bachelor’s degree in professional accounting and finance. He is a Certified Public Accountant (CPA) and a CERTIFIED FINANCIAL PLANNER® (CFP®) professional. Jake’s claim to fame is his time playing tight end for the Eastern Washington University Eagles, all while earning four-time Big Sky Conference First Team All-Academic honors! Jake values giving back to his community and does this by volunteering with the Children’s Cancer Association, Family Building Blocks, and New Avenues for Youth. In his free time, Jake takes advantage of the many outdoor activities the Northwest has to offer, such as trail running, mountain biking, and hiking. He loves traveling and spending long weekends at his family beach house in Seaside, OR. To learn more about Jake, connect with him on LinkedIn.