Financial Intelligence Newsletter for Q4 2025

In this publication of Financial Intelligence, I introduce Javier Gomez, another recent addition to Peak and its now robust (and expanding) financial planning team.

Speaking of planning, Bethany Aylor has written and recently published a white paper on equity compensation. This is a complex area of wealth management that we feel doesn’t get enough attention considering the various types of equity compensation paid out and the percentage of the overall rewards and compensation packages many highly compensated employees receive. Bethany takes a deep dive into vesting schedules, navigating taxation, and investment strategies that can be part of a comprehensive wealth building strategy. We have published a portion of the white paper here – just enough to whet your appetite and leave you wanting more. The entire article can be found on our website and is an absolute wealth of information. Please check it out.

The team has also been active presenting on topics recently, including tax planning associated with OBBBA (One Big Beautiful Bill Act) and college planning for busy and overwhelmed parents. I have included a summary article based on our recent college planning presentation regarding the rising costs associated with college, the best savings vehicles to use, tax saving tips, financial aid planning and the advantage of starting to save early.

I hope you find all of the information provided helpful. Let us know how we can assist you. Javier Gomez joined Peak Asset Management in September as a Paraplanner. Before Peak, he spent five years in management at Amazon leading operations teams while earning his second bachelor’s degree in Financial Planning at Arizona State University. His first degree was in Molecular & Cell Biology, but along the way he realized what really energizes him is building relationships and helping people feel confident and secure about their financial lives.

He is currently pursuing the Certified Financial Planner™ (CFP®) designation, and he loves putting what he has learned into practice to support client planning strategies. Being part of a team that values integrity, collaboration, and continuous growth is exactly where he wants to be.

Originally from San Diego, he has lived up and down the West Coast before settling recently in Colorado. Outside of work, you’ll find him exploring Colorado with his fiancée – hiking, mountain biking, climbing, and discovering new restaurants. He also enjoys playing pickleball and table tennis. He will be a very important piece of our planning team moving forward.

A Sneak Peak into the World of Equity Compensation

By Bethany Aylor, CFP®, EA

A summary excerpt from Bethany Aylor’s White Paper, entitled, “Understanding Equity Compensation: A Financial Planner’s guide to RSUs, Stock Options, ESPP, and Performance Awards”:

From early-stage startups to large public companies, employers are using equity compensation to attract, retain, and reward talent. While equity compensation can be a powerful wealth-building tool, it also brings wealth management complexities. Navigating taxation, vesting schedules, and an investment strategy can feel overwhelming without a comprehensive plan. At Peak Asset Management, our goal is to align equity compensation with a client’s broader financial objectives. Whether you’re just getting started or managing a growing portfolio of stock-based benefits, this guide aims to provide a clear and user-friendly overview of the four most common types of equity compensation: Restricted Stock Units (RSUs), Stock options (ISOs and NSOs), Employee Stock Purchase Plans (ESPPs), and Performance Awards.

Restricted Stock Units (RSUs) are one of the more common and straightforward types of equity compensation. RSUs are company shares granted to an employee, subject to a vesting schedule. Once vested, they are considered income and taxed accordingly. Unlike stock options, no purchase is required, as shares are delivered to the employee as compensation.

Stock Options (Incentive and Non-qualified) are a type of stock award that gives you the right – but not the obligation – to purchase (exercise) company stock at a predetermined price (the strike price) during a specified timeframe. The value lies in the difference between this strike price and the market price when exercised. Think of it like a coupon – if the value of your company’s stock increases, you are exercising your option to buy shares at a predetermined discounted price.

In the landscape of equity compensation, Employee Stock Purchase Plans (ESPPs) stand out as a compelling benefit offered by many public companies. They give employees a tax-advantaged way to acquire company stock at a discount, often creating a valuable wealth-building opportunity when used wisely. But not all ESPPs are created equal, and understanding the tax implications of your choices can make a significant difference in outcomes.

Another award type that has become more commonplace for employees is the grant of performance shares, often in the form of Performance Stock Awards (PSAs) or Performance Stock Units (PSUs). These grants are unique in that the ultimate payout is based on more criteria than just continued employment or the company stock price reaching a certain threshold. Performance based awards can be similar to RSUs, but vest only if specific performance goals are reached, such as achieving increases in total shareholder return (TSR), earnings per share (EPS), sales, return on equity, return on assets, or levels of customer satisfaction. As these awards only vest when certain company performance criteria are met, they often satisfy investors and help establish a stronger link between pay and performance.

To learn more about these various types of equity compensation, including how they are taxed, key features and planning considerations for each type, variations of these unique awards, how to exercise them, and examples and case studies of how they work and function, the full article is available on our website, or we can provide you a copy by contacting Bethany directly at bethanyaylor@peakam.com

College Planning for 2025 and Beyond

By Jason Foster, JD, AEP®

This material is summarized from a recent Peak Asset Management presentation given by the financial planning team on college planning in October 2025.

The cost of college has escalated in the last several decades. Since the early 80s, post-secondary education costs have soared 900% according to the BLS Consumer Price Index. This is a greater inflationary rate than any other household expense and equates to an average annual increase of 5.6% per year. For reference, health care has “only” risen 486% during this same time frame.

If we project out this same 5.6% per year increase for a newborn child in 2025, it would cost the child over $258K to attend 4 years at a public in-state institution 18 years from now, over $457K to attend a public out-of-state institution, and over $600K to attend a private school according to College Board’s Trends in College Pricing and Student Aid 2024. One of the best ways to combat this inflationary rate is to counteract it with saving early and achieving a rate of return equal to or greater than that of the inflationary rate. This strategy sounds simple enough to deploy, but what savings accounts make the most sense to use?

529 Accounts. These are designated college savings accounts designed to grow tax free if used for “qualified” educational expenses, such as tuition and fees, room and board, books, supplies, computers, software, and can even be used to pay for a portion of student loan payments (up to $10K per individual over their lifetime).

With no specific annual contribution limits under CO law, our planning team resorts to the federal annual exclusion limits for guidance, which is the maximum amount you can gift without requiring a gift tax return be filed with the IRS. These thresholds are currently $19K for individuals and $38K for married couples. Interestingly, for married couples, the annual federal gifting limit almost equals the maximum allowable 2025 CO state tax deduction for contributions made to 529 accounts by a married couple filing jointly ($38,100). The maximum CO state tax deduction for single filers is $25,400 per beneficiary.

You also have the ability under federal law to “frontload” 529s with 5 years of annual exclusion amounts done in a single calendar year, or $95K for single filers and $190K for married couples filing jointly. But you are still limited to the annual $25,400 and $38,100 CO state tax deduction levels. Thus, although you would miss out on the growth associated with the larger upfront contribution over the full 5 years, it might be more advantageous from a tax planning perspective to get a CO state tax deduction every year for the 5-year contribution period, instead of just the one year capped at the above deduction levels. For those with the capability of frontloading, the decision depends on your objectives and preference in receiving either a greater cumulative tax deduction or the greater potential growth in the account.

Although 529 accounts have been recently approved for K-12 qualified educational expenses at the federal level, the state of CO has not expanded the use of 529 funds to cover these types of expenses. But 529s do offer flexibility in other ways – you have the option to change the beneficiary on the account as circumstances change. For example, if the initial child beneficiary does not go to college, or qualifies for significant financial aid and the 529 has a left-over balance when the beneficiary graduates, you can move this money to another 529 account with a different beneficiary within the family tree who may have future college aspirations. You could also leave the balance in the account and allow the remaining balance to continue to compound over time and redirect the 529 principal later. 529s have no forced distribution schedule. The accounts can continue to compound and be used by the next generation.

The recent Secure Act 2.0 also introduced a rollover option relating to 529 balances, allowing a rollover into a Roth account after 15 years. Contributions made in the last 5 years would not be available to rollover, and rollovers would be limited to the annual contribution limits, with a current lifetime limit of $35K. This provides an additional option for beneficiaries who have left over balances at the end of their college careers.

Other accounts. Coverdell Education Savings Accounts also exist and can be used for K-12 college expenses, but have a $2K limit per beneficiary per year, do not allow for a tax deduction at the state or federal level, and have an income level phaseout. Currently, this phaseout starts at $95K for a single taxpayer, and will be completely disallowed once $110K of income is reached. For married couples, $190K is the phase out starting point, and a couple is completely phased out from using a Coverdell account once they reach $220K of income.

Another account option for college savings is a Uniform Transfer to Minor’s Account (UTMA). If you would rather gift to an account that does not have restrictions on distributions (there is no “qualified” educational expense requirement here) this is an account to consider. UTMAs can be invested in anything with annual exclusion limits discussed previously applying here. But there is no 5-year front loading option here as with 529s. Other important distinctions include:

• Once the child reaches the age of the majority (21 years in CO), the parent or custodian loses control and management over the account, and the child (now an adult) becomes the owner, and
• Any investments sold within the account are subject to capital gain and loss rules, and any interest or dividends paid on investments owned within the account are subject to ordinary income tax (this is not the case for a 529 account, where the balances grow tax free assuming distributions are used for qualified expenses).

The above differences from a 529 account tend to make the UTMA account a potentially inferior choice, especially if you are earmarking your gift for future higher educational expenses. One additional negative – this type of account weighs heavier against the student for financial aid purposes, as 100% of the account will count against the student versus between 5 and 6% of a 529 account (more on this later).

Parent or child-owned Roth IRAs and parent-owned Brokerage Accounts are alternative choices, but generally not preferable to 529s. The original principal of contributions made to a Roth can be withdrawn without penalty or tax if distributions are used for qualified higher education expenses. Roths also do not count against the student for financial aid purposes. But any earnings distributed are still subject to ordinary income tax if the owner is not yet 59 ½ years old. More importantly, Roths offer a key tax-free bucket of liquidity in retirement, so we would generally discourage taking from Roth accounts to pay for higher educational expenses.

We view a parent’s brokerage account as a good supplemental account to utilize in addition to the 529, especially if the child is unlikely to qualify for financial aid (a parent’s brokerage account is an asset that will be counted against the student for need-based financial aid), although a judicious approach should be used in liquidating investments within the parent’s brokerage account to pay for college expenses so taxes can be managed accordingly. While not as tax efficient as a 529, a parent’s brokerage account isn’t mandated to be utilized solely for qualified college expenses, so it is more flexible if money is required for other needs.

Financial Aid Planning. The Free Application for Student Aid (FAFSA) form governs eligibility for Federal grants, loans, and work study. This application will determine whether or not your student will receive need-based aid. Financial aid eligibility is determined by a Student Aid Index (SAI), and although it does not determine the amount you are expected to pay for college, it establishes a guide for administrators to create a financial aid package. The form analyzes both income and assets and uses the prior-prior year’s tax return information. It does not consider equity in a homestead or retirement accounts as assets that will count against the student for purposes of aid determination. Student income and assets are weighed more heavily as well, which can penalize a student disproportionality for having an UTMA, whereas only 5 to 6% of 529 values are considered.

Merit-based aid also exists. This comes in the form of academic or athletic scholarships available through the schools. Regardless of whether you believe the FAFSA form will result in you qualifying for need-based aid, you should still complete the form. Schools might consider whether you will receive any federal aid in putting together merit-based scholarships or grants. And there are also student loans available – both federal and private loans. Federal loans will be the preferable option here because of lower interest rates, borrower protections and the potential of income driven payments. Private loans often are the mode of last result, as they tend to have much higher interest rates, and a co-signor is often needed (the parent).

If financial aid is available, whether need or merit-based, it will likely only pay for a portion of your student’s overall college costs. In 2023-2024, of the 60% of families receiving need-based grants, the award only paid 11% of private and public college. Of the 64% of families receiving scholarships for merit-based aid, the amount received paid 19% of private college and 13% of public college. Sallie Mae, How America Pays for College, 2023 and 2024.

How do we bridge the gap? Saving early and often, regardless of the type of account you choose, will be key. Here is a chart illustrating the benefits of compounding vs. borrowing:

If the goal is to save $80K for college and you started when your child is born, you’d have to save $190/month at a 6% growth rate to reach this $80K mark by the time that child is 18. This requires a total investment of $41,040 for 18 years. Compare this with borrowing $80K when the child goes to college at 6.53% paid over 20 years. You will pay $598/month and a total of $143,489 after the 20-year loan term. The difference is over $102K extra paid when assessing the two strategies. Here is another chart showing the benefit of frontloading a 529 account:

If you and your spouse opened a 529 account at your child’s birth and made the maximum tax-deductible amount of $38,100, you also would receive an account opening bonus of $118 and a $500 match for this first-year contribution. If this initial $38,718 investment grows 6% per year, the account value will be an estimated $118K by the time the child is 18 – without any additional contributions! We realize not everyone has $38K to invest at a moment’s notice, but the effect of lump sum investing early in a child’s life can be a game-changer. It is important to know where you are in the process and how your specific circumstances will affect planning decisions. Do you have more than one child? What do your resources look like? Will grandparents be helping? Could you anticipate need-based aid on your future FAFSA form? Could your child qualify for merit-based aid? Are you considering private or public schools? In-state or out-of-state? The answers to these questions (and others) will help shape the financial planning associated with your child’s college planning. One thing is certain – the more you can save early in the process the better. At Peak, we regularly assist clients with this type of complex planning. Our financial planning offering is holistic and comprehensive in nature – college planning will be part of a much bigger conversation and analysis involving tax, retirement, and legacy planning. As always, we are here to help.