Post Career NFL Tax Strategy | Zach Miller | NFL Players’ Podcast #19
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Episode Summary
What should your financial game plan be after you retire from the NFL?
The truth is that tax planning isn’t over when you retire - the game is actually just beginning. There are still plenty of opportunities as a retired player for you to keep more of the money you earned if you take the right steps. A solid tax strategy saves money. Just filing your taxes does not.
In this week’s episode, I scratch the surface on the topics below, but if you want more details then download my Post Career Tax Game Plan through the form above.
Episode Highlights
(00:06) After-tax return is what matters
(3:58) Roth Conversions Strategy
(3:13) Backdoor Roth IRA Strategy
(5:15) NFL Pension + Annuity Plan + CAP Plan + 401(k) Plan Optimization
(7:38) Donor-Advised Funds saves on taxes and increase impact of giving
(8:22) Leveraging Post-NFL income with all the above
+ Read the Transcript
Zach Miller (00:06): Hey guys. Welcome back to the NFL Players Podcast. I'm your host, Zach Miller. As today is 4/15, it's normally tax day. I know myself was making estimated tax payments for 2021. I got to talk about taxes again and last time we talked about what an active player can do with their taxes and tax strategy, tax planning. This week we're going to talk about what a retired player can do. There's so much strategy still left out there and the game's not over. You actually can still do a ton of stuff after your career is over when it comes to tax strategy. And so much of that is because of what you've done on the field and taking all that human capital and turning it into financial capital. I tell myself every time I make the estimated tax payments, that it's a great thing.
Zach Miller (00:58): It means you took all that human capital, as a football player, turned it into financial capital and then invested it so it could grow. And all those dividends, all those payments that come out and capital gains, those are good problems to have, because it means that you realized your potential and turned it into financial capital. Then you can use it to do fun things. You can use it to provide for the ones that you care about. That's the ultimate goal there. And before we dive into what some of the strategies are that I personally used once I was done and really contributed to my net worth, I just want to mention the whole Aaron Donald thing. And obviously it's really early in what's going on with that.
Zach Miller (01:39): But as an NFL player, as a pro athlete, you have a target on your back. People want to challenge you, whether they're jealous, envy, they want, or they just want to see how tough you are. And it doesn't matter who's right or wrong. If you do get into those, whatever happened in that situation, you're going to look like the bad guy in the media. You're going to look like the one and they're going to blame it on you and they're going to sue you. And as much as you can help it, you've got to try to stay out of those situations. And obviously I have no details about what happened. I just know that personally, as a player, hanging out with my buddies, hanging out, going out at night, there's multiple instances where the group of friends, I was with, my close knit group that I went out with, there were were people, other guys at the bar that knew who I was and they want to challenge me, start something.
Zach Miller (02:36): And luckily I had the people around me that were able to get me out of the situation and you've got to make sure you surround yourself with the right kind of people that keep you out of trouble. It's hard when people can say whatever they want this day and age and there's no repercussions, but it's the reality of the situation. Surround yourself with people look out for you. As a retired player, what is a financial strategy that actually contributes and can save you in taxes? Obviously you paid so much money in taxes as a player.
Zach Miller (03:13): You can really, as your tax bracket comes down post-career, whether you're in a second career or just relaxing, enjoying the fruits of your labor, you can do a lot of strategies. And one of the ones that a lot of people don't do is, if you have availability to have earned income, you can continue doing backdoor Roth contributions. And some of the ways that, just any earned income can allow you to do that. And then, like we talked about last time, you can keep doing those backdoor Roth and building that Roth account, that Roth IRA account. And that's really a massive amount later. And that's one strategy.
Zach Miller (03:58): The other strategy is just like that is if you do have a job that offers a Roth 401K, the reason a lot of people don't contribute and max out their 401ks is because of cashflow, they just can't afford to do it. And if you've done it the right way, had the right advice when you were playing and saved a ton, you don't have cashflow issues. You can max out those retirement accounts, and this is general advice, but, you can really decide at what tax rate to go ahead and contribute to a Roth account, or what your marginal tax rate is. Then maybe you are deferring into a regular individual 401k, but you can really get into the details on that aspect.
Zach Miller (04:40): And then the other is if you don't know what an HSA, health savings account is, the NFL does have a HRA, a health reimbursement account. The problem is it doesn't grow with inflation. Each year goes by, it's actually losing its purchasing power. If you have an option to get into an HSA, you can contribute to that. And that's triple tax-free. It goes in without taxes, comes out without taxes and grows without taxes. That's one of the best accounts that's out there when it comes to reducing your taxes.
Zach Miller (05:15): The other one that comes up a lot is every year you play, you earn more towards a pension benefit, and you can take that as early as 45, but you have to pay penalties. If you do that really, it's a 55 or 65 decision, but you need to take that into account in conjunction with your other investments, because that is like a high quality bond. That pension is like a high quality bond in your portfolio. And if you're ignoring it, you might not have enough of an equity allocation in your portfolio. If you don't know how to value that, it's not that hard. Well, I think pretty much any finance undergrad could do it, but it's something that should be in part of your plan and not ignored, like a lot of financial advisors do, especially the brokers.
Zach Miller (06:07): And then at the 401K, the NFL 401K is great. Huge contributions you can make every year, immediate tax savings. And then at 45 you can roll over that to an IRA and really use it as, you could possibly use a self-directed IRA and put taxes, inefficient assets inside of it. And there's just a lot of tax planning when it comes to all the benefits you earn as a player that you really have to have someone that knows them really well, so that you can maximize your wealth. Some of these things are just little things, but added up together, they really add up massively to your net worth. All of these things are things I've planned for myself, things that as a retired player, I made sure that I maximized or optimized as best I could.
Zach Miller (06:57): And I see so many other guys I've played with that just aren't taking full advantage of all those opportunities that are out there. And essentially just leaving money on the table. It's basically free money, if you have the right kind of financial advice, the right kind of tax planning. Another tax strategy that I just see a lot of people miss and it's just a really simple one is to donating appreciated securities rather than donating cash in. Like myself, that was lucky enough to play during such a strong bull market, you have appreciated securities you can donate instead of cash, and then you get the tax deduction and there's not a tax liability attached to that.
Zach Miller (07:38): And you could also do that through a donor advised fund where you donate the appreciated securities, and then the donor advice fund, you can direct that money to the charity and they will give the cash to the charity if they can't handle the appreciated security. It's just a smarter way to give and unless you have a good advisor, unless you kind of know the strategy of a donor advised fund, it might not make sense, but trust me when you do the math, you're able to make more impact because you're able to give more and pay less in taxes at the same time. With these tax tips for retired players, I'm going to actually put a link in the show notes, and then also it'll be on the website to go ahead and download.
Zach Miller (08:22): These are the five, basically the five tax strategies that I did once I retired that added the most of my net worth. And they had a huge impact, was able to take advantage of these tax strategies. It will be just a short, real simple, easy to understand, the five best strategies you can do as a retired player to really save on your taxes. And I've actually had a really interesting question lately. It's actually how do I personally invest? And you look around and you see so many advisors that don't invest like their clients, they don't own the funds that they put their clients in. And really investing comes down to keeping expenses low, taxes low. You should always have taxes in the back of your mind when you make investments.
Zach Miller (09:08): That's what I do with my personal strategy, as passively as I can implement. I already have a lot of exposure to real estate in my home. I don't really take a lot of risk in real estate. A lot of it's public equity market and then there's this common misconception that just because you have a lot of money that you should be ultra conservative and only own bonds. And it's just ill-advised because there's ... Once you have the right financial structure and you have a protective reserve with your downside protected, you can actually take and you know how much those future cash flows and all those priorities are accounted for, you can actually take more risk in the equity market and be riskier because you're investing for generations. And that's what I do with my own plan.
Zach Miller (10:00): Volatility is not scary to me. Uncertainty is always going to be there and you have to account for that and have a personal hedge in the form of your protective reserve. That's what I do. And then I take probably a significant amount of risk compared to the standard 60/40 portfolio, which just is not optimized. It's not tailored to a personal situation and it doesn't match priorities and what people want to accomplish in life. I think each person deserves that and really should have a portfolio that's customized to them. I wouldn't work at a place that I didn't believe what the investment philosophy and data-driven, evidence-based investing.
Zach Miller (10:42):
With that, just please, like, subscribe, rate the podcast, appreciate it, send all your questions, go ahead and email me them. I'll cover them. If there's anything you want me to go in more detail on. And then for that download, go ahead and hit the download. You'll be able to see the five strategies that really helped me the most and really added to my net worth once I was done playing. And because there's still a lot of good strategies out there for those retired guys that are done playing. I'll see you next time.
Zach Miller (11:25): The information in this podcast is educational and general in nature, and does not take into consideration the listener's personal circumstances, therefore it is not intended to be a substitute for specific individualized, financial, legal, or tax advice. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a final decision.