The Colts will pick up $2.75 million of cap space with this move. It also ensures that Indianapolis holds the rights to McAfee should he elect to return to the NFL at some point.
McAfee announced his retirement back in February.
McAfee, 29, is a former seventh-round pick of the Colts back in 2009. He was entering the fourth year of his five-year, $14.5 million contract that included $5 million guaranteed and set to make a base salary of $2.75 million for the 2017 season.
For his career, McAfee totaled 26,653 yards on 575 attempts (46.4 YPA) over the course of 127 games. He was selected to two Pro Bowls and was a first-team All-Pro in 2014.