Most professional athletes have two things in common: (1) high income; and (2) young ages. As a result, they have different retirement plan needs compared to the average person.
So, what is the best way to design a custom retirement structure for people like this?
In this post, we will discuss customizing designs for younger, high-income clients. Specifically, we will have an example of an NFL player. Let’s jump in!
Background
Most professional athletes have very short earnings windows, so it makes sense that they would like to maximize retirement contributions. The leagues that employ them often have very comprehensive retirement plans. We can’t re-architect those benefits.
But just because they have retirement plans through the league, doesn’t mean that the athletes can’t have other plans for their side income. For example, many athletes have net income from endorsement deals, camps, appearances, and other promotional activities, That side income is the lever.
Example
Let’s look at an example. Assume the following:
- NFL player
- Age 25
- NFL salary of $5 million
- Profit from side income of $1 million
- Side income taxed as a sole proprietor
This structure unlocks three stacked strategies below:
- Cash Balance Plan. In this example we will use a life insurance design.
- Mega Backdoor Roth. They should be doing a 401(k) deferral through the NFL. But they can get a tax-deductible profit-sharing contribution with the remaining amount going into an after-tax/Roth account up to the annual cap.
- Backdoor IRA. While not a homerun, it is a nice add-on.
Cash Balance Plan with Life Insurance
A cash balance plan is a defined-benefit plan, so contribution room is driven by actuarial math, not a flat IRS dollar cap like a defined contribution plan. Important design levers for a 25-year-old would be using prior service and age 55 as early retirement age.
Contributions are largely driven by age and income. A standard plan is written to age 62. By writing the plan with an early retirement age of 55, we compress the funding window and the actuary can justify larger annual amounts. But using the early retirement age will still be limited by the 415 limits, so it won’t help this client in year one. But if the side income decreases, they can possibly pick up higher contributions in subsequent years.
Using prior year(s) compensation will result in a bigger year one increase for this client. This is often referred to as “frontloading” contributions into the years the player actually has earnings.
Layering life insurance on top adds another deductible piece. The plan owns the policy, the premium is funded out of plan contributions, and the death benefit is paid to the player’s beneficiaries.
Because the cash surrender value of the policy is lower than the contribution amount, the actuary treats it like an investment loss which pushes contributions in the subsequent year a bit higher. In addition, the player can take advantage of prior service and the 50% cushion limit to get substantial money in over the first several years of the plan.
401(k) Profit-Sharing + Mega Backdoor Roth
The NFL player’s employee elective deferral is already consumed by the NFL 401(k) plan. The elective deferral limit is a per-person cap, so we can’t double-dip there.
But the annual additions limit — the current $72,000 ceiling on combined employee deferrals, employer contributions, and after-tax dollars — is a per-employer/per-plan cap. That means the side business plan can be filled with employer money and after-tax money independent of the league 401(k) plan.
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For a sole proprietor, the maximum profit-sharing contribution is 6% of the “deemed” wage (subject to the $350,000 comp cap) when combined with a cash balance plan. In this example you would get $21,600 of the $72,000 limit.
The remaining $50,400 is the after-tax employee contribution that is immediately converted to the Roth source inside the plan — the classic mega backdoor Roth. Total to this plan: $72,000. Giving up some current deductions in exchange for tax-free Roth growth works for a 25-year-old with a 30+ year compounding runway.
Backdoor Roth IRA
At $6M+ AGI, the player is far above the Roth IRA income phase-out, so a direct Roth contribution isn’t allowed. The fix is a non-deductible traditional IRA contribution of $7,500, immediately converted to a Roth IRA.
Because the player has no other pre-tax IRA balances (any pre-existing IRAs should be rolled into the qualified plan first to avoid the pro-rata rule), the conversion lands cleanly in Roth with effectively zero tax.
Year One Illustration
| Plan Component | Pre-Tax (Deductible) | After-Tax / Roth | Total |
|---|---|---|---|
| Cash balance pay credit (ERA 55 design) | $51,000 | — | $51,000 |
| Life insurance premium (in plan) | $25,000 | — | $25,000 |
| 401(k) profit-sharing | $21,600 | — | $21,600 |
| After-tax 401(k) → Roth (mega backdoor) | — | $50,400 | $50,400 |
| Backdoor Roth IRA | — | $7,500 | $7,500 |
| Totals | $97,600 | $55,900 | $155,500 |
| Tax savings @ 40% marginal rate | $39,040 | — | $39,040 |
What This Buys the Player
In one year, he uses three retirement vehicles to generate sizable pre-tax and after-tax/Roth contributions. In addition, he acquires meaningful permanent life insurance with premiums paid out of plan contributions rather than after-tax personal cash.
Compounded over a six- or eight-year career — and with the cash balance plan engineered to frontload contributions while the player’s earnings are high — the cumulative effect is a substantial tax-advantaged design that exists entirely outside the NFL’s qualified plans.
A few practical caveats worth flagging when this strategy is presented to a client:
Is a Cash Balance or Defined Benefit Plan Right For You?
- The cash balance contribution above is illustrative. The actual number must come from an actuary using the plan’s pay-credit formula, interest crediting rate, and the player’s age, and compensation.
- Cash balance plan contributions will be lower in this scenario because of the player’s young age.
- Because the cash balance plan is owner-only and therefore not PBGC-covered, the combined deduction limit applies. Profit-sharing up to 6% of compensation is exempt.
- The Mega Backdoor Roth requires that the 401(k) plan document specifically permit after-tax contributions and in-plan Roth conversions or in-service distributions. Custom plan design, not an off-the-shelf solo 401(k), is usually needed.
- IRS annual additions limits adjust each year; the §415(c) cap is $72,000 in 2026, so the after-tax piece grows modestly as limits inflate.
- Life insurance inside a qualified plan is subject to “incidental benefit” rules limiting premium as a percentage of total contributions, and the participant recognizes annual economic-benefit income equal to the term-cost of the death benefit.
For a player who knows his on-field income is a window rather than an annuity, structuring the off-field income this aggressively — and tuning the cash balance plan with an ERA of 55 and prior service can funnel dollars in while they’re earned — turns one good endorsement year into a thirty-year tax-advantaged compounding engine.
Final Thoughts
In the aggregate, this structure includes three retirement vehicles combined into a very efficient design. Replicated across a typical NFL career, the strategy is capable of producing seven figures in cumulative pre-tax and after-tax contributions. All of it outside the league’s qualified retirement plans and independent of the player’s on-field compensation.
For professional athletes, the fundamental planning challenge is not the magnitude of current income but the brevity of the window in which it is earned. A coordinated structure of this kind converts a finite earning window into a durable, tax-advantaged foundation. Properly designed at the outset, it materially alters the trajectory of the player’s financial life long after the final season has ended.