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Author: Nathan Kangpan

  • Client Letter #4: Living Off a Portfolio’s Income

    2025 Tax Planning Summaries, engineering a Personal Endowment, capital-intensive infrastructure bubbles, and a primer on income-centric investing

    Dear Friends and Client Partners,

    In this week’s deep dive I’ll be talking a bit about the income strategy I’ve used to create the cashflows that support my family. This portfolio income took the place of my C-level salary when I left the corporate world and also provides the cashflow that allows me to be intentional and measured in who I decide to work with as I build Kangpan & Co.

    A number of you have asked about or expressed interest in living off your portfolio as you think about your future so hopefully this is a helpful start. But first, a quick update on Systematic Upgrades we’ve made for our clients’ financial lives.

    Systematic Upgrades

    Focus: 2025 Tax Planning Summary

    We have finalized your 2025 Tax Planning Summaries. These reports highlight actions we took together that have tax implications that are not readily apparent on your W-2s and 1099s (e.g. 529 plan contributions, IRA funding, etc.). 

    The goal of this summary is twofold: ensuring zero “tax leakage” and reducing the administrative drag on your accounting team. Implementation is as follows:

    • Comprehensive Tax Coordination: For clients utilizing our integrated tax coordination services, we’ll be sending summaries directly to you and your CPAs. No action is required.
    • Independent Tax Services: For clients managing their own accounting flow, your summary will be securely sent over to you if you have any notable actions.

    Deep Dive

    Engineering a Personal Endowment

    As countless modern philosophers (both academic ones and the armchair variety) have pointed out, two of the hardest addictions to overcome are carbohydrates and a steady paycheck.

    The pretzels, frozen waffles, and assorted cookies that we regularly refill at the Kangpan household present no argument against the addictiveness of carbohydrates.

    Let’s talk about the monthly salary.

    I spent almost two decades in the corporate world, the latter half mostly as a C-level executive. I always had a proclivity for investing and financial planning so I was diligent over the years in contributing a fixed percentage of my salary to my family’s portfolio. This allowed me to “retire” from the corporate world before 40.

    However, the strategies that work during accumulation aren’t necessarily the same ones that should be used when switching gears to living off your portfolio.

    Low-cost, broad stock indexes with selective exposure to various factors are a great way to build your portfolio while you’re in accumulation mode. These were a core part of my strategy for building my own asset base and they form the foundation for many of Kangpan & Co.’s growth-focused clients.

    But predictability, stability, and the preservation of assets are what’s important when you are living off investments. 

    A traditional stock and bond portfolio doesn’t check those boxes as the inflationary 1970s, the 2008 GFC, the synchronized drawdown in 2022, and many other events have repeatedly shown. 

    These major shock events are incredible opportunities for buying when you have a steady wage to invest into the market. But they create significant sequence of returns risks for anyone living off their investments.

    Volatility aside, I also knew I didn’t want a strategy that involved steadily selling the assets I had accumulated. When you spend twenty years or more building up a nest egg via a steady paycheck, it is very difficult to suddenly shift into selling the family jewels to support a post W-2 life.

    This means I needed to engineer a portfolio strategy that:

    • Generates a predictable income across economic cycles
    • Grows that income steadily over time
    • Protects the underlying assets against common economic shocks

    Essentially, I developed a portfolio strategy that was modeled after how large universities manage their endowments – a Personal Endowment that provided a synthetic, growing income to replace the one I was stepping away from.

    This Personal Endowment portfolio is primarily made up of the following strategies:

    • Quality-Tilted Equity Income: Companies across a diverse set of industries and geographies that have steadily increasing cashflows, established distributions, and conservative payout and debt ratios.
    • Real Assets: Real estate and infrastructure that generate contractual revenue tied to inflation escalators. 
    • Alternative Credit: Private and senior-secured loans that are primarily floating rate in nature that help smooth the rate sensitivity of the portfolio.
    • Economic Hedges: A mix of uncorrelated assets such as managed futures, cash, gold, etc. that help shield the portfolio against major economic shocks. These form the basis of Kangpan & Co.’s Guardian strategy used across many client portfolios.

    The exact mix of these assets can vary throughout the economic cycle but I generally aim for a balanced mix of yield and yearly growth of that yield. This allows the portfolio to generate a livable, diversified income today and a steadily increasing cashflow that aims to outpace inflation over time.  

    So how’s it going?

    So far this strategy has done exactly what I wanted it to do.

    I designed this Personal Endowment style portfolio because I wanted a stochastic (random) market to support a more deterministic (predictable) life. 

    It was important to me to be able to comfortably and reliably support my family through our investment portfolio when I left Kepler. This wasn’t because I wanted to retire, but because I wanted to be measured and intentional in how I pursued my second act.

    Not needing the income from Kangpan & Co. has allowed me to to focus on working only with clients I enjoy spending time with while supporting them the way I think a full service wealth manager should. I don’t need scramble to build assets and take on clients that aren’t a fit for the firm or compromise Kangpan & Co.’s integrity by accepting commissions for products. 

    I don’t care about being the biggest wealth manager, I want to be the best for the client partners whom have entrusted their family’s future with my firm. My portfolio strategy gives me the absolute independence from outside pressures to focus on that goal.

    If you are interested in looking at the math of supporting a career pivot or retirement with a customized Personal Endowment strategy, let’s sit down and run your specific numbers together. 

    Food for Thought

    A collection of articles or books I’ve read that might be interesting to many of you.

    • The AI Debt Boom Does Not Augur Well for Investors via the FT: A reminder that capital-intensive infrastructure booms have historically had permanent, transformative effects on the broader global economy and human behavior…. but can create short to medium term investment pain if the capital cycle turns. As the FT notes:

    “History rarely rewards lenders who finance capital-intensive growth booms at their peak. In the late 1990s, telecoms companies borrowed heavily to lay fibre-optic cables, confident that data demand would ensure adequate returns. Although the infrastructure transformed the economy, it generated little return on investment for years.”

    • The Ultimate Dividend Playbook by Josh Peters: For anyone interested in learning more about income-centric investing (a least in terms of equities). This is a solid primer on assessing the quality and sustainability of payments from publicly traded firms. The appendix also provides a great series of briefings on investing in various industries like utilities, REITs, and more. I don’t agree with all the valuation methods but the book provides a strong foundation from which to expand.

    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

    Not a client yet? 

    Subscribe to this bi-monthly client update for free to see all the engineered tax, investing, and planning strategies we run for high-earning and high net worth investors like you.

    Or reach out to us to get a complimentary, 30-minute Diagnostic to see what tax, investing, and planning opportunities your current strategy or advisor is overlooking.

    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. The Personal Endowment is a conceptual investment framework customized to each client and does not represent a specific fund or guaranteed outcome. Asset allocation and yield targets are subject to market volatility. We do not receive any direct payments or commissions for securities discussed in our posts. 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.

  • Leaving a C-Level Corporate Career

    I was having a conversation with a good friend (who is also a client) recently about the corporate climb and how the desire to continue up that ladder has become inversely proportional to net worth.

    Like me, my friend is a former C-level executive who has transitioned out of the corporate world. We laughed about the scene in Succession when Connor and Tom are advising Cousin Greg on the perils of a $5m net worth:

    “You can’t do anything with five, Greg. Five is a nightmare. Can’t retire. Not worth it to work. Poorest rich person person in America… The weakest strong man at the circus.”

    We put aside the question of whether five million is enough to retire on. It really depends on your lifestyle.

    The “Not worth it to work” part is what we talked about. This mid-million net worth is when many people suddenly have enough saved up to viably walk away from a corporate salary.

    And when you have enough to walk away from the corporate climb you start asking yourself a lot of questions once the kids are down and you’ve caught up on Slow Horses.

    It’s not just about running the numbers again and again to see if you have enough to step away and start that boutique consultancy or live your dream of running your own coffee shop plus wine bar.

    The biggest questions that confront you are those relating to your identity.

    If you’ve spent nearly two decades climbing a specific career ladder, it will look like an awfully long way back down when you’re ready get off. Whether you have $5m or $50m, you’ve merged a massive part of your identity with your career.

    Questions like, Who am I if I’m not the “Global Chief Information Officer” of a respected advertising agency? What if I become the person important people used to call, but no longer do? What if these are the golden years of my career and I regret stepping away when I was at the top?

    It’s these questions that prevent many people from making that much anticipated jump off the ladder.

    Instead of confronting these questions head on, you delay by telling yourself “just one more year” or “just another $200k” to be extra sure I have what I need to support my post-corporate lifestyle.

    I encountered all of these questions when I left my C-level position.

    Running the numbers over and over again was really just a proxy for the bigger questions that face anyone leaving the corporate track to start a second act.

    At the end of the day, the numbers in a spreadsheet are just a part of the decision to leave a corporate career. The real fears tie to who you are without the title. It’s the fear of the silence. It’s the realization that when you aren’t the one holding the multi-million dollar budget, the phone might stop ringing. That’s a structural shock most advisors aren’t equipped to help you navigate since they’ve never done it.

    Here were a few things that I found helpful in giving me the confidence to finally make that leap:

    • Something to run towards: If you’ve been entertaining notions of leaving the corporate world for a while, there’s a high probability you’re burnt out. You’ve likely spent years thinking about what you’re running away from—the back-to-back meetings on topics that no longer spark curiosity, the client that always seems to have urgent firedrills, etc. But if you don’t have a clear vision of what you’re running towards, then you’re just jumping into a black abyss.
    • Someone to talk to: I found it helpful to talk to other people who had made this decision. Very few people know what it’s like walking away from a C-level title and a yearly salary multiples higher than the average retiree’s nest egg. At Kangpan & Co. we’re not just building your wealth, we’re creating a close-knit community. If you’d like to talk to other former executives and senior leaders who have left the corporate world we can easily arrange that.
    • An income-centric financial strategy: When I gave my notice, I didn’t want to rely on spending down a generic 60/40 portfolio that was subject to the whims of the market. I built a specific income-centric strategy designed to replace a steady paycheck. It turned my portfolio from a static number on a screen into a functional cashflow to support my next chapter. Some of you have asked about this income strategy in various conversations so I’ll write more about this in future posts. It is, of course, available to any clients of the firm.

    I’m always happy to talk to any of you about the emotional as well as the financial side of making this kind of decision. Most advisors want to talk to you about your ‘Risk Tolerance’ for the stock market. I’d rather talk about your ‘Risk Tolerance’ for staying in a career that no longer fits the person you’ve become.

    Nathan
    Founder & Lead Advisor
    Kangpan & Co.

    If you liked this piece:

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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. 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.

  • How We Found $3,334 in Tax Optimizations for a High-Earning NY-Based Couple

    Today’s case study is an example of how Kangpan & Co.’s growing proprietary capabilities helped uncover core tax optimizations that our clients’ previous advisor was overlooking.

    There is nothing more rewarding than providing immediate, tangible results within the first few conversations with a new partner. As the clients in this case mentioned in our latest review session:

    “It’s hilarious just how much better your approach is compared to our old advisor… He never talked to us about any of this.”

    Tax Optimizations for High Earners in NYC

    Our clients are a high-earning, married couple in their 30’s living in New York. They have a combined income in the high six figures. They came to us because they were unhappy with the advisor they were working with at the time, sensing (correctly) that their old advisor was overlooking many strategies that could help them put thousands more a year towards their financial goals.

    We started the relationship by building a comprehensive, dynamic financial plan that would help us fully understood the couple’s financial situation as well as their short, medium, and long-term goals.

    Once we had a holistic picture, we were able to focus our detailed series of diagnostics on the critical tax, planning, and investment optimizations that would help them put thousands more per year towards their goals.

    We went through our full suite of tax, investment, and planning diagnostics during the onboarding process. While we delivered value across all three of those categories, we want to use this case study just to highlight the key tax opportunities we identified:

    • Saving for College Before the Stork Arrives: The couple are planning to but do not yet have children. Like many of us, they prioritize college savings in their long-term financial goals and were planning on opening a 529 Plan once they had children. Many couples are unaware that you can open 529 Plans before your kids are born to a) get a head start on saving but also b) start taking advantage of the tax benefits now. We modeled out the tax and long-term savings impact of our clients starting their 529 this year and also helped them set up and fund their account to begin taking advantage of all the tax benefits.
    • Health, Wealth, and a Triple-Tax Advantage: One of the clients has had an HSA for years into which their employer has been contributing $1,000 a year. However, the client had not been adding any additional funds since they felt they were young and healthy and had no need for putting funds into the HSA. We walked through the triple-tax advantages of HSAs and discussed how HSAs can function like an additional retirement account once they turned 65… when the funds could be tapped penalty-free for non-healthcare spending.
    • Maximizing Charitable Giving By Waiting for the New Year: Our clients donate to several charities each year. While the amounts are generous, they are not high enough for our clients to itemize. However, in 2026, the OBBBA tax changes will allow couples filing jointly to deduct up to $2,000 in qualified charitable cash donations, even if they take the standard deduction. Based on this change, we advised our clients to wait until at least Jan 1, 2026 to make some of their planned donations to take advantage of this new deduction policy.
    • Continuous Tax-Loss Harvesting: We identified and realized multiple tax-loss harvesting opportunities as we migrated the clients’ portfolios towards our recommended allocations. While many advisors only look at tax-loss harvesting once a year (if that), we implement it year round to continuously capture opportunities as they present themselves.

    These four optimizations alone added up to more than $3,334 in additional after-tax income that our clients will be able to build year after year. Note: this couple has graciously offered to serve as a reference for any of you reading this who are not yet clients.

    If you found this letter helpful:

    Nathan
    Founder & Lead Advisor
    Kangpan & Co.

    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. 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.

    The case discussed in this post is a real-life client case study. The clients in this case study have agreed to be featured in Kangpan & Co.’s materials without any form of direct or indirect compensation. All results are specific to each individual client’s unique circumstances and may not be representative of results other clients would achieve.

  • Client Letter #1: Supporting Financial Literacy and Three Year-End Tax Optimizations

    Thank you for a wonderful 2025; why we donate to support financial literacy; three tax optimizations you should complete before the end of the year.

    To Our Friends and Valued Client Partners,

    I hope you get the chance to slow down and enjoy the holiday season with your loved ones as the year winds down.

    The close of the year is as good a time as any to kick off an official client newsletter. Moving forward, I’ll send these letters to keep you up to date on strategies and capabilities we’re developing between our planning sessions. I also hope these help serve as a valuable knowledge repository for future clients to learn about how we approach the financial world.

    This inaugural letter contains just two main topics:

    1. We Will Donate 5% of 2025 Profits to Philadelphia Financial Scholars
    2. Three Pre-End of Year Tax Optimizations to Keep In Mind

    I’ve loved working with each of you this year as we identify, optimize, and implement strategies aligned to your unique financial goals. Thank you for the wonderful partnership this year and I look forward to many more together.

    Happy Holidays from our family to yours,

    Nathan

    Topic #1: We Will Donate 5% of 2025 Profits to Philadelphia Financial Scholars

    Like many of you, I value education and want to support fair and equal access to quality programs. I have decided to focus specifically on supporting Financial Literacy because:

    • A basic understanding of personal financial management early on can change the entire course of someone’s life
    • Financial literacy is not part of the national education curriculum so it’s a topic that is widely misunderstood, particularly among underserved communities
    • As a wealth manager, financial literacy is a personal passion of mine (as any of you who have seen me excitedly pull up a chart or diagram in the middle of a meeting probably know all too well)

    Kangpan & Co. will donate 5% of 2025 profits to Philadelphia Financial Scholars, a “charitable organization that partners with schools to give students and families knowledge and confidence to achieve lasting financial empowerment.” Note, we do not have any formal affiliation with PFS at this time, we just like their mission.

    Topic #2: Three Pre-End-of-Year Tax Optimizations

    We’ve covered these strategies with most of you in your recent planning reviews, but just as a reminder, here are a few key tax planning strategies to be aware of as the year comes to a close:

    • 529 Plan Contributions: Most of you have until December 31 to make any tax-deductible contributions to your plans for calendar year 2025. We’ve discussed the tax benefits each of you qualifies for and have worked with many of you to complete your contributions for the year already. Reach out to us if you want to make any last minute updates or changes to your strategy.
    • Charitable Giving: OBBBA changes to the tax code next year allow for up to $2,000 in qualified charitable cash donations in 2026 to be deducted from your taxes, even if you are taking the standard deduction. That means it could be tax-beneficial for some of you to wait until Jan 1st for your holiday season cash donations. I’m sure many of you agree with us that Charitable Giving shouldn’t just be about the tax savings, but taking advantage of this tax benefit means you will be increasing your giving power to the causes you care about.
      • We also wrote a piece earlier in the year on our blog about advanced charitable giving via donating appreciated stock that you can check out here
    • Tax-Loss Harvesting: We continuously manage, and then report on tax-loss harvesting throughout the year for any accounts we directly manage for you. This is just a reminder for those of you with any accounts we don’t directly oversee to complete your tax-loss harvesting before the end of the year. Reach out to us if you want help or guidance with this.

    If You’re Not a Client Partner Yet…

    Kangpan & Co. is a comprehensive wealth manager using proprietary technology and analytics to identify and implement high value tax, planning, and investment strategies that other advisors and approaches overlook. We partner with high-earning and high net worth professionals that want their finances functioning at peak efficiency.

    Not a client yet? Subscribe to our bi-monthly client newsletter for free to see all the engineered tax, investing, and planning strategies we run for investors like you.

    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. 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.

  • How to Donate Appreciated Stock

    Summary: Donating appreciated stock rather than cash lets you support your causes, eliminate capital gains taxes on the appreciation, and receive a deduction on the full market value. We show how a high-earning NJ couple donating $20,000 in stock with $10,000 in gains could produce $11,174 in combined tax benefits. We then discuss how to do a direct transfer to the charity or a set up a donor-advised fund.

    Charitable giving doesn’t have to be limited to just cash

    Donating appreciated stock directly to charity helps you avoid capital gains tax on the appreciation while receiving a tax deduction based on the market value of your assets. To donate, simply notify your broker to transfer shares to the charity’s brokerage account, or use a donor-advised fund (DAF).

    Donating appreciated stock or other assets can help you support a cause you believe in, reduce capital gains taxes, and receive tax deductions for your donation.

    How to quantify the expected tax savings of donating appreciated stock

    We like to illustrate concepts through simple, tangible examples.

    Imagine you and your spouse live in NJ and make a combined $620,000 a year. You file your taxes as Married, Filing Jointly.

    • Your Federal marginal income tax rate is 35%
    • Your State marginal income tax rate is 8.97%
    • Your long term capital gains rate is 20%
    • Because you are fortunate enough to be considered a high-earning household, you also owe an additional 3.8% NIIT on any investment income such as capital gains.

    You and your spouse enjoy being an active part of the community by supporting your local charitable organizations each year with $20,000 in donations.

    Let’s say you made a smart $10,000 bet on an individual stock a few years ago which has now doubled to $20,000. You’d like to sell out of this position to capture these gains. But selling out will result in more than $2,380 in capital gains taxes ($10,000 in capital gains * (20% capital gains rate + 3.8% NIIT).

    $2,380 isn’t that much in the grand scheme of things for a couple making $620k a year, but it’s still something that would be better to offset than to pay out of pocket.

    We believe in paying the taxes you owe, but we also like to help clients figure out how to avoid leaving an additional cash tip with the IRS – especially when those funds can be given to causes that are important to our clients.

    Instead of selling out your position, you can donate your stocks instead. By donating this $20,000 of appreciated stock to a qualified organization, you can:

    • Support your causes and charities: You are still directly giving $20,000 to your desired charitable organizations.
    • Eliminate $2,380 of capital gains taxes: Qualified charitable organizations do not pay capital gains on donated stocks and securities.
    • Get ~$8,794 in tax deduction benefits: If you’re itemizing your donations, you will be able to deduct the full $20,000 stock donation (i.e. inclusive of the gains) from your gross income. At a combined federal and state margin rate of 43.97%, this comes out to almost $8.8k in tax benefits.

    You’ve now turned a $2,380 capital gains tax bill into an incremental $11,174 of optimized charitable impact ($2,380 saved cap gains + $8,794 tax deduction benefits).

    How to donate stocks to charities

    So you’re sold on the idea of donating some of your appreciated stock this year. How do you do it?

    Give Directly
    Some organizations will allow you to donate stocks and other securities directly. Just ask the charities you support if they’ll accept these kinds of donations and what their preferred steps are.

    Set up a Donor-Advised Fund (DAF)
    We feel one of the more flexible options is to set up a Donor-Advised Fund at a bank or brokerage firm which allows you to flexibly gift your assets to the fund whenever you’d like while keeping those funds invested within the DAF. You can then distribute your funds in the form of a check directly from the DAF whenever you want to provide your donation. Speak to a licensed advisor if you’d like to learn more about the pros and cons of using DAFs to manage your charitable giving.

    Beware the fine print

    You’ve made it this far and are ready to donate to your charity. Make sure you coordinate with your tax or financial advisor to get the final details right.

    • Holding period matters. You must have held the stock for more than one year to deduct its full fair market value. If held one year or less, your deduction is limited to your original cost basis, not the appreciated value.
    • Paperwork. Donations over $500 require IRS Form 8283. Larger or non-publicly-traded gifts may also require a qualified appraisal.
    • Deduction ceiling. Appreciated stock donations to public charities are deductible up to 30% of your adjusted gross income (20% for private foundations). Anything above that carries forward up to five years.
    • New 2026 floor and rate cap. Starting in 2026, the first 0.5% of your AGI in charitable giving isn’t deductible at all (a floor, not a ceiling), and for top-bracket taxpayers, deductible dollars are valued at a 35% rate rather than your actual 37% bracket rate — even though the 30%/20% ceiling above still applies. Net effect: the tax benefit shrinks somewhat, but the stock-donation strategy still beats donating cash.

    Need help with your charitable giving strategies?

    If you’re working through a charitable giving strategy or want to understand how tax optimization fits into your broader financial picture, feel free to reach out to me for a free consultation.

    Nathan
    Founder & Lead Advisor
    [email protected]

    Disclosures:
    This content is for educational purposes only and is not investment, tax, or legal advice. Employees and clients of Kangpan & Co. may hold positions in securities discussed in this post. 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.

  • What is the 30-day tax window for an 83(b)?

    This is an FAQ on 83(b) elections including what they are, what you should consider when making an election, and key rules and regulations to be aware of before making an election.

    What is an 83(b) election?

    Filing an 83(b) election allows you to pay the income taxes on the value of your equity or option grants today rather than the value that are at when they vest in the future. This must be done within 30 days of receiving your grants.

    Why would you want to do this?

    Let’s say you’re a VP who works for Public Big Tech Company with each share valued at $1,000 today. You were just given a one-off Restricted Stock Award (RSA) of 500 shares that vests in one year and your effective tax rate is 35%.

    You would owe $175,000 today if you make an 83(b) election and pay taxes on those shares right now. Whether that’s a good decision depends on what the expected value of those shares are in the future. The chart below shows the taxes you’d owe depending on the value of each those shares in the future.

    If the shares go up 20% in the next year, you would owe $210,000 at that time in income taxes (or $35,000 more than paying today). But if the shares go down, you would have paid more in taxes today than if you would have just waited. This means, of course, making an 83(b) election should only be done if you are bullish on the prospects of the equity value of the company giving you the awards.

    How do I optimize my 83(b) outcome?

    One of the most critical inputs in deciding to file an 83(b) election is your view on the future value of the grants. But what else might you want to consider as part of the 83(b) decision to optimize your decision-making?

    • Opportunity costs: You should consider what else you could do with the tax payment you’re making whether that’s just having the cash on hand for liquidity needs or investing in other assets.
    • Concentration risks: If you already have a large share of your net worth attached to the company, you are going to be further increasing that concentration by making an 83(b) election for positions you will not be allowed to sell out of until they vest
    • Leaving the company: If you leave the company after you’ve paid the 83(b) election but before your shares have fully vested, you will lose out on both the remaining shares and the taxes you’ve already paid as the IRS will not refund you the tax payment
    • Alternative Minimum Tax: Certain actions like exercising ISOs early and then filing an 83(b) election can trigger the AMT; you should be aware of what these actions, thresholds, and liabilities are before doing anything

    Make sure you think through these considerations before deciding to do an 83(b) election. These analyses (and many others) are part of our Equity Compensation Diagnostic that we use to help our clients get the most out of their equity comp strategy.

    What other 83(b) rules should I know about?

    Like all tax laws and regulations, there are some critical steps and rules to note about 83(b) elections:

    • You must make the election within 30 days of the grant; this is a strict deadline, no extensions
    • You will need to have the cash on hand to pay the income taxes on the election at the end of the calendar year
    • 83(b) elections are irrevocable, make sure this is what you actually want to do
    • 83(b) elections are made for the full award, you can’t elect to do just X% of the shares or options that make up the grant
    • 83(b) elections are only for grants and awards for which there “is a substantial risk of forfeiture;” not every type of equity or option award or grant qualifies (for example, RSUs typically do not fall under this categorization) it is highly recommended you speak to a qualified advisor about your situation

    If you liked this piece:

    • Email us to schedule a complimentary 30-minute introductory call if you’d like to learn more about 83(b) elections or explore how to better optimize your equity compensation strategy:
      email: [email protected]
    • Check out our newsletter about aligning your finances more intentionally to the life you want to live

    Disclosures:
    This content is for educational purposes only and is not investment, tax, or legal advice. Employees and clients of Kangpan & Co. may hold positions in securities discussed in this post. 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.

  • What is Tax-Efficient Asset Location?

    Tax-efficient asset location is the practice of placing each investment in the account type where it receives the most favorable tax treatment. High-yielding assets taxed as ordinary income like bond funds belong in tax-advantaged accounts like IRAs and 401ks. Lower-yielding assets with preferential tax rates like stock index funds belong in taxable accounts.

    For a high-earning couple in a high tax state with $1.7M invested, getting this right could be worth $6,370 per year in tax savings without changing a single investment they own. Here’s exactly how it works.

    The Detailed Math Behind Asset Location Tax Savings

    Here are the assumptions for this example:

    • John and Jane are a high-earning couple in their late-30s working and living in California
    • They have a combined income this year of $832,000 putting them in the 37% Federal and 10.30% CA state tax brackets (assuming they will file Married, Filing Jointly). We’ll hold off on local taxes for this example.
    • The couple have $790,000 spread across various Traditional IRA and 401k accounts and $915,000 in taxable investment accounts
    • John and Jane know the basics of personal finance and hold a diversified 60/40 stock and bond allocation within each of their investment accounts (i.e. they have a 60/40 split in their 401k plans, a 60/40 split in their brokerage investments, etc.)

    We’re going to spend the rest of this post examining how shifting assets across John and Jane’s various portfolios will help them reduce their overall tax drag. Instead of using a 60/40 allocation within each investment account they have against, we will look at all their investments in aggregate in order to determine a more tax-efficient strategy across their accounts.

    To simplify this analysis we will:

    • Focus just on the impact of taxes on the dividends or distributions from investments
    • Treat all qualified accounts as one portfolio which we’ll called Tax-Advantaged Accounts and all taxable accounts as another portfolio which we’ll call Taxable Accounts
    • Use a portfolio mix of 60% stocks represented by Vanguard’s S&P 500 Index (ticker: VOO) and 40% bonds represented by iShares’ Core US Aggregate Bond Index (ticker: AGG). While we don’t default to a 60/40 for our clients, it serves as an illustrative common reference point across examples we provide.
    • Assume the same funds are available to an investor in both their Tax-Advantaged Accounts and their Taxable Accounts

    Table 1: Yield and Tax Rates for High-Earning CA Couple For VOO and AGG

    Vanguard S&P 500 Index (VOO)iShares Core US Aggregate Bond Index (AGG)
    30 Day SEC Yield11.16%4.18%
    Taxes on Yield:
    Federal220.0%37.0%
    State310.3%10.3%
    NIIT43.8%3.8%
    Effective Tax Rate34.1%51.1%

    1. As of August 31, 2025 for VOO and September 18, 2025 for AGG
    2. Simplified assumption for this analysis that all VOO dividends are qualified while no distributions from AGG are qualified
    3. CA levies flat 10.3% tax rate at this income level across all dividends and distributions
    4. Assuming this couple will pay Net Investment Income Tax (NIIT) based on income

    Optimizing Asset Location means taking into consideration two key traits of these assets that should be clear from the above:

    • First, qualified dividends from stock index funds such as VOO are generally taxed at a lower Federal rate than distributions from bond funds. For John and Jane’s income level that means a 20.0% rate for qualified dividends and 37.0% rate for bond fund distributions.
    • Second, the dividend yield of 1.16% on VOO is much lower than the 4.18% on AGG. In other words, there is less taxable income coming out VOO overall than AGG per dollar invested.

    Our path to optimization is clear… move as much of the higher-taxed, higher-yielding asset into Tax-Advantaged Accounts (such as IRAs and 401k plans) while moving as much of the lower-taxed, lower-yielding asset into Taxable Accounts.

    We’re going to assume John and Jane currently hold a 60% stock and 40% bond mix within each of their accounts which gives us the following split of assets and taxes between their Tax-Advantaged Accounts and their Taxable Accounts:

    Table 2: Non-optimized, Consistent 60/40 Within Accounts:

    Distributing assets in a 60/40 split consistently within each of their accounts results in John and Jane paying ~$9,990 in taxes on the dividends and distributions they receive from their investments.

    Now let’s look at what would happen if we optimize the portfolios for Asset Location by shifting as much of our bond mix into the Tax-Advantaged Accounts as we can while keeping the overall mix of stocks and bonds across accounts at 60/40. We’re making this shift because bonds both yield a higher income per dollar invested and are taxed at a higher rate than the stocks in our portfolio so we want to .

    We now have the following results after redistributing assets across portfolios:

    Table 3: Optimized, 60/40 Across Accounts

    We’ve put all our bond holdings into the Tax-Advantaged Accounts boosting the share of bonds within those accounts to 86% (but keeping the total share of bonds across all accounts at 40%). We still have some stocks within our Tax-Advantaged Accounts, but our Taxable Accounts are now comprised 100% of lower yield, lower tax stocks. The total amount of pre-tax income we’re receiving from our investments in the form of dividends and distributions remains unchanged, but we’re keeping much more of the after-tax value of that income.

    The net effect of this swap is a decrease in taxes paid on income from our investments from $9,989 a year down to $3,619. This is a decrease of $6,370 just by being a bit more intentional with how we approach allocating our assets across different types of accounts.

    As we mentioned earlier, this is just a basic, illustrative example to show how more thoughtful asset location can benefit investors. In the real world, we would likely be doing this across a larger range of assets, account for the costs of reallocation, consider unique needs a client may have for a particular account, etc.

    Are There Tax Leaks in Your Portfolio Strategy?

    If you found this content helpful:

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    • Contact Us for a complimentary 30-minute Portfolio Efficiency Diagnostic to quantify the potential impact of tax location and other tax-efficiency optimizations may have on your portfolio.

    Disclosures:
    This content is for educational purposes only and is not an investment recommendation. This is not tax or legal advice. We receive no direct compensation from any of the funds discussed. Employees and clients of Kangpan & Co. may hold investments discussed in this article. Speak with a licensed financial advisor before making any changes to your investments. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.

  • Over the NJ 529 Income Limit? Here’s What to Do Instead.

    Summary

    NJ eliminates 529 contribution deductions for households earning more than $200k a year. Since you don’t qualify for the deduction, you are able to open and contribute to any state’s plan that you’d like. You still get tax-deferred growth on your 529 contributions and can select from a much wider range of investment options, many with lower fees than NJ’s default plan. Here are a few to look into.

    The Rule: NJ households earning more than $200k a year are not eligible for 529 state tax deductions

    New Jersey allows up to $10,000 a year of 529 Plan contributions to be deducted from state taxes. This is available for residents contributing specifically to the New Jersey 529 Plan. However, this deduction is only available for those with a gross income of $200,000 or less.

    That means if you’re a New Jersey resident who is fortunate enough to earn more than $200,000 a year, you do not get the benefit of the state tax deduction for contributions made to a New Jersey 529 plan (though you still get the benefits of deferred taxes on the growth of your investments within the plan).

    This also means you are free to look into plans offered elsewhere and can select from a wider range of investment options, lower fees, and better interfaces.

    Look into other 529 plans if you don’t qualify for NJ State Tax Benefits

    529 plans are not created equal when it comes to fees and investment options.

    Let’s take a look at the potential fee benefits a high-earning New Jersey household could realize by moving their NJ 529 plan to another state’s plan.

    For this comparison we are looking at:

    • 529 Plan State: the state where the plan is sponsored
    • 90/10 Portfolio Fee: fund fees for implementing a 90% Stock / 10% Bond portfolio utilizing the options available within the plan. Fees for each individual fund are noted in parentheses
    • Yearly Fees Per $100,000: the expected yearly program and fund fees paid for every $100,000 invested in the plan
    529 Plan State90/10 Portfolio FeeYrly Fees Per $100,000
    New Jersey0.142% blended
    – Franklin U.S. Large Cap Index 529 Portfolio (0.13%)
    – Franklin U.S. Core Bond ETF 529 Portfolio (0.25%)    		$142
    (0.142% total fees)
    California0.053% blended
    – Index U.S. Equity Portfolio (0.05%)
    – Index Bond Portfolio (0.08%)    		$53
    (0.053% total fees)
    Kansas (via Schwab)0.031% blended
    – U.S. Equity Index Portfolio (0.03%)
    – Bond Index Portfolio (0.04%)    		$31
    (0.031% total fees)

    Data as of October 20, 2026 from each 529 Plan Sponsor’s Website

    For every $100,000 invested in New Jersey’s 529 Plan, you could be paying:

    • $89 more per year in fees vs. investing in a similar strategy within California’s 529 Plan
    • $111 more per year in fees vs. Schwab’s 529 Plan

    These amounts may seem small but can easily add up to thousands of dollars over the life of your 529 plan when you pay this every year and also lose out on the power of compounding each time you pay the difference.

    If you found this post helpful

    Check out our other popular articles on financial planning for your child’s future:

    If you’re working through college savings planning or want help setting up a 529 plan, feel free to reach out to me at the email below. We don’t charge for intro conversations to understand your needs.

    Nathan
    Founder & Lead Advisor
    [email protected]

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    Kangpan & Co. is a flat-fee financial advisory firm specializing in helping mid-career professionals navigate the career, family, and financial tradeoffs that come with this stage of life. This content is for educational purposes only and is not financial, legal, or tax advice. Consult a licensed advisor for help with your individual situation. Employees and clients of Kangpan & Co. may hold positions discussed in our content. Past performance is no guarantee of future results.

    Additional Disclosures:
    Comparisons in this content are for educational purposes only and is not an investment recommendation. This is an illustrative example highlighting the difference in program and fund fees between two 529 Plans allocated to 90/10 strategies using available options. There are other considerations when selecting a 529 plan such as availability of investments, the expected performance of those investments, and other fees. The selection of California and Kansas in these examples are not an endorsement of any specific plan. Speak with a licensed financial advisor before making any changes to your investments. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.

Kangpan & Company LLC is a Registered Investment Advisor with the state of Pennsylvania. All content on this site is for educational purposes only and should not be considered financial advice. Past performance is not indicative of future returns and all investing involves risk including the loss of capital. Individualized responses to persons in a particular state will only be made after complying with all regulatory requirements of that state. Kangpan & Company LLC is not responsible for the content of external websites linked from this site. For a full description of our services, fees, and other important information, please read our Form ADV Part 2A, which are available on the SEC’s website here.