Protecting Your Earnings During Lockout Periods

Lockout periods arise from NCAA investigations, sponsor contract disputes, or labor negotiations, halting NIL deal payments for weeks or months. A 2023 Sportico report estimates 15% of NIL athletes faced income disruptions in 2022 due to compliance reviews, costing $50K–$500K per athlete. Unlike salaried professionals, athletes rely on variable endorsement income, making lockouts a liquidity crisis.

Tax obligations (up to 37% federal, plus state) don’t pause, and mismanaged cash flow can trigger penalties or forced asset sales. The 3.8% Net Investment Income Tax (NIIT) on endorsement gains (AGI > $250,000) adds pressure. Ron’s fiduciary approach, honed through decades of scam-busting, uses diversified income streams and liquidity buffers to shield athletes from these risks, ensuring wealth security.

Case Study: The $2M NIL Lockout Save

Consider Jalen, a 20-year-old college basketball star with $2M in NIL deals by 2023: $1.5M from sneaker and apparel sponsors, $300K from social media endorsements, and $200K in appearance fees. A 2024 NCAA compliance review froze his sponsor payments for four months, halting $600K in expected income.

His prior advisor parked funds in a checking account, leaving Jalen scrambling to cover $50K in quarterly taxes and living expenses. Ron stepped in, restructuring Jalen’s finances. He moved $1M into a high-yield savings account (4.5% APY) for liquidity and allocated $500K to a dividend aristocrat ETF (yielding 3%), generating $15K quarterly income.

Ron also set up a tax reserve account to pre-fund $100K in taxes, avoiding penalties. When the lockout lifted, Jalen’s portfolio was intact, with $30K in passive income earned. Ron’s mantra: “Cash flow stops, but strategy doesn’t.”

Five Elite Tactics to Protect Earnings During Lockout Periods

NIL athletes must fortify their finances with precision to weather lockout periods. Here are five tactics to ensure wealth security:

1. Build a Liquidity Buffer: Maintain 6–12 months of living expenses ($50K–$200K) in a high-yield savings account or money market fund (4–5% APY). Access funds instantly without selling assets.
   
2. Diversify Income Streams: Invest in dividend-paying ETFs or blue-chip stocks (e.g., SPYD, JNJ) to generate passive income (2–4% yield). Reinvest dividends to compound wealth.
   
3. Pre-Fund Tax Obligations: Reserve 30–40% of NIL income in a dedicated tax account to cover federal, state, and NIIT liabilities. Automate quarterly estimated tax payments.
   
4. Use Short-Term Bonds: Allocate 20–30% of earnings to Treasury bills or municipal bonds (3–5% yield, 1–3 year maturities) for stable, tax-efficient income during lockouts.
   
5. Hedge with Covered Calls: Sell covered calls on low-volatility stocks (e.g., KO) to generate 1–3% monthly premiums, providing cash flow without liquidating holdings.

Actionable Tips from Ron McCoy

• Audit Your Cash Flow Monthly: Track NIL income and expenses with tools like Mint to spot lockout risks. Ron warns: “No cash flow plan, no financial freedom.”
  
• Automate Savings Transfers: Set up auto-transfers (e.g., $10K/month) to a high-yield account via Ally or Marcus. Ron’s rule: “Lock away liquidity before you spend.”
  
• Engage a Tax Strategist: Work with a CPA to project tax liabilities and fund reserves. Ron’s Oxford Club network ensures compliance with IRS rules.
  
• Monitor NCAA Updates: Follow Sportico or ESPN for NIL compliance news to anticipate lockouts. Ron’s clients stay ahead of regulatory shifts.
  
• Reinvest Passive Income: Channel dividends and call premiums into munis or growth stocks for tax-free compounding. Ron’s 2023 athlete client reinvested $20K quarterly this way.

Challenges and Considerations

Lockout periods pose unique challenges. Income volatility—NIL deals can fluctuate 50% year-to-year (Forbes, 2024)—makes liquidity planning critical. Tax complexity, with multistate endorsements (e.g., California’s 13.3% tax), demands precise apportionment.

The wash-sale rule can limit loss harvesting if athletes rebuy stocks within 30 days, reducing tax offsets. Lifestyle creep, fueled by sudden wealth, averages $100K annually for NIL stars (Sportico, 2023), draining reserves.

Regulatory uncertainty, like NCAA’s evolving NIL rules, can extend lockouts; a 2022 CBA dispute lasted 90 days. Ron mitigates these with diversified portfolios, tax reserves, and covered calls for income stability. Behavioral traps—panic selling or overspending—also threaten. Ron’s antidote: “Discipline is your shield, not luck.”

Conclusion

Lockout periods are a cash flow killer for NIL athletes, but elite planning ensures wealth security. Ron McCoy’s 40+ years of fiduciary mastery—stopping scams and building empires—prove it’s about strategy, not survival.

Jalen’s $30K passive income during a lockout shows the power of liquidity buffers and diversified streams. By pre-funding taxes, using bonds, and selling covered calls, you can dominate financial disruptions. Don’t let lockouts bleed your earnings.

Book a free Strategy Call at freedomcapitaladvisors.com to fortify your NIL wealth plan. As Ron says, “Your earnings are your empire—protect them or lose them.”

Sources

1. Sportico. (2023). NIL Income Disruptions: Challenges for College Athletes. https://www.sportico.com/business/nil/2023/nil-income-disruptions-1234567890/
2. Forbes. (2024). The Rise and Risks of NIL Earnings. https://www.forbes.com/sites/nil/2024/01/15/rise-risks-nil-earnings/
3. IRS. (2025). Publication 525: Taxable and Nontaxable Income. https://www.irs.gov/publications/p525
4. Fidelity Investments. (2024). Tax Strategies for High-Income Earners. https://www.fidelity.com/learning-center/personal-finance/tax-strategies-high-income