A combination of recent tax cuts, swelling government debt and changing political winds have many concerned about increases in future tax rates.  This has created a growing interest in strategies that can lower and mitigate future income taxes. One such strategy is available and often missed by many Nike employees within their 401(k) plan, known as “Mega Backdoor Roth 401(k) contributions”. While the name often elicits laughter at first, it can in fact be a serious and tangible way to save on future income taxes. 

What is the Nike Mega Backdoor Roth 401(k)?

The Mega Backdoor Roth 401(k) provides the ability to make additional tax-advantaged contributions to the Nike 401(k) plan above and beyond the typical employee limits of $24,500, plus catch-up contributions of $8,000 for ages 50+ and an additional $3,250 for ages 60-63 (2026). The additional contributions are in the form of “after-tax” contributions of up to 3% of income.  This applies to base salary and any PSP bonus. The total contribution amount will have a cap based on annual IRS limitations: $10,800 for 2026. The after-tax contributions can then be converted to Roth dollars within the plan, which allow them to grow tax-free and be distributed tax-free* in the future. 

How to Execute the Strategy

The process starts by electing to make after-tax contributions within the Nike 401(k) plan of up to 3%.  Once the after-tax contributions have been made, it is important to then convert these contributions into tax-free Roth funds* by periodically electing to do an “In-Plan Roth Conversion”.  To complete the In-Plan Roth Conversion, the employee will need to call the Nike 401(k) phone line and make the request verbally.  Be prepared to spend 10-15 minutes on the phone for the conversion process to be completed.     

The In-Plan Roth Conversion is important because the growth of the after-tax contributions will become taxable as ordinary income upon distribution if the conversion is never completed. However, if you convert those funds into Roth dollars, then the future growth and distributions will be tax-free*. We recommend that the In-Plan Roth conversion be completed on a periodic basis to make sure that the funds are converted before any significant growth occurs.  Any growth of the after-tax contributions at the time of this conversion will be taxable income, but if completed regularly, the growth and subsequent tax is typically minimal.  Ideally the conversion would be completed after every payroll or monthly, but practically speaking, one to two times per year should be sufficient to effectively execute the strategy.

Is this Strategy Right for You?

Nike’s robust benefit options can leave many unsure of which savings plan is best for them.  Whether it is 401(k) contributions, ESPP, Deferred Comp or Mega Backdoor 401(k) contributions, there are only so many dollars available out of a paycheck.  The order of priority is different for each person based on their personal tax situation, time frame at Nike, and plans for the future.  We believe that the best way to determine the priority of one plan over another is through financial planning projections. Through the financial planning process, we take your financial considerations today and project them into the future. While this does not predict the future, it does allow you to measure the impact of each savings option and find the optimal course of action.

Solution to Cash-Flow Problem

A potential solution to the cash-flow challenge of participating in the Mega Backdoor Roth 401(k) contributions is to repurpose other funds.  Available options that we have identified include existing after-tax accounts like Individual, Joint or Trust investment accounts, extra cash in the bank, or cash that you have from selling and diversifying out of Nike RSUs, ESPP, or Stock Options.  You can use these accounts to supplement your cash flow while the Mega Backdoor Roth contributions are coming out of your paycheck. 

Lower Your Tax Burden

While this strategy may not make sense for every Nike employee, it is a unique opportunity to get significant dollars into a Roth account that might not otherwise be available.  Whether or not income taxes actually do increase in the future, the Nike Mega Backdoor Roth 401(k) is a very effective way to lower your long-term tax burden and should be considered as part of your financial plan.

If you want to know more about how to take advantage of the Nike Mega Backdoor 401(k), please get in touch.

You can schedule time with our team on Calendly, or e-mail us at nike@humanvesting.com.

*Assumes first Roth contribution made at least 5 years before withdrawal and withdrawals occur after age 59½.

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A financial plan is a structured approach to managing one’s financial life. It is not merely a spreadsheet or a collection of investment products—it is a comprehensive framework that organizes income, expenses, savings, risk management, taxes, and long-term goals into a cohesive, actionable strategy. When constructed properly, a financial plan enhances decision-making, reduces uncertainty, and improves financial outcomes (Nissenbaum, Raasch, & Ratner, 2004).

Yet if financial planning is so powerful, why do so few follow through?

The answer often lies not in math, but in mindset. Research shows that even financially literate individuals struggle to plan for the future when they lack self-control, future orientation, or supportive social norms (Tomar, Baker, Kumar, & Hoffmann, 2021). A well-designed plan must account not just for assets and liabilities—but for human behavior. That’s why the best financial plans are often paired with an accredited fiduciary advisor, who offers a simple, visual, and tailored approach to help you make decisions.

At its core, a financial plan helps individuals clarify what matters most and align their resources accordingly. Whether navigating early adulthood, managing a growing family, or preparing for retirement, individuals benefit from a written plan that reflects financial priorities and personal values. In my work as a financial advisor and educator, I have seen that the most significant breakthroughs often come not from more money, but from more clarity.

the purpose of a financial plan

The purpose of a financial plan is twofold: to organize current financial resources and to make informed decisions about the future. This may sound straightforward, but the complexity of modern financial life often makes it difficult for individuals to answer even basic questions such as, "Can I afford this?" or "Am I on track?" A financial plan provides a framework to answer these questions thoughtfully and methodically.

More than a static document, a financial plan is a living tool. It should evolve alongside an individual's life stages, economic conditions, and shifting priorities. According to Nissenbaum, Raasch, and Ratner (2004), regularly reviewed and updated plans yield significantly better financial outcomes over time.

It starts with defining your goals

Goal-setting is the anchor of any financial plan. Without clear goals, even the most sophisticated strategies can lose direction. Goals give context to numbers and bring meaning to saving and investing. They can be short-term (saving for a vacation), mid-term (purchasing a home), or long-term (funding retirement or creating a legacy).

One of the most effective frameworks for goal setting is the SMART method—specific, Measurable, Achievable, Relevant, and Time-bound. Goals should inspire and direct behavior. In my experience, clients who articulate their goals clearly are far more likely to follow through on their plans.

components of a comprehensive plan

A thorough financial plan includes several interdependent elements, each of which contributes to the individual's or household's overall financial health. According to Ernst & Young’s Personal Financial Planning Guide (Nissenbaum et al., 2004), the five essential components are:

1. Cash Flow and Budgeting
   Understanding income and expenses is the foundation of any financial plan. A clear cash flow picture allows individuals to make informed decisions about saving, spending, and giving. Budgeting is not about restriction; it is about intentionality. When individuals budget effectively, they begin to control their money rather than letting money control them.

2. Risk Management and Insurance
   Life is unpredictable. A good financial plan includes appropriate insurance coverage to protect against major disruptions—including illness, disability, death, or property loss. While not exciting, insurance serves as a financial firewall. Emergency savings also fall into this category, with most professionals recommending a reserve of 3 to 6 months of essential expenses.

3. Tax Planning
   Tax efficiency is a core pillar of financial planning. Smart planning reduces unnecessary tax burdens and aligns financial decisions with long-term goals. This includes strategic use of tax-advantaged accounts, such as IRAs and 401(k)s, as well as decisions around capital gains, charitable giving, and income timing.

4. Investment Planning
   Investments must serve the plan—not the other way around. A financial plan defines the purpose, time horizon, and risk tolerance for each investment goal. This helps investors avoid emotional decisions and focus on long-term strategies. Diversification, asset allocation, and periodic rebalancing are all part of this disciplined approach.

5. Retirement and Estate Planning
   A financial plan must consider the future. This includes projecting future income needs, optimizing Social Security benefits, managing required minimum distributions (RMDs), and crafting an estate plan that reflects one’s legacy goals. Planning ahead ensures that wealth is transferred intentionally and tax-efficiently.

Building a financial plan: a step-by-step process

While the components of a financial plan are well-established, the process of creating one can be deeply personal. Below is a common approach used by both individuals and professionals:

1. Establish Goals and Priorities
   Start by asking what matters most. What do you want your money to do for you? What are your non-negotiables? Apply the SMART method in making them more attainable. Writing these goals down is a powerful first step.

2. Gather Data
   Collect all relevant financial information, including income, expenses, debts, assets, insurance policies, and legal documents. The accuracy of your plan depends on the quality of your data.

3. Analyze and Diagnose
   Identify gaps, inefficiencies, or risks. This includes assessing debt levels, reviewing savings rates, stress-testing for emergencies, and evaluating investment alignment.

4. Develop Strategies
   Design strategies that address the specific needs uncovered in your analysis. This might include refinancing high-interest debt, increasing retirement contributions, or adjusting your investment allocation.

5. Implement the Plan
   Execution is where many plans fall apart. Automate good behavior when possible—automated savings, investment contributions, and bill payments reduce reliance on willpower.

6. Monitor and Review
   Plans should be reviewed at least annually, and anytime there is a significant life event (e.g., marriage, new job, birth of a child). Adjustments should be proactive, not reactive.

Behavioral considerations in financial planning

Financial planning is as much about psychology as it is about math. Behavioral finance has shown that individuals often act irrationally with money due to cognitive biases, emotional reactions, and social pressures. A written financial plan serves as a behavioral anchor—a tool that reduces the likelihood of impulsive decisions.

Recent research reinforces the role of psychology in retirement financial planning. Tomar, Baker, Kumar, and Hoffmann (2021) identify several psychological determinants that significantly impact whether individuals engage in effective planning. These include future time perspective (the ability to think long-term), self-control, planning attitudes, and financial knowledge. In other words, it is not enough to know what to do; one must also be inclined to do it. Social norms and perceived behavioral control also play an influential role, suggesting that a supportive environment enhances financial planning behavior.

Research has shown that investors with written plans are more likely to stay invested during market volatility, rebalance their portfolios regularly, and avoid the pitfalls of market timing. A plan brings structure, and structure supports discipline.

common mistakes and how to avoid them

Even well-intentioned individuals fall prey to common planning mistakes. These include:

• Neglecting emergency savings

• Underestimating expenses in retirement

• Taking on too much investment risk

• Failing to review insurance coverage

• Overlooking tax implications of financial decisions

• Not discussing financial goals with a spouse or partner

Avoiding these mistakes begins with awareness and regularly revisiting the plan. A good advisor doesn’t just build a plan—they help you adapt it.

the value of working with an advisor

While many individuals can build a basic plan on their own, the guidance of a fiduciary financial advisor can add significant value. Advisors provide objectivity, technical expertise, and behavioral coaching. At Human Investing, we believe our highest calling is to serve as guides—helping clients navigate complexity with wisdom and clarity.

Importantly, not all financial advisors are held to the same standard. A fiduciary advisor is legally obligated to act in your best interest. Yet even among those who use the fiduciary label, fewer than five percent operate without receiving any form of commission (Fisher, 2025). That’s why the true fiduciary standard—free from all commissions—should be the baseline, not the exception.

turn intention into action

A financial plan is not just a document—it’s a decision. It reflects your willingness to take control of your future instead of drifting into it. The most successful outcomes aren’t reserved for the wealthiest or the most analytical—they’re earned by those who start, stay consistent, and make adjustments along the way.

If you’ve made it this far, you already care about your financial future. The next step is simple, but powerful: act. Whether it’s writing down your goals, scheduling time to review your budget, or meeting with a fiduciary advisor, do one thing today that your future self will thank you for.

Your money needs a plan. And now, you have the framework to build one that works.

References
Fisher, P. (2025, February 14). Only 4.92% of advisors are true fiduciaries. Is yours? Human Investing. https://www.humaninvesting.com/450-journal/only-5-percent-of-advisors-are-true-fiduciaries

Nissenbaum, M., Raasch, B. J., & Ratner, C. L. (2004). Ernst & Young's personal financial planning guide. John Wiley & Sons.

Tomar, S., Baker, H. K., Kumar, S., & Hoffmann, A. O. (2021). Psychological determinants of retirement financial planning behavior. Journal of Business Research, 133, 432–449.

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Disclosures: Human Investing is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply a certain level of skill or training. This article is provided for informational and educational purposes only and should not be construed as personalized investment advice. The information contained herein is believed to be accurate as of the publication date but is subject to change without notice. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal. Readers should consult with a qualified financial advisor to assess their individual circumstances before making any financial decisions.

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A growing complexity

As a Nike leader, you are provided a comprehensive range of benefits that help achieve financial and retirement goals. The downside is that these benefits often create confusing tax implications. Multiple measures over the last few years have passed to increase taxes on high-income earners, including the Metro and Multnomah County taxes. These tax measures in addition to regular Federal and Oregon taxes are becoming an increasing burden for Nike executives. 

A clear understanding of the tax implications with these benefits is crucial. Employing appropriate strategies can both reduce your tax burden and also prevent any surprises during tax season in April.

Let’s examine the three biggest reasons you could get hit with a tax bill and review a recommended solution.

The 3 leading causes to tax surprises

1. Wrong tax withholding on supplemental pay

Many compensation sources at Nike beyond salary (such as PSP, LTIP/PSU vests, RSU vests, and stock option exercises) are taxed as “supplemental pay,” which come with a set percentage of tax withholding (22% Federal + 8% Oregon) regardless of your tax bracket or tax withholding elections on your salary. The reality is most Nike executives are in a much higher income tax bracket, sometimes as much as 17% higher than the amount withheld. This discrepancy leaves a significant gap in the amount taxes that should have been withheld versus the actual amount.

For example, Kate Executive has $100K of RSUs that vested on September 1st. With all her income sources (salary, PSP, LTIP/PSU, RSUs) her taxable income is $700K. The taxes automatically withheld on the $100K RSU vests would be about $30K (22% Federal + 8% State).  However, based on her tax bracket, Kate will owe another $17,000 on that RSU vest.

2. No tax withholding for Multnomah County’s “Preschool for All” tax

For those who live in Multnomah County, you are likely subject to the “Preschool for All” tax that started in 2021. Unfortunately, Nike does not withhold taxes from payroll to cover this tax, so you will be responsible to fully cover this on your own. Multnomah County expects these payments to be received quarterly to avoid interest and penalties.

The Preschool for All tax is 1.5% on taxable income over $125,000 for individuals and $200,000 for joint filers, with an additional 1.5% on taxable income over $250,000 for individuals and $400,000 for joint filers. The rate will increase by 0.8% in 2026.

3. No coordination of Portland Metro tax payments for 2 working spouses

Since Nike headquarters is located within the Portland Metro, they do withhold taxes for the Metro Supportive Housing tax (a.k.a. Homeless tax) that also started in 2021. The Metro Supportive Housing Tax is a 1% tax that is applied on income over $125,000 single filer or $200,000 joint filer. 

A common issue arises when you have two working spouses at different companies, since the income threshold for this tax is based on household income and the two different employers obviously do not communicate with each other.   

For example, once a Nike executive’s income reaches $200K, Nike will start to withhold the Metro tax on any income above that amount. However, the other spouse’s employer does not know about the income at Nike and assumes that the spouse’s income is the household income. So, if that spouse earns $90K, no Metro tax is withheld on that amount even though all of it is subject to the Metro tax.

The 3 tax payment issues identified above often lead to a frustrating situation, where you either end up with a significant tax bill in April or you have been paying in the wrong quarterly estimated tax payment amounts given to you by your CPA.

Our recommended solution: The pay as you receive strategy

For many Nike executives, setting aside additional tax payments into your monthly household cash flow can become stressful, since the amounts can be so inconsistent.   

The “Pay as You Receive” strategy is calculating the estimated amount of taxes due from each type of “Bonus Compensation” as you receive it and making those tax payments at that time, while you have the funds to do it. This will leave your monthly cash flow separate and unaffected.

If this sounds like a lot of work, you can make it simpler by applying this method during 2 key time periods. 

• Time Period #1: August – PSP, LTIP/PSU bonus’

• Time Period #2: Early September: September 1st RSU vests

A more thorough approach is the also include any February retention RSU vests and stock option exercises as they occur.

These supplemental estimated tax payments, when combined with the withholding, should be equal to your anticipated tax bracket for the calendar year. This approach helps ensure that your total payment to the IRS, Oregon, Multnomah County, and Metro aligns with your tax obligations.

Additional strategies for minimizing your tax liabilities

If you’re looking for more tax savings or want to use your stock benefits to take care of tax payments, we highly recommend proactive tax planning. This involves looking beyond the past year and anticipating opportunities to reduce taxes in the future.

Proactive tax planning common solutions include:

1. Maxing out your Nike 401(k) with pre-tax contributions

This is a simple strategy, yet it is often missed.  With the maximum contribution amount increasing periodically with inflation and with opportunities for additional catch-up contributions at age 50, forgetting to review your contribution percentage each year is common.  We recommend reviewing your 401k contribution amount after your PSP bonus is paid, since it is a variable amount that is part of the equation.

2. Selling the right type of Nike stock

If you ever need funds from Nike stock, find the most optimal type of Nike stock to sell to minimize your taxes. Typically, RSUs are preferred over ESPP from a tax standpoint, but this can depend on when it was purchased/vested, how long it has been held, and what the stock price is at the time.

3. Utilizing the Nike deferred compensation plan to defer your taxable income to a later date 

Nike’s deferred compensation plan is generally the most powerful tax savings tool available for Nike leaders.  There are specific IRS rules and many important considerations to plan around when using this strategy.  To learn more click here.

4. Charitable giving

Most people assume that all donations to charities are tax-deductible.  They can be tax-deductible but are not always, depending on your individual tax situation. To receive a charitable deduction, you need to exceed a certain threshold each year, and it may make sense to “bunch” donations (make multiple years-worth of contributions in a year) to cross that threshold and capture tax benefits. Coordinating your charitable strategy with the Nike charitable match can be an effective way to lower your taxes and benefit your desired charities at the same time. To find out more click here.

5. Residence planning

If you currently live in Multnomah County, you might consider moving to another county, such as Clackamas or Washington Counties, to avoid the Preschool for All tax. This solution should consider the estimated tax savings compared to the cost of selling your home, the tax implications of selling your home, the purchase price of a new home, and the difference in a new mortgage payment (especially because mortgage rates have increased significantly).

6. Planning around the Oregon state kicker

Oregon law has a provision known as the “kicker” credit. This is a surplus credit that is returned to you on your tax return when tax revenue is larger than predicted.  By accounting for this, you can strategically recognize more income in “kicker” qualifying years so that your potential kicker credit is increased.  The last kicker payment was 17.34% of the Oregon taxes you paid in 2020 and the next one is estimated to be even larger. 

Bring in experienced experts

By implementing a proactive forward-looking tax strategy and payment plan, Nike leaders have a significant opportunity to improve their financial situation and relieve stress related to taxes. It is important to note that any tax payment and mitigation strategies should be part of a comprehensive financial plan that is tailored to your specific financial situation.

If you have questions about how to set up a proactive forward-looking tax strategy, please contact our team to learn more.

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