Why NBA Free Agents Should Consider Signing Shorter Contracts For Now

From a financial perspective, there’s never been a better time to be an NBA player. Just ask Naz Reid, who plans to re-sign with the Minnesota Timberwolves on a five-year, $125 million contract, according to ESPN’s Shams Charania.

The free-agent market projects to be bleak for players hoping to change teams this offseason because the Brooklyn Nets are the only team expected to have significant salary-cap space. But the cap itself has skyrocketed over the past decade, bringing player salaries right along with it, as Reid can newly attest.

In 2015-16, the salary cap was $70 million flat. The non-taxpayer mid-level exception was roughly $5.5 million, while the taxpayer MLE was not even $3.4 million. The 2025-26 cap is expected to land at roughly $154.6 million, which would put the non-taxpayer MLE at $14.1 million and the taxpayer MLE at $5.7 million.

Yes, you read that right. The taxpayer mid-level exception in 2025-26 is expected to be roughly $200,000 higher than the non-taxpayer mid-level exception was a decade ago.

That stratospheric growth isn’t expected to stop anytime soon, either. Thanks to the NBA’s new 11-year, $75 billion national TV contracts and the cap-smoothing proposal that the league office and the players’ union agreed to as part of the new collective bargaining agreement, the salary cap will likely rise by the full 10% that it’s allowed to increase year-over-year for at least the next few seasons.

Although it may be hard for NBA players to turn down nine-figure contract offers, they should think twice before locking in long-term deals this offseason. No matter what contract they sign, the salary cap projects to increase at a faster pace than their new deals will.

The Compounding Problem

Any NBA player looking to maximize their earning potential over the next half-decade needs to familiarize themselves with the concept of compounding.

When a player re-signs with his own team, he’s eligible for as much as 8% annual raises. However, that’s a fixed rate after the first season. However much his salary increases year-over-year from the first season to the second is exactly how much it will rise in the ensuing years, too.

For instance, say a player’s new contract begins at $30.0 million and has 8% annual raises. It would jump to $32.4 million in the second year of the deal, but it would not increase by another 8% the following season. Instead, it would again rise by $2.4 million.

It’s even worse for players who sign with other teams in free agency. Those players are only eligible for four-year deals and have only 5% annual raises at most. Theirs work the same way as the 8% group, namely that the increase between the first and second seasons is equivalent to how much their salary will rise in future years.

The NBA salary cap itself has no such issue. Not only is it projected to rise by 10% each year for the foreseeable future, but unlike the annual increase in contracts, those raises compound. As a result, long-term contracts will take up a slightly smaller portion of the cap each year, even if players get the full 8% max annual raise by re-signing with their own teams.

If a player signed a five-year, $313.9 million max deal this summer, his salary would start at $54.1 million, increase to nearly $58.5 million in 2026-27 and then rise by another roughly $4.3 million over the remaining years of the deal. But if the cap does go up a full 10% annually over the lifespan of that contract, said deal would go from being 35% of the cap this coming season to only 31.6% in 2029-30.

Granted, those smaller-than-the-cap-increase raises could ultimately benefit both players and teams. Given the new CBA’s harsh team-building restrictions for the league’s most expensive rosters, teams must be more cautious than ever while building around players on max contracts, particularly if they have two or more players on 35% max deals. Having those players take up an increasingly smaller portion of the salary cap each year could give teams extra wiggle room under the aprons to build out a championship-caliber supporting cast.

Contracts are growing so massive that not every player will care about milking their respective teams for every dollar possible. For instance, New York Knicks guard Jalen Brunson signed a four-year, $156.5 million extension last summer rather than testing free agency in 2025, when he could have been eligible for a five-year, $269.1 million contract. Knicks wing Mikal Bridges, Brunson’s college teammate, could potentially follow suit this offseason.

Thus far, Brunson has been the exception to the rule. Jimmy Butler forced his way off the Miami Heat after they refused to give him the two-year, $110-plus million extension that he received upon landing on the Golden State Warriors. Anthony Davis signed a three-year, $175.4 million max extension in August 2023 that runs through the 2027-28 campaign (player option). Cade Cunningham, Evan Mobley, Franz Wagner and Scottie Barnes all received max deals fresh off their rookie-scale contracts last year, too.

As Reid just demonstrated, some players might prefer to lock in long-term financial security over fully maximizing their earning potential. After all, one major injury could threaten their ability to secure another nine-figure payday. Look no further than Isaiah Thomas and DeMarcus Cousins, both of whom were in line for massive contracts within the past decade before a hip injury (Thomas) and Achilles tear (Cousins) derailed their careers.

However, players who want to earn the most money possible during their NBA careers should be open to taking shorter-term contracts given the salary-cap outlook over the next few years. In fact, they should try to line up their deals to coincide with when they become eligible for a new earning tier. (Players with 7-9 years of NBA experience can receive up to 30% of the cap as their starting salary, while players with at least 10 years can receive up to 35%.)

That approach comes with clear injury risk, but it also features more financial upside.

Unless otherwise noted, all stats via NBA.com, PBPStats, Cleaning the Glass or Basketball Reference. All salary information via Spotrac and salary-cap information via RealGM. All odds via FanDuel Sportsbook.

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