As a Nike employee you have access to a wide range of benefits that will help you save for retirement, provide financial security, and when leveraged correctly reduce taxes.
It may feel overwhelming to figure out which ones to prioritize, so we have compiled a list of the most essential Nike employee benefits and strategies for optimizing them.
Nike 401(k)
Your salary and cash bonus are only two-thirds of your total compensation. As your Restricted Stock Units (RSUs) begin to vest, they are treated as income and are taxed, even if you never sell them. If you do decide to hold onto those RSUs, it’s as if you’re given
Make sure you fully fund your 401(k) and earn the maximum employer match. Nike will match 5% of your annual salary. You must contribute at least the same amount to earn the match. In 2023, you can contribute:
- $23,000 if you’re under age 50.
- $30,500 if you’re age 50 or older.
If you earn $150,000 and contribute up to the 5% match, you can earn $7,500 in free money!
Taxes and Your 401(k) Contributions
There are two ways you can contribute to your 401(k), and the decision on how to contribute comes down to when you pay taxes. Here are a couple of things to think through:
Traditional pre-tax 401(k): Reduce your taxable income now and pay taxes when you withdraw the money in retirement. Your contributions will grow tax-deferred until withdrawn. This is one of the best ways to reduce your annual taxable income. We recommend that high-income earners make pre-tax 401(k) contributions.
With a Roth, you contribute after-tax dollars. You will pay taxes on these dollars now but not in retirement. This money, including the interest earned, is never taxed again when withdrawn in retirement.
Nike Mega Backdoor Roth
If you know you’re on track to max out your 401(k), the next benefit to prioritize is the Mega Backdoor Roth. This is a provision within your 401(k). It allows you to contribute after-tax dollars to your 401(k) and then automatically convert those dollars to a Roth.
As mentioned above, within a Roth your money grows tax-free. These same dollars, and the growth, are tax-free when accessed in retirement.
Nike allows you to contribute up to 3% of your annual salary, up to $10,350. These after-tax dollars can then be converted to Roth dollars. It’s an excellent way to save for retirement and reduce your future tax bill.
Nike Deferred Compensation Plan (DCP)
Deferred Compensation is available to employees who earn a base salary of $150,000.
It’s like your 401(k) because it allows you to reduce your taxable income on a dollar-for-dollar basis. For example, if you defer $10,000 of your income, using DCP, you reduce your taxable income by $10,000.
Eligible Nike employees can defer:
- Up to 100% of next year’s bonus.
- Up to 75% of next year’s salary.
If you’re eligible, you can enroll in deferred comp during Nike’s open enrollment window.
Important Nike Deferred Comp Considerations
You need to think about current cashflow and monthly expenses to know how much income you’re comfortable deferring. When you make your deferral, you also need to decide when you want to receive your payout. Every time you receive a distribution, you are taxed. It’s important to think about future sources of income you’ll receive in retirement to make sure your DCP payouts don’t negatively impact future tax bills.
We explain more in this Nike DCP video.
Nike Employee Stock Purchase Plan (ESPP)
The Nike Employee Stock Purchase Plan (ESPP) enables you to purchase Nike stock at a 15% discount.
We know that many Nike employees tend to prioritize Nike’s ESPP benefit over others. We recommend you consider fully leveraging all the tax-advantaged benefits mentioned above enrolling in ESPP – your future self will thank you.
Nike Restricted Stock Units (RSUs) and Stock Options
You may be wondering how you can take advantage of all these benefits while balancing your cashflow and paycheck. Nike employees receive a cash bonus in August, known as the PSP bonus. You may also receive an equity bonus and will need to choose between receiving it as RSUs or Stock Options.
Using proceeds from your RSUs or stock options can free up more income to use from your paycheck to fully maximize your Nike benefits.
This strategy can also help you avoid keeping your money tied up in NKE stock, which can reduce your concentration risk and help you maintain a diversified portfolio.
Questions About Your Nike Benefits?
Remember, investing in yourself is one of the most important decisions you can make for your financial future. By taking advantage of these benefits offered by Nike, you can optimize your retirement savings and reduce your tax bill.
If you have any questions or need further guidance, don’t hesitate to reach out to our team.