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  • Should I Save for Retirement or Spend Money on Travel?

    Summary:

    Life is all about tradeoffs. In this post I talk about one of the most common one that people try to work through: saving more for retirement vs. enjoying life today. I cover the key numbers that you need to calculate and how to weigh those numbers against what you’re actually afraid of. Estimated read time: 6min.

    “We’re finally making enough where we have extra cash at the end of each month. We really want to start traveling more but should we be saving it instead?”

    It’s not always travel, it could be a dream home, a major renovation, a nicer car. 

    It’s a nice feeling to finally make it past those stretch years. You’re done paying off student loans. You’ve had a few promotions along the way (congrats!) and you’re now at the point where you don’t have to avoid the off the menu special of the evening that the waiter tells you about.

    You want to enjoy this new financial flexibility but you’re also worried you could be sacrificing your future. After all, shouldn’t you be putting more towards retirement?

    I talk to a lot of people about the tradeoff between long-term goals and short term lifestyle desires. The good news is that these tradeoffs are easily quantified. 

    The harder part is figuring out how you feel about what the numbers show. Which usually means working through what you’re actually anxious about together.

    Start by quantifying your retirement numbers

    First, sit down to calculate how far off you are from retirement based on your current assets and savings rates if you haven’t done it yet. A surprising number of people I meet with have no idea what numbers they’re actually aiming for.

    Let’s say you and your spouse are both 35 and have two young kids. One of you is a corporate lawyer (in-house, now that you have kids) and the other works in marketing. You currently have $700k in retirement savings between you and you’re both maxing out your workplace retirement accounts.

    We work through the numbers and find you should be able to retire by 55 based on your current trajectory and anticipated future spending needs. 

    We have a starting point. Your baseline strategy puts you 20 years from retirement.

    What are you trading off against retirement?

    You’d like to spend an extra $15k this year going on a special family trip. You’re not sure if that’s irresponsible. You don’t know how that affects your future retirement.

    Since you know you’re 20 years from retirement, we can figure out how much that $15k today could be worth by the time you retire. If we assume your alternative is to put it into a stock-heavy portfolio earning a hypothetical 9.0%1 between now and retirement, that $15k could be worth $84k by the time you’re handing in your final resignation from the working world.

    How should you think about this tradeoff?

    Like I said before, the numbers are easy. Now we have to think through what those numbers mean to you.

    It doesn’t affect your plan.

    You both like your jobs and don’t really think about retiring early. Your baseline numbers show you could stop working at 55 without any additional contributions besides maxing your 401k plans. You’re going to be financially ready to retire well before you plan to actually leave the working world.

    In this case, your decision is pretty simple. 

    Your retirement strategy is on auto-pilot. It doesn’t need extra fuel to get to the final destination. Spend the money on living life between now and retirement. Life is about much more than just the last two decades.  

    It could speed up retirement

    Maybe you can’t stand your jobs and you really want to leave the working world as soon as you can. If you’re targeting being able to spend $150k a year by the time you’re retired, that $85k knocks half a year off your timeline.

    That’s what the numbers clearly show on the spreadsheet.

    But you also really want to take this trip. May it’s the one your youngest will form as one of their first core memories. And the one where your family took that picture that you actually print out and keep above your fireplace for the rest of your life. 20 years is a long time to give up on all of life’s missed opportunities and memories along the way.

    Now you’re really torn.

    In these cases, I find it can be helpful to model out a few tweaks to your plan like promotions along the way or even career changes. There are lots of ways to speed up the timeline to retirement if that’s what you really want. 

    But it’s much easier making it through life when you actually enjoy what you’re doing for the majority of your waking hours during the week. I learned this myself when i made the decision to leave a C-level career to do what I do now. And it’s something I see time and time again from mid-career changers. They thought what they wanted was the escape work altogether as fast as possible but what they really wanted was to find the work that was meaningful to them.

    It could give you more flexibility in retirement

    Maybe you’re the type who is just a bit on the anxious side. Your financial plan says you’re going to have plenty by the time you’re retired. But twenty years is a long time from now. What if the markets crash between now and then and you end up not having enough in retirement? What if there’s some big cost you’re not accounting for in retirement? What if?… You’d rather have more saved up just in case.

    Here’s the counter-example to think about. What if you don’t make it to retirement? What if you or your spouse have mobility issues by the time you hit 60 and your dream of traveling the world or hiking the local trails isn’t possible? 

    In reality, most people dynamically manage their spend in retirement. They pull back in years the markets have been bad or they splurge a bit more in years when the market goes on a tear. And there are plenty of ways to smooth out retirement spending needs if all you want is stable, predictable cashflows year to year.

    Sometimes the right answer is to create that extra retirement cushion. But often if you have a concrete fear, you an develop an objective plan to tackle that fear.

    Your own tradeoff

    Money. Work. Life.

    These three things are always in tension and that’s what generic financial advice and calculations don’t capture. Money numbers on paper are easy to calculate, but those numbers may not actually help you figure out what it is you want from Work and Life.

    Reach out to my email below if you’re trying to figure out your own retirement numbers or want help weighing the tradeoffs you’re facing. I love hearing from readers and don’t charge for friendly chats.

    If you liked this piece, you might want to check out:

    Nathan
    Founder & Lead Advisor
    [email protected]

    The Tradeoff

    Get more insights, strategies, and stories just like this delivered straight to your inbox every other week. Always free, no paywalls.

    Check it Out

    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.

    1. 9.0% is an illustrative number and is not a guaranteed rate of return. Use an appropriate estimate for your situation.

  • What Is the 4% Rule? A Quick Explanation, and Where It Falls Short

    Summary:

    The 4% Rule is a popular benchmark for figuring out how much you can safely withdraw from a portfolio each year without running out of money over a 30-year retirement. I specialize in helping mid-career professionals retire early from the corporate world and the 4% Rule is one of the most common numbers people ask about. In this piece we’ll get into:

    • What it is
    • Where it came from
    • Why it’s popular
    • Five places where it falls short
    • My personal POV on the 4% rule

    What is the 4% Rule?

    The 4% rule says you can:

    • Withdraw 4% of your portfolio’s value in your first year of retirement
    • Adjust that initial dollar amount for inflation every year after…
    • While having a reasonably high probability of not running out of money over a 30-year period

    For example, if you retire with a $1,000,000 portfolio, that’s $40,000 in year one, then $40,000 plus inflation in year two, and so on for the next 30 years and you’ll have a reasonable chance of not running out of money during that time period even with the market’s ups and downs.

    Where did the 4% Rule come from?

    The rule is credited to Bill Bengen based on a piece he published in the Journal of Financial Planning in 1994 where he looked at different withdrawal rates across multiple US stock and bond market return periods. His main conclusion found a 4% withdrawal was the highest “safe” number that held up in the vast majority of the tested time periods.

    Here’s a reprint of the original piece.

    Why is the 4% Rule so popular?

    It’s simple. It’s a single number that turns the complicated question of “how much do I need to retire” into a problem that can be solved on a post-it note.

    All you need to do is take your expected annual spend in retirement, divide by 4% (or multiply by 25) and you have a target portfolio size needed to support your retirement. When your portfolio reaches that number, you are theoretically ready to retire.

    For example, if you anticipate spending $150,000 in your first year of retirement, the 4% rule implies you can leave the working world once your portfolio hits:

    $150,000 in spend / 4% = $3,750,000 target portfolio value

    You don’t need a complicated spreadsheet and you don’t have to make all kinds of assumptions about future market performance.

    Five places where the 4% rule falls short

    Like any single number applied generically to all situations, the 4% rule is either too conservative or not “safe” enough. Researchers since the original study argue both sides with ranges between 3-5% being safe number. Here are some of the arguments across those ranges.

    The 4% rule was calculated for a 30-year retirement. The original study modeled someone retiring at a traditional age and living another 30 years. If you’re aiming to retire before 50 like many of the people we work with, your retirement could easily run 40-50 years. The study doesn’t say whether the strategy fails past 30 years, it just doesn’t go that far out.

    The rule assumes a steady withdrawal amount year after year. This isn’t how people budget in retirement. People adapt. They adjust their spending down in a bad market. A rigid rule that inflation-adjusts a fixed withdrawal every year doesn’t reflect how a thoughtful retiree actually behaves. 

    It’s based entirely on historical U.S. market returns. Past performance modeling has an obvious limitation. The next 30-50 years may not look like the time period in the original study. Modeled future returns dramatically impact what the safe number actually is. But nobody knows, because nobody can predict what the markets will do in the future. Even if your name rhymes with Barren Wuffett.

    It doesn’t account for other income sources. A single 4% number ignores things like social security, passive real estate investments, or even part-time work throughout retirement. This can mean the rule is overly conservative if additional income sources will cover a portion of your spending needs.

    It doesn’t solve for sequence of returns risk. A market downturn in your first few retirement years can significantly impact the success of your overall strategy.

    For example, let’s say you need $100k a year and you retire with a $2.5m portfolio ($100k / 4%). The first month after you retire, the markets drop 50%. Your portfolio is now worth $1.25m. Your $100k withdrawal is now 8% of the portfolio. 

    The 4% Rule accounts for this somewhat by design (it was tested against periods that included bad early sequences), but it’s still the single biggest reason a “safe” withdrawal rate can turn out not to be safe for a specific person’s specific timing.

    How I think about the 4% Rule

    I applied the 4% rule to my own finances when I left a C-level corporate career at 38. I closely monitored and managed my expenses and resigned from my job when the value of my portfolio blew past 25x my expenses. 

    I have yet to find a better starting point for retirement readiness calculations than the 4% rule. But it doesn’t account for how long you’ll be retired, your mix of fixed vs. variable expenses, other income sources you have available, and what happens if the markets tank those first few years of retirement.

    It’s a very blunt tool but that doesn’t mean it’s a bad starting point. The more common issues I find with people trying to retire early is that they:

    • Don’t have an accurate read on what their spending needs will be once they leave corporate and they often forget to include healthcare, changes in tax situation, etc.
    • Aren’t prepared for a huge market drawdown within the first few years of retirement
    • Count on assets locked in 401k or IRA accounts without a plan for accessing those funds

    Reach out if you’d like a second opinion on your retirement calculations

    I specialize in working with people who want to or have already retired early. I’ve developed a range of strategies over the years for analyzing and then mitigating the risks associated with blindly using the 4% Rule. 

    I’d be happy to to help you look over your early retirement assumptions.

    If you liked this piece, you might want to check out:

    Nathan
    Founder & Lead Advisor
    [email protected]

    The Tradeoff

    Get more insights, strategies, and stories just like this delivered straight to your inbox every other week. Always free, no paywalls.

    Check it Out

    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.

  • Career Advice From a 22-Year Old

    Would you let a 22-year old decide your career path? 

    I came back to this question over and over as I was thinking about leaving my C-level career a couple years ago. 

    I graduated in 2008 and decided to go into marketing consulting because the starting pay was good and it felt more stable than working in finance as the markets were melting down. 

    I was good at my job so the promotions came fast. Rising up the “corporate ladder” felt more like riding an escalator than some kind of arduous climb. I reached a C-level position at an early age. The problem was, I never really stopped to wonder whether all this was what I actually wanted for myself.

    A decision I made at 22 with no insight into who I would become and what kind of work I actually enjoy dictated how I spent the next 16 years of my life.

    What you know now

    This is how many careers develop. You pick a job when you graduate. You work your way up. Before you know it, your adult identity has formed around being the person who does XYZ and you’re further locked in by the income that comes with more senior positions.

    It was a few years after reaching the C-suite that I really started questioning whether what I had been doing was what I wanted to keep doing. 

    If I knew back when I was choosing a first job what the rest of this career path would look like, would I still have signed that contract? 

    The more I thought about it, the more I landed on the answer to that question being no.

    It took me many more years to build up the courage to finally jump off the corporate ladder. When you’ve spent that long making your way to the top of a chosen field, the view back down looks scary. 

    Change is easier when you can talk to people who can relate

    I work with a lot of people who are navigating this kind of decision. The Corporate VP who wants to become an entrepreneur. The physician who wants to leave medicine to spend time with their kids.

    The financial side of this kind of decision is the easier piece of the puzzle. 

    I have standard frameworks to optimize that initial financial runway, create passive income to bridge the transition, etc.

    But I always thought financial advisors who focus purely on the numbers are only solving half the puzzle for people. By far the tougher piece to work out is the emotional aspect of making such a significant identity change. 

    One of the most important aspects of making these pivotal life changes is being able to talk to others like you who have also made the shift. But it can be hard to find other people like this in your immediate network. There are only so many people who are outwardly successful who decide to blow it all up and pursue a more intentional second act.

    A lot of people have come to me because I did this myself and openly talk about what it was like. I can relate to many of the tradeoffs they’re trying to work through.

    Over the past year, many of those people have also become clients. And they are more than happy to also talk to people weighing these decisions and share their own experiences. It’s become a curated network of career changers, second actors, and early retirees. 

    Reach out if you’re working through these kinds of questions. Beyond the financial aspect, I can help connect you with others who have navigated the emotional and identity questions that come with these big life changes.

    If you liked this piece, you should also check out:

    Nathan
    Founder & Lead Advisor
    [email protected]

    The Tradeoff

    Get more insights, strategies, and stories just like this delivered straight to your inbox every other week. Always free, no paywalls.

    Check it Out

    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.

  • Can You Use HSA Funds to Pay COBRA Premiums in Early Retirement?

    Summary: 

    Yes. HSA funds can be used tax and penalty-free to pay COBRA premiums, but not marketplace health insurance premiums. That means for anyone retiring early, it’s worth looking at the numbers behind using HSA funds to pay for COBRA first, before moving on to a marketplace plan. This can protect the funds you’re using to support the first phase of your early retirement before you can fully access the rest of your accounts at 59.5. Here’s how all this works.

    Health Insurance Is One of the Largest Costs in Early Retirement

    Most early retirement strategies focus on overall costs and safe withdrawal rates relative to the portfolio. Healthcare is typically one of the largest components of those expenses. However, our experience is that very few early retirees accurately model healthcare expenses or even develop an approach to tackling these costs until well after they’ve left their corporate jobs. Planning out an approach before you leave your job can protect your core cashflows until full retirement benefits kick in. 

    The key is using your HSA as a bridge fund to pay for premiums. But it’s important to know which premiums can be paid with your HSA.

    Can you use HSA funds to pay for COBRA premiums?

    Yes. The IRS explicitly allows HSA funds to be withdrawn tax and penalty-free to pay COBRA premiums. This is one of the few premium types HSAs are allowed to cover before full retirement benefits. We’ll get to why this matters in a moment.

    Can you Use HSA funds to pay for marketplace premiums?

    No. Marketplace (ACA exchange) premiums are explicitly excluded from the list of HSA-qualified expenses. There is one exception: if you’re receiving federal or state unemployment compensation, marketplace premiums can qualify. 

    Outside of that exception, if you try to go straight to a marketplace plan pay for it with HSA funds, you’ll owe income tax on the withdrawal, plus a 20% penalty if you’re under 65.

    How HSA-funded premiums affect early retirement

    If you’re retiring before 59.5, you’re likely relying on funds in your savings, taxable brokerage, and Roth accounts in the early years. The less you need to tap into these early on, the more assets you’ll have to carry you to full retirement age where you’ll unlock the rest of your accounts (401k, IRA, etc.). 

    Let’s say you retire early at 45 in April.

    You already made too much this year in earned income and your expected passive income to qualify for marketplace subsidies so you would have to pay full price for a plan. The plan you’re looking at is $1,850 a month without these subsidies.

    Your COBRA plan also costs you $1,850 a month. You can use this plan for the next 8 months until the start of the following calendar year when you can take advantage of marketplace subsidies. 

    $1,850 a month * 8 months = $14,800 in premiums for the rest of the year 

    If you’re following the 4% safe withdrawal guidelines for typical early retirement budgeting, paying these premiums out of the accounts you’re using to support your early retirement would reduce your withdrawal rate by:

    4% * $14,800 = ~$592 a year

    While that’s not a huge number, every bit helps in the first stages of early retirement. The loss of that $14,800 in assets used to support your day to day living is an immediate and permanent loss of $592 in potential funds you can pull from your accounts. Ouch.

    What else you need to look at

    This was a simplified example to show the primary reason why an early retiree would consider COBRA over Marketplace if they have available HSA funds to utilize.

    When we help clients with this decision, we look at other factors like:

    • How pulling funds from the HSA will reduce the tax-deferred compounding of the account. You need to weigh the tradeoffs of doing this vs. the amount of liquidity you want available to you for early retirement.
    • How much of a subsidy someone qualifies for and where their income will be for the calendar year
    • The net cost of the marketplace plans they’re considering vs. the net cost of their COBRA options

    If you liked this piece, you should check out:

    We specialize in all things early retirement. If you want help modeling out how to approach healthcare in early retirement, reach out to me at the email below.

    Nathan
    Founder & Lead Advisor
    [email protected]

    The Tradeoff

    Get more insights, strategies, and stories just like this delivered straight to your inbox every other week. Always free, no paywalls.

    Check it Out

    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.

  • Is It Better To Sell Stock or Borrow Against It to Buy a Business?

    Summary:

    A client recently needed significant capital to buy a small business. They wanted to tap into their portfolio for some of it, but selling stock to help fund the purchase would have triggered a huge capital gains tax bill. I showed them how borrowing against the portfolio instead, using a securities-backed line of credit (SBLOC), would let them keep the full amount invested and avoid the capital gains tax hit. Here’s the math on how this works and what can go wrong.

    Selling stock isn’t your only option to finance a business purchase.

    There are many points in life when you need a big chunk of capital.

    Buying a business is a common one. Your investment portfolio is a natural place to look for quick capital, but selling stocks can lead to significant capital gains. But a bigger problem is losing out on future gains for the portion you’ve sold. 

    People assume selling is the only option they really have. Most people don’t realize they can borrow against their portfolio. 

    Lots of people have heard about “rich people” who borrow against their assets and never incur capital gains. But they assume that’s for the multi, multi millionaires and billionaires. The option is actually more accessible than a lot of people think it is. Many large brokerages offer this to investors with portfolios as low as $500,0001.

    What selling stock costs you.

    Let’s do the math.

    Say you need to raise $500,000. 

    You have stock that you can sell to finance the purchase. But $100,000 of that sale is going to be capital gains. If you’re at a 15% long-term capital gains rate, you’re paying $15,000 in taxes on the gain before any additional state taxes or NIIT.

    You’ll start with $500,000 in your portfolio, but end up with only $485,000 in cash after selling so you still need another $15k to make up the difference.

    What borrowing against your portfolio costs.

    A Securities-Backed Line of Credit (SBLOC) lets you borrow against your portfolio without selling anything. No shares change hands, no capital gains.

    So what’s the catch? The loan will cost you in the form of interest. 

    Let’s say the rate on the SBLOC is 7.5%2 (rates on these are variable and move with the market, so treat this as an example, not a quote you should expect). 

    On $500,000, that’s:

    $500,000 × 7.5% = $37,500 a year in interest.

    That sounds like a lot next to a $15,000 one-time tax bill. Until you account for what the gains in your portfolio because that $500,000 had stayed invested. A stock heavy portfolio generating an expected 9.0% gross return3 could result in:

    $500,000 × 9.0% = $45,000 in portfolio returns.

    Compare that to the $37,500 in interest, and you’re theoretically coming out about $7,500 ahead in a given year. 

    Here’s a table to sum up the comparison:

    Option 1:
    Selling Stock from Your Portfolio    		Option 2:
    Borrowing Against Your Portfolio
    Capital Needed$500,000$500,000
    – Capital Gains($15,000)$0
    – Loan Interest$0($37,500)
    + Portfolio Returns$0+ $45,000
    Net Result:$15,000 lost to capital gains$7,500 gained between the cost of the loan the portfolio returns

    That last row in that table is the punchline: borrowing lets the money in your portfolio continue to grow. Selling means it stops growing.

    As long as the growth rate of your portfolio is higher than the amount you’re borrowing, you may be able to make a spread on your borrowing cost while avoiding capital gains.

    One More Thing: The interest on an SBLOC loan may be deductible if you’re using the funds to buy a business.

    One more point to add to the SBLOC tally. Interest on an SBLOC can be deductible, but it depends entirely on how the borrowed funds are actually used. The IRS traces loan proceeds to their use, not to the collateral behind them. 

    If the funds go toward acquiring a business, there’s a case for treating it as investment or business interest, subject to some limitations. But this is the kind of detail that requires you to work closely with a CPA or other licensed financial professional to ensure you have the right structure to take the deduction.

    What can go wrong.

    This all sounds great, right? There are some downsides you need to be aware of. 

    An SBLOC is typically structured as a demand loan, the lender can require you to pay it back whenever they want, not just when you miss a payment. 

    If the market drops and your collateral value falls with it, you can get hit with a maintenance call. Meaning you need to top up your account balance. If you can’t post more collateral, the lender sells your securities for you, at whatever price the market happens to be offering that day. 

    Rates are variable. Whatever interest rate you initiate your SBLOC at isn’t what it will be going forward. The SBLOC rates move with broader interest rate trends. If rates go down, then this works in your favor. But if rates go up, you’ll end up owing more on your loan. 

    Let’s chat.

    If you’re working through how to fund a major purchase without selling pieces of a portfolio you’ve spent years building, I’d be happy to help you think through the specifics. Reach out to me at the email below.

    Nathan
    Founder & Lead Advisor
    [email protected]

    The Tradeoff

    Get more insights, strategies, and stories just like this delivered straight to your inbox every other week. Always free, no paywalls.

    Check it Out

    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.

    1. Each financial institution has different minimums and requirements for their SBLOC programs. Work with a licensed professional if you’re researching options.
    2. This rate varies widely between different institutions and the amount you are setting aside as collateral. This is purely for illustrative purposes and not a quote you should expect.
    3. Markets do not return a steady 9.0% a year. This is for illustrative purposes only. Investing involves risk, including the loss of capital. Past performance is not indicative of future returns.

  • Reflections on My First Year of Entrepreneurship

    It’s been just a little over a year since I signed out of Slack and left the corporate world to become an entrepreneur / independent wealth manager. 

    In that time, I’ve comes across so many other people who have left their 9-5 to start something of their own, or are actively thinking about it, so I wanted to share some reflections on how these first 365 days have gone.

    Founder Nathan Kangpan working at desk.
    Welcome to Kangpan & Co.’s Global HQ

    But first, thank you to all of you who have entrusted me with your family’s financial well-being. It’s been an incredible first year in business and I’m really excited about the upcoming services I’m building out for you in Year 2.

    Here are eight thoughts on the last 365 days.

    1. I didn’t know what I was so afraid of.

    I spent years unsure of whether I had what it took to build my own book of business from scratch. I was no stranger to getting clients in my prior roles. But I was never sure if it was me, the company, or something else that landed those relationships. I didn’t know if anyone would want to work with me if I struck out on my own, especially since I was shifting industries. 

    Turns out, there was nothing to fear. People remember when you treated them well and did what you said you’d do. 

    2. I miss working with people. 

    I see and talk to clients all the time. But I’m running a solo operation on a day-to-day basis. I don’t have anyone to bounce ideas off of, celebrate wins with, or even just message a meme to on Slack. The lack of this collaborative energy is probably the thing I miss most about leaving corporate.

    I’m on track to make my first hire early next year and excited to have a daily partner again (and someone to send fun gifs to).

    3. I got to be a big part of my kids’ lives while they were young.

    My kids played a big part in me leaving corporate. There were so many days when I wouldn’t see them at all because I had to leave early and get back late. I was missing all the important moments in their life like my daughter’s first steps.

    Working from home for myself has meant no more commute so I could be around for the morning and evening routines. I’ve seen so much more of my kids’ personalities just by physically being around more and feel a lot closer to them as a result.

    I also got to have lunch with my kids most days instead of eating an overpriced salad bowl at my desk in the office. They lived off my grilled cheese for nearly six months until they moved on to Sheila’s egg wraps.

    4. I miss the paycheck

    I left at a C-level. I knew I wouldn’t be seeing those kinds of numbers hitting my bank account every 2 weeks for a long time. 

    And I was right. 

    Although I’ve been pleasantly surprised by the number of people who signed up to work with me so early on, my revenue is nowhere near what my paycheck was. What would I do with hundreds of thousands in extra income each year? A new car to replace my 2015 Jeep Wrangler would be nice.

    5. I feel more in control of my time than I did for years. 

    My calendar used to be packed with all kinds of meetings I wanted no part of. But I had to go anyway because of the role I had. The more senior I got the less in control I felt over my schedule.

    I now have 93.2% control over my time. Time sensitive stuff still comes up occasionally for clients, but it’s work I want to do and it has a tangible impact on their life. I pick which clients I’ll take on, how I want to organize my day, etc. 

    6. I don’t miss corporate.

    It was a great first part of my career and I do miss a lot the people I worked with (though some of the ones I liked most are clients now). But I did it for long enough. I didn’t need to live the same work year 20 more times. I haven’t personally met someone who left corporate who regretted it. A few had to go back out of necessity, not desire. 

    Never say never, but right now I cant picture myself ever wanting to go back.

    7. I like the sense of meaning I get from my work now.

    I ran technology, analytics, and marketing teams in the corporate world. We worked with big Fortune 500 companies to help them get even bigger. The core of what we did was mostly fun and intellectually interesting. But I would hardly call it meaningful work in most cases. 

    I now help people design and then build the lives they want to live. The strategies I develop and the actions I take go directly towards helping people retire earlier, fund their kids’ education, start the business they’ve been dreaming of, and so much more. I’ve found I really like working on the personal scale more than the corporate scale.

    8. Starting my own thing has been harder than I thought but also far more rewarding than expected.

    It takes a lot to get a small business going. And I don’t just mean selling the work and getting clients. Bookkeeping, legal, compliance, new vendors, etc. all take so much mental bandwidth early on. 

    But each step and decision feels like it’s actually mine. And my business feels more and more like a reflection of who I am and how I want to engage with the world. Cheesy? Yes. But those of you who run your own firm know what I mean. It becomes a part of you.

    What’s your experience been like?

    I love meeting people on the entrepreneurial path. Whether you’re already running a business or thinking about starting one, feel free to reach out to connect through my email below.

    If you liked this piece, check out:

    Nathan
    Founder & Lead Advisor
    [email protected]

    The Tradeoff

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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.

  • My $200,000 Dog

    My family’s been wanting a dog for a long time. We’ve been visiting the dog rescue events around us for months looking for the dog that felt right. 

    We knew Moo Shu was the one as soon as we saw her. So we filled out the application on the spot and Moo Shu came home with us this past weekend.

    She’s going to cost me at least $196,799.

    My wife and daughter holding our new dog for the first time.

    I’m an optimizer by nature and a financial advisor by vocation. I think about everything in terms of time value and opportunity costs.

    My first instinct is to quantify decisions to understand their impact on our finances. 

    One of the first things I looked up was “How much does a Border Collie eat”? The median answer? About $80 worth of dog food per month. For 15 years.

    We like to travel as a family so the next thing on the list was, “How much is pet sitting per day”? A lot.

    On and on it went as I pulled together my cost model. 

    The total out of pocket costs added up to tens of thousands on my spreadsheet over the years. But the real punch in the financial gut was the time value of those costs. If all those costs had instead been invested along the way in a diversified portfolio earning 8.0% a year? The number in 15 years ends up just shy of $200,000.

    Ouch. 

    What would I like to do with $200,000 in 15 years? A dark green Porsche would be nice to drive around in with Sheila once the kids are out of the house.

    It’s taken me years to get past what the numbers on a spreadsheet mean. Getting married and having kids has allowed me to see life in more than just financial terms and to stop delaying the things that add texture to living. 

    As I wrote about in the time value of life, opportunity costs don’t just apply to money. It also applies to life experiences that are forgone in pursuit of said money.

    So what was Moo Shu’s true opportunity cost?

    I would have missed seeing the biggest smile ever on Sheila and Remy’s faces the first time they hugged Moo Shu. 

    I wouldn’t have the next 15 years of Moo Shu resting her head on my lap while Sheila and I re-watch Friday Night Lights or Schitt’s Creek year after year.

    BTW, if you’re wondering about Moo Shu’s name, we wanted to call her Moo because she’s patterned like a dairy cow. But that felt too short so we did a play on words and named her after the dragon in Mulan.

    If you liked this piece, check out:

    Nathan
    Founder & Lead Advisor
    [email protected]

    The Tradeoff

    Get more insights, strategies, and stories just like this delivered straight to your inbox every other week. Always free, no paywalls.

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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.

  • Four Unique 529 Benefits for Pennsylvania Residents

    Summary

    If you live in Pennsylvania, you have access to one of the most generous 529 policies in the country. You get:

    • Up to $19,000 in state tax deductions with no income restrictions on deduction eligibility
    • Deductions that apply to any state’s 529 plan, not just PA
    • Up to $20,000/year in K-12 tuition withdrawals per beneficiary
    • Exemption from PA inheritance tax. 

    We are flat fee financial advisors based in the Philly area and help families understand how these benefits incorporate into an optimized financial plan. Let’s explore each of these in more detail.

    How PA’s $19,000 state tax deduction works

    If you’re a PA resident, then you get a state tax deduction for every dollar you contribute. Since PA’s state tax rate is a flat 3.07%, that means if you’ll get roughly $3.07 back in tax benefits for every $100 you contribute to a 529 plan

    Many states cap their 529 deduction to just $5,000 or less per year, regardless of how much you contribute. And this is typically per married couple, not per beneficiary.

    Pennsylvania’s 529 plan deductions are much more generous. PA allows up to $19,000 per contributor, per beneficiary. That means a married couple can contribute up to $38,000 per beneficiary.  

    How much is this worth? A married couple maxing $38,000 in contributions for a child could be getting $1,166.60 in state tax deductions ($38,000 * 3.07% state tax rate).

    And because the limit applies per beneficiary, a family with three kids could really crank things up with up to $114,000 in deductible contributions in a single year.

    No income restrictions on deduction eligibility

    Many states have a limit on income to qualify for 529 tax deductions. If you make more than that limit, then none of your 529 contributions are eligible for this deduction. High earners in PA don’t have to worry about this. There’s no income cap to be able to take advantage of the $19,000 in deductions. 

    Deductions apply to any state’s 529 plan

    Here’s a detail people often miss. Pennsylvania has tax parity, meaning you get the state deduction even if you use a 529 plan sponsored by a different state. You are not limited to just Pennsylvania’s own PA 529 plan. 

    Each state’s 529 plan investment options, online experience, and fees are different. If another state’s plan has lower fees or better investment options for your situation, you don’t lose the PA tax benefit by using it.

    You can use a 529 for K-12 tuition expenses in Pennsylvania

    529 plans aren’t just for college anymore. As of Jan 1, 2026, Pennsylvania allows up to $20,000 per year, per beneficiary to be withdrawn tax-free from 529 plans for qualified K-12 tuition expenses at public, private, and religious schools. 

    This is a meaningful planning opportunity for families already paying private school tuition directly from a checking account.

    Running tuition payments through a 529 first, even briefly, can capture the state tax deduction on money you were going to spend anyway, as long as you’re following the funding-then-withdrawal sequence correctly. This means you’re effectively getting a 3.07% discount on tuition expenses you were going to pay anyway.

    529 accounts are exempt from PA state inheritance taxes

    PA’s state inheritance tax can run as high as 15% for non-lineal heirs. 

    The entire value of a 529 account is exempt from Pennsylvania inheritance tax for state residents for any beneficiary relationships. 

    For families thinking about multi-generational education funding such as grandparents contributing to a grandchild’s account, this is a genuinely useful, PA-specific estate planning tool, not just a college savings vehicle. You get three distinct tax advantages: the state tax deduction for the contributions going in, tax-deferred growth of those assets, and then funds being passed on without state inheritance tax. 

    Reach out if you’d like help with your K-12 or college education planning.

    Educational funding is one of the main areas we work through with our Pennsylvania-based clients, particularly families navigating the cost of K-12 private school alongside college savings at the same time.

    If you’re trying to figure out how to afford private school, sequence 529 contributions, tuition payments, and other savings goals, this is exactly the kind of decision we help clients work through and we’d love to help.

    If you found this content useful, you might also like:

    Nathan
    Founder & Lead Advisor
    [email protected]

    The Tradeoff

    Get more insights, strategies, and stories just like this delivered straight to your inbox every other week. Always free, no paywalls.

    Check it Out

    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.

  • How We Manage Your 401(k) Rollover

    Summary:

    We are fee-only financial advisors who help clients roll over their 401(k) balances into IRAs. This article goes into the steps that we take when clients want us to handle the rollover for them, not a generic explainer of “how rollovers work.” Here’s the exact process, step by step, including what happens if your provider sends a check instead of a wire, how long this all takes, etc.

    The Entire Process Takes About 30 Minutes of Your Time

    In our experience, the anxiety around a rollover has almost nothing to do with the financial mechanics and almost everything to do with not knowing what’s about to happen to your money or how long or complicated everything will be.

    Here are the key steps:

    • Send us your latest 401(k) statement
    • Set up an IRA if you don’t have one already
    • Call your 401(k) provider together
      • If your provider sends the funds directly, we’re finished
      • If your provider sends a check, I’ll provide an envelope for you to forward
    • We then let you know when the funds have been received and then invest them according to your investment strategy

    The process on your end will take about 30 minutes active time in total.

    Note, at this time we primarily use Schwab as our custodian so all steps will refer to how our process works with them. Let’s dive into each of the steps.

    Step 1: Send us your latest 401(k) statement

    We need your statement in order to:

    • Confirm your name and address. To avoid complications, we need to check your name and address with your 401(k) provider matches your name and address at Schwab.
    • Check that your funds have all vested. Some 401(k) plans have vesting periods. If you transfer funds before they are fully vested you may be leaving money on the table.
    • Ensure we set up the right types of accounts with Schwab. Some clients contribute to traditional, pretax 401(k) plans, others use Roth 401(k), and some have a mix of both. 401(k) funds must be sent to the corresponding IRA types.
    • Get the contact information of the plan provider. This will be used for when we reach out to them together in Step 3.

    Step 2: Set up IRAs at Schwab if we don’t have them already

    We need to make sure we have somewhere for your 401(k) funds to go. If we haven’t set up IRAs already, we will need to do this before reaching out to your 401(k) provider.

    As with most our account setup processes, we streamline this for you. Our team will set up the account details with Schwab and then you will receive a DocuSign that takes no more than a minute to review and complete. Your account will be ready within 2-3 days.

    Step 3: Call your 401(k) provider

    While some providers allow direct 401(k) rollovers, our experience says most do not and it is often quicker and easier just to call them. Here’s what this looks like:

    • Call Provider Together: We need to call them together so that you can authenticate yourself as the owner of the account and authorize me to speak on your behalf. I will handle most of the conversation from here.
    • Confirm Direct Rollover: We will confirm with the plan provider that we are going to do a Direct Rollover into accounts held at Schwab. They will typically ask for the account numbers which I will provide.
    • Review Plan Details: They will typically provide you with a summary of your current plan balances, an estimate on timing to receive the funds, and other information. I’ll write all this down and can provide you the summary if you’d like.
    • Confirm Distribution Process: We found about half of providers will send the check directly to Schwab which requires no additional work from you. The other half will send you a check directly which then needs to be sent to Schwab. If this is the case, we will send you a stamped envelope along with a note to Schwab that provides some additional instructions to them. All you need to do when you receive the check is put it into this envelope and drop it in the mailbox.

    Step 4: Confirm funds received

    We will monitor your account with Schwab and let you know once they have received the funds or if there are any additional steps that require your attention. Funds typically arrive within 7-10 business days of checks being sent out.

    Once the funds have been received, we will then invest them according to the investment strategy we have aligned on with you.

    The fine print

    This process describes how Kangpan & Co. typically handles 401(k) rollovers for clients; individual provider requirements and timelines vary.

    It’s important to note that rolling over a 401(k) is not always the right choice. Some employer plans have lower costs or unique investment options (e.g., stable value funds) not available outside the plan.

    Our 401k Rollover Advisory Services

    • We offer hands- on 401k rollover services to our wealth management clients as part of their relationship.
    • We also offer our 401k rollover services on a standalone, one-time fee basis for people who like managing their own investments but just want objective advice on whether a rollover makes sense and assistance with the rollover process itself.

    If you found this helpful, you might also want to check out:

    Nathan
    Founder & Lead Advisor
    [email protected]

    The Tradeoff

    Get more insights, strategies, and stories just like this delivered straight to your inbox every other week. Always free, no paywalls.

    Check it Out

    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.

  • The Four Money Personalities I See in High Earners

    How a person handles their money says a lot about who they are, what they believe in, and their overall approach to life. 

    I manage money for high earners and multi-millionaires. I see four consistent money “archetypes” across this group:

    • The Compounder
    • The Cruiser
    • The Spender
    • The Independent

    There is no right or wrong archeteype. You can be happy or miserable regardless of which type you fall into. The key is being aware which one you are and managing your life and finances in a way that aligns with the personality.

    For example, the generic financial advice to get a job and then save 10% a year until 65 works well for a Cruiser but will feel heavily restrictive and out of alignment with an Independent. 

    People can have aspects of multiple archetypes, but there is usually a dominant one that drives life and financial decisions. 

    Let’s get into each.

    The Compounder

    Compounders view money as a game to be beaten. The highest score at the end wins. They’re constantly thinking about investing, starting new businesses, etc. It doesn’t matter if they have $3m or $20m in assets. Their goal is to at least 10x whatever it is they have now (and then 10x again after that).

    The purpose of money is to get more money. 

    A lot of very successful business owners and entrepreneurs are in this group. Done well, it leads to a life of heavy intellectual engagement and a prominent role in the community creating jobs and building the local economy. Taken to extremes you end up with Ebenezer Scrooge. You build a huge cash pile but end up having no one to share it with. You prioritized the money over relationships with your kids, friends, or your community.

    Financial strategies developed for this group have a heavier weighting towards business management, tax and estate planning, and unique investment access. 

    The Cruiser

    These are the people where money seems to have no intrinsic value outside of supporting daily living needs. These are the millionaires you read about in popular financial media who still go to their 9-5 jobs, drive a Toyota and shop at Costco. 

    Money is a byproduct of living.

    They’re generally content with what they’re already doing in work and life and can’t envision doing something else. So they keep going down the same path year after year. Work a reasonable amount at job they mostly enjoy. Spend quality time with family and friends outside of work. Their brokerage and retirement accounts grow larger every year but they barely notice. 

    They don’t think about money that often and are generally content with what they have. 

    This is where the standard financial playbook works well. Get a good job you like and stay till 65+. Contribute to your 401k along the way, don’t take on too much debt, and have a simple estate plan in place.

    The risk with this group is their money ends up creating problems down the line for other people. Not everyone is passive when it comes to money. Their children could end up fighting over the way the state distributes everything. Or they pass away and their husband gets remarried and a significant portion of the estate ends up going to the new wife’s adult children instead of their biological children.  

    The Spender

    These are the people who see money as something to be enjoyed. You can’t take it with you, so spend it while you’re alive. 

    This doesn’t always mean buying extravagant things for themselves. The money can go to helping loved ones like covering the down payment for their children’s first house or donating to causes they believe in.

    Money is what enables the good life.

    But we all know the extreme versions of this. The spendthrift who takes on too much debt to fund a life they can’t afford and ends up broke or working well past 70 to support themselves.

    I don’t see this version too often in my practice. Most of the people I work with are self-made through years of disciplined saving and investing rather than inheriting sudden windfalls. The muscles to build and maintain wealth have been well-established. 

    Budgeting and asset bucketing plays a bigger role for Spenders than other archetypes. They often need a bit of help managing the cash inflows and outflows in a way that maximizes life enjoyment while mitigating the risks of running out of funds.

    The Independent

    The final group are the ones that treat money as an employee. They want their money to work for them and typically have a goal of building up their portfoio to support their desired lifestyle in perpetuity.

    Money is infrastructure to this group.

    These are the people who like to build passive income, think a lot about financial independence, and ultimately want to retire from the “have to work for money” world in order to spend their time pursuing their passions and have control over their time.

    If you push too hard here you get the extreme versions of FIRE. 

    People who claim money isn’t important, but the only thing they think or talk about is the marginal cost of everything and how to reduce it. Their entire life and personality ends up being about money. Life gets put on hold while they build up their nest egg. They miss out on lots of experiences and potential friendships along the way due to their excessive frugality.

    Financial strategies for this group focus heavily on tax / fee optimization, cashflow management, and budgeting.

    I’m 80% Independent and 20% Compounder

    The interesting thing is about all these groups is that most people don’t know which they’re going to fall into until they’ve started building their wealth. 

    I used to think I was primarily a Compounder. That the point of money was to beget more money. I wanted to have the most of it among my family and friends.

    But once I started earning enough to start building up my savings and investments I realized I was actually much more of an Independent. It gradually became more important to me to be able to balance work, life, and family on my terms rather than getting a high score.

    I started aligning my financial goals to creating a portfolio that could support our living expenses, giving myself the freedom to build a financial advisory practice the way I wanted to without having to sacrifice my vision for the sake of rapidly building revenue.

    Which are you? If you’re not sure, feel free to reach out and I can help you figure out your money personality and how best to align your life and finances to who you are.

    If you liked this post, you might also want to check out:

    Nathan
    Founder & Lead Advisor
    [email protected]

    The Tradeoff

    Get more insights, strategies, and stories just like this delivered straight to your inbox every other week. Always free, no paywalls.

    Check it Out

    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.

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.