Olivia Dunne's $1 Million NIL Deal | Deal Breakdown - Ostrich (2024)

Olivia Dunne, a gymnast at LSU and gold medalist, received a $1 million NIL deal with active wear brand Vuori. Dunne has a large social media presence across TikTok and Instagram where she posts a combination of gymnastics videos, top trends, and videos from her life. Originally from New Jersey, Olivia competes at the highest level of gymnastics.

How Much Olivia Dunne Pays in Taxes

The first thing to plan for when landing a big deal is making sure you cover your tax liabilities. Unfortunately for Olivia both New Jersey and Louisiana have state income tax.

Since we are unsure of the exact details of the deal or which state Olivia claims as her permanent residence we’ll assume she received all of the money in one year and focus just on federal taxes.

She’ll pay $334,072 in federal income tax which leaves her with $665,928.

What Olivia Dunne Can Buy

Using that after-tax money Olivia can afford to purchase many things, including 22,198 leotards ensuring she can wear a fresh outfit every day for the next 60 years. Olivia could also cover the tuition, room and board, and other expenses of 27 LSU students! She could buy 3,700 round-trip flights from New Jersey to Baton Rouge, 124,473 Popeye’s Chicken Sandwiches, 372,027 pounds of crawfish for her next crawfish boil, or 2,775 bouncy houses.

What Olivia Dunne Can Invest In

With the after-tax money of $665,928, Olivia could choose to invest the money using some tried and true practices. Let’s take a look at some of those options.

The 4% Rule

The 4% rule is used to help you determine how much income you’ll have in retirement. We take Olivia’s after tax money of $665,928 and we simply multiply it by 4%. This gives us the annual salary that Olivia would receive if she retired today and never made another dime.

Which for Olivia results in an income of $26,637 a year if she chose to retire now. Not bad for a 19-year old college gymnast.

How does the 4% rule work exactly?

The 4% rule has its origins in the idea that you can achieve 8% returns over the long run by investing in a diverse stock market portfolio. This doesn’t have to be a complex portfolio, and may be made up of just a few low cost ETFs, such as VOO that we discuss below. In the first year of your retirement, you would withdraw 4% of your portfolio to live on. In future years, you adjust that withdrawal amount by the inflation rate. You can read more about the 4% rule in this excellent Forbes article written by Rob Berger.

Investing in the S&P 500

Another option for Olivia is to invest in a low cost index fund that tracks the S&P 500. This is a popular strategy because, since its inception, the S&P 500 has historically returned an average of 10%. A low-cost index fund means you can buy all of the companies in the S&P 500 with one stock purchase. You’ll own a tiny bit of each company. Our founders are big fans of Vanguard’s S&P 500 index fund that trades under the stock ticker: VOO.

If Olivia put that $665,928 in the S&P 500 with dividend reinvesting on, in 25 years her money would be worth $7,867,085 based on historical returns.

Purchasing a Rental Property

A third option for Olivia is to purchase an investment property. There are many benefits to owning rental property, from regular cash flow to beneficial tax treatment and more. A popular way to purchase real estate is to get bank financing so you can buy a larger property, but let’s assume Olivia pays cash and puts all of the $665,928 into a property with a 10% cap rate.

In that scenario, Olivia Dunne would cash flow $66,593 a year after expenses.

How does a cap rate work exactly?

A 10% capitalization rate is calculated by taking the net operating income (total income minus expenses) and dividing that by the purchase price of the property. The cap rate allows you to measure the return and risk across different types of real estate investments.

What Should Olivia Dunne Do?

Our hope is that Olivia will adopt one or multiple of these investment strategies while she’s young in order to set herself up for success. While we don’t know what Olivia will do, you can start to adopt these strategies yourself.

Download Ostrich to get your financial health score, see how you compare to your peers, and start building your nest egg. It’s never too early (or too late)!

Olivia Dunne's $1 Million NIL Deal | Deal Breakdown - Ostrich (2024)

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