Which Investment Account Is Right for NIL Athletes?

Jesstine Kemper |

Account 1: Brokerage Account

Best for: Flexible, accessible investing with no contribution limits

A taxable brokerage account is the most straightforward investment account available. You open it, fund it, and invest in stocks, ETFs, or mutual funds. There are no contribution limits, no income requirements, and no restrictions on when you can access your money.

Access

Anytime. No penalties, no age requirements, no waiting period.

Contribution Limits

None. Invest $1,000 or $1,000,000 — no ceiling.

Tax Situation

No upfront deduction. Profits are taxed as capital gains when you hold investments for more than one year. You qualify for long-term capital gains rates of 0–20%, which are significantly lower than income tax rates.

Best for: Money you want accessible, investing above your retirement account limits, or building a taxable wealth base alongside your tax-advantaged accounts.

Account 2: SEP IRA

Best for: Simple retirement plan setup with meaningful tax deductions

A SEP IRA (Simplified Employee Pension) is designed for self-employed individuals and small business owners. It's easier to set up than a Solo 401(k) and still allows significant contributions.

Access

Age 59½ penalty-free. Early withdrawal triggers a 10% penalty plus income tax on every dollar.

Contribution Limits

Up to 25% of your net self-employment income, with a maximum of $72,000 per year. Note: unlike the Solo 401(k), all contributions are employer contributions — you're limited to 25% of W2 income regardless of how much you earn.

Tax Situation

Contributions are pre-tax and reduce your taxable income today. The account grows tax-deferred, and withdrawals in retirement are taxed as ordinary income.

Important note: Depending on how your business is structured, the SEP IRA may allow a lower total contribution than a Solo 401(k) — even at the same income level. Consult an advisor to compare.

Best for: Athletes who want simplicity and a solid tax deduction, especially if the Solo 401(k) contribution difference isn't significant for their income level. Important to note that if you have W2 employees, you’re required to fund this plan for them as well. 

Account 3: Solo 401(k)

Best for: NIL athletes who want the maximum tax advantage available

The Solo 401(k) is purpose-built for one-person businesses — which is exactly what a NIL athlete operating through an LLC is. It offers the highest contribution limits of any retirement account available to self-employed individuals, plus the flexibility to choose between Roth and Traditional treatment.

Access

Age 59½ penalty-free. Unique feature: you can borrow up to 50% of your balance (maximum $50,000) and repay yourself with interest — without taxes or penalties.

Contribution Limits

Up to $24,500 as the employee (you), plus up to 25% of net self-employment income as the employer (your LLC) — combined maximum of $72,000 per year.

Tax Situation

Your choice: Traditional (pre-tax contributions reduce taxable income today, taxed on withdrawal) or Roth (after-tax contributions, 100% tax-free growth forever).

Requirement: No W-2 employees. This account is for solo operators only.

Best for: Most NIL athletes with meaningful income. The combination of high limits, Roth option, and loan feature makes it the most powerful retirement account available to self-employed athletes.

Account 4: Backdoor Roth IRA

Best for: High-earning athletes who exceed the standard Roth IRA income limits

A Roth IRA lets you contribute after-tax money that grows 100% tax-free — but there's an income limit. In 2026, single filers earning above $153,000- $168,000+ are phased out from contributing directly to a Roth IRA. For athletes with strong NIL income, this limit can come into play.

The Backdoor Roth IRA is a legal strategy that lets you get money into a Roth account regardless of your income level.

How It Works

Step 1: Contribute to a Traditional IRA (non-deductible). Anyone can do this regardless of income — the limit is $7,500 per year 

Step 2: Convert that Traditional IRA to a Roth IRA. Because you already paid tax on the contribution (it was non-deductible), there's typically little to no additional tax owed on the conversion.

The result: money inside a Roth IRA growing completely tax-free — even though your income was too high to contribute directly.

The Pro Rata Rule — Watch Out

If you have other pre-tax IRA money sitting in a Traditional, SEP, or SIMPLE IRA, the IRS applies what's called the pro rata rule when you do a Roth conversion. This can trigger an unexpected tax bill. Talk to your advisor before executing a backdoor Roth if you have existing IRA balances.

Contribution Limits

$7,500 per year (2026). Lower than a Solo 401(k), but a meaningful addition to your overall tax-free wealth-building strategy.

Best For

Athletes earning above the Roth IRA income threshold who want an additional layer of tax-free growth on top of their Solo 401(k). It works especially well when coordinated with a Solo 401(k) that's already maxed.

The Simple Priority Order

For most NIL athletes:

  • Open a Solo 401(k) first. Max your contributions with the Roth election if your income level makes sense.
  • Add a Backdoor Roth IRA if your income exceeds the standard Roth IRA limit and you want additional tax-free growth.
  • Then open a brokerage account for any additional investing above your retirement account limits.
  • Consider a SEP IRA only if the administrative simplicity outweighs the potential contribution difference for your situation.

Every athlete's income, structure, and goals are different. The right account mix depends on your specific numbers — which is exactly the kind of conversation IroncladNIL has with every athlete we work with.

Book a free call with IroncladNIL — we'll build your investment account strategy → ironcladnil.com 

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Investment advisory services offered through Mutual Advisors LLC DBA IroncladNIL, an SEC registered investment adviser. Securities offered through Mutual Securities, Inc., Member FINRA/SIPC. Mutual Securities, Inc. and Mutual Advisors, LLC are affiliated companies. IroncladNIL, nor any of its members, are tax accountants or legal attorneys, and do not provide tax or legal advice. For advice tailored to your situation, please consult your tax or legal professional.