Private real estate investments, when high earners don’t know if they can afford private school, a primer on infrastructure investing, Hu Anyan’s I Deliver Parcels in Beijing
Dear Friends & Client Partners,
The past couple of weeks have seen increased geopolitical uncertainty leading to all kinds of economic headlines. As many clients may recall from our portfolio strategy conversations, most of our portfolios include assets such as gold and commodities that have historically been a shield against geopolitical uncertainty.
That said, your particular portfolio is aligned to your unique long-term risk tolerance and objectives and will have varying degrees of these kinds of assets within them. We’ve been closely monitoring all of our clients’ portfolios, but if you’d like to talk about any concerns you have about the markets, please reach out at any time.
For the rest of today’s letter we will shift focus and discuss private investments we’ve been making for accredited clients and a topic that has come up in a number of recent conversations – paying for private K-12 education.
Firm Updates
Investing: Private Real Estate
We’ve started incorporating private real estate funds into client portfolios. As I mentioned in Client Letter #5, we have developed a partnership with a leading private fund platform that works with independent wealth managers to provide access to the same institutional private equity, real estate, infrastructure, and credit funds as the largest banks and brokerages.
The difference is they bring a level of fees, investment minimums, transparency, and operational processes that I feel good about using for my own family’s private fund needs – which means I feel good about bringing them to clients.
I have been impressed with what I have seen from them so far and will be sharing my findings and recommendations with those of you who are accredited investors during our upcoming quarterly reviews.
As a reminder, unlike many other advisory firms, we are a fee-only fiduciary. We do not accept third party commissions or payments for the services or investments we recommend. We want our clients to feel confident when we recommend a strategy or fund that we have no hidden incentives in doing so.
Deep Dive
Making K-12 Private School Work
These middle years can be tough. You need to balance your career with the demands of caring for young children, and in many cases, for aging parents.
You’ve had a lot of professional success but costs are adding up and you’re not sure if your mid to high six-figure family income is enough to provide the life you want for your family today while still making sure you’re not robbing yourself of your future goals.
We have two young children and I’ll be 40 in two months so I’m intimately familiar with what many of you are going through.
One item that has come up repeatedly in conversations with mid-career professionals is the enormous cost of private school for the K-12 years. Even C-Level executives at mid-sized firms and doctors are struggling to come up with the $100,000+ per year it takes to put three kids through private school while also paying for the mortgage, family vacations, and day-to-day life in a high cost-of-living city.
Figuring out how to make the yearly budget accommodate school tuition is a painful but relatively straight-forward exercise for this group. However, the most common question I get is whether paying for school now is going to significantly impact retirement in the future.
How Much Will Spending Tens of Thousands on Private School for the Next Decade Impact My Retirement?
The wealth management industry has done a good job educating people on the need to aggressively contribute funds to retirement throughout their entire career. This is sound advice for the average household making the median income throughout their lives.
But some of this is manufactured fear created by an industry that makes money off of how much people keep in their accounts – not when people choose to spend their money intentionally on the things that are important to them.
Many of our clients have been aggressive both in their careers and in putting excess funds towards retirement and other investments. They are lucky enough to already have seven figures saved up by the time they come to the end of their 30s. Our financial planning algorithms show that for these people, putting more money towards retirement is a nice to have, not a necessity, to live the retired life they want in the future.
Here’s an example.
- You and your spouse have both worked high paying jobs since graduating.
- You’re both around 40 years old and already have $2,000,000 saved up across your retirement and investment accounts.
- You have three kids you want to put in private school but that would mean not being able to contribute nearly as much to your savings and investments as you have been.
Even if you never contributed to these funds again, your nest egg could be worth just a bit over $13.6 million by the time you retire at 65 (assuming a moderately aggressive allocation that returns 8.0% a year).
Whether $13.6 million is enough to retire on depends on your ultimate goals and what you want your lifestyle to be. But using the simplified 4% rule of retirement, those assets could support a yearly retirement spend of $544,000.
In this situation, you can likely focus on providing the education and lifestyle you want for your family now while knowing time is going to do a lot of heavy lifting on the assets you’ve already built.
This is where having a solid idea of what you want your future lifestyle to be can better define the tradeoffs you might be making today.
Making Private School Payments Slightly Less Painful
There are a few ways to reduce out-of-pocket private school costs for high-earners. Note, these can vary significantly based on state and school policies:
- Using a 529 as a tax-advantaged K-12 private tuition payment account
- Paying tuition upfront
- SBLOCs or other specialized loan vehicles
I. Using 529 as a tax-advantaged payment account
As of January 1st 2026, parents can now use up to $20,000 a year per student in 529 Plan funds to pay for K-12 tuition expenses without Federal penalties.
But the real benefits come at the state level due to state tax deductions. Because there are generally no time restrictions on how long funds need to be in a 529 before being used for qualified expenses, you can effectively use your 529 Plan as a state tax deductible payment account for your K-12 tuition.
Each state has different rules but let’s look at Pennsylvania as an example. In PA, a married couple can contribute up to $38,000 a year per beneficiary per 529 plan. PA has a flat state income tax rate of 3.07%.
Let’s say you have two kids in private school and you’re paying $30k a year for each of them. Here’s how your 529 Plan could generate up to $1,228 in yearly “savings” on your tuition payments:
- Contribute Tuition Funds to the 529: Instead of paying your tuition out of your bank account, first contribute up to $20k each school year into each child’s 529 Plan. Remember, $20k is the federal limit for using 529 funds for K-12 expenses without penalties.
- Pay the Tuition Out of the 529: Pay the tuition out of your 529 Plan.
- Get you state tax deduction: Since the $20k contribution to the 529 is state tax deductible, you will get a state tax deduction worth $614 ($20k * 3.07% PA state tax rate) for a combined $1,228 between your two children.
This isn’t life changing by any means, but every bit helps when you’re in the squeeze years of trying to pay for school, your mortgage(s), and day-to-day living expenses. You are saving $1,228 by paying tuition that you would have paid anyway.
If you’re a client using our managed services, we will handle most of these steps for you, including letting your accountant know to properly file each of these items.
If you’re doing this on your own, make sure you coordinate with your accountant or other tax advisor on all of these steps and check your state tax code. Every state has different rules for how / if 529 funds can be used for K-12 expenses.
II. Paying Tuition Upfront
Some schools offer small discounts for paying tuition upfront vs. paying throughout the year. This is typically 2-3% but depends on your school’s specific policies. In some cases you need to specifically ask for or negotiate a discount for upfront payment.
Some people may see the 2-3% as being lower than what you could get in a high yield savings account or money market fund at this time and be tempted to try and squeeze out an extra percentage or two.
For example, if your tuition is $30,000 you might look at something like this:
- 2.5% discount on $30,000 paid now = $750 in tuition savings
- $30,000 invested at 3.5% in a High Yield Savings Account = $1,050 in potential yearly interest if I pay tuition throughout the year
If you’re doing a calculation like this, you need to keep in mind the after-tax impact of your strategies.
In the first scenario, your $750 in tuition savings goes straight to your bottom line.
If you’re a high earner (which you likely are if you have kids in $30k / yr private school), then your $1,050 could be subject to federal, state, and local taxes which could add up to well over 45%. Your $1,050 in interest ends up being $567 after 45% taxes.
III. SBLOCs or Other Specialized Loan Vehicles
Depending on current rates and your broader personal risk tolerance, net worth, and cashflow profile, you may be able to fund your private school needs through various loans with favorable rates relative to the rest of your financial assets. Higher net worth families have options available to them that go beyond educational loans such as borrowing against investment accounts, home equity, etc.
This is a nuanced, complex topic that we won’t be able to fully cover in a newsletter. We can work with any of you who are interested in this to understand the tradeoffs and how it may impact your broader financial plans.
Private Consultation: We advise our clients on education strategies as part of their broader financial planning. If you’re not a client but would like someone to help you understand the short and long-term financial tradeoffs of sending your kids to private school, you can schedule a complimentary 30-minute session with me. We waive fees for newsletter subscribers for any initial consultations.
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Food for Thought
A collection of articles or books I’ve read that might be interesting to many of you.
- Assessing Private Infrastructure via CAIS: We’ve started incorporating private real assets into client portfolios and came across this piece during our research into the risks and potential benefits of private infrastructure funds. As CAIS notes:
“Private infrastructure funds, in aggregate, have demonstrated a low correlation to public equities and fixed income, while maintaining a moderate correlation to private real estate. They also had smaller drawdowns than public equities, perhaps most significantly following the 2022 Fed rate hikes.”
- I Deliver Parcels in Beijing by Anyan Hu: I kept coming across this book in various “Best of 2025” lists from the Financial Times, Economist, etc. I agree with the sentiment, it’s one of the best books I’ve read in the past year. It’s a first person account of what it’s been like working in China over the past 10-15 years as a cog in the vast machinery of the platform companies. It’s both an informative look at how Chinese companies operate and an interesting meditation on the purpose and meaning of work in one’s life.
Thank you for the continued partnership and for the opportunity to help steer your family’s capital toward what matters most.
Nathan
Founder & Lead Advisor
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Disclosures: This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. We do not receive any direct payments or commissions for securities discussed in our posts. Private funds are illiquid, speculative, and carry higher fees. Private funds are generally available only to ‘Accredited Investors’ as defined by the SEC. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.
Kangpan & Co. 