The College Process | Consumer Confidence

THE COLLEGE PROCESS: College application process and major selections can be stressful. As Ron Leiber said, “Figuring out how to pay for college is one of the biggest financial decisions families make in their lifetime, and parents often leave the final call to a 17-year-old who has never purchased anything more expensive than a bicycle.” The weight and pressure placed on high school seniors can be overwhelming and unhelpful. Picking the “right” major at age 17 can be an impossible task. The following chart seems to confirm this idea:

How can we de-stress this process for students, while also supporting the next generation as they discover their passions and competencies? A few questions we find helpful:

What can we do to help our kids and grandkids build real-world experience with their passions and vocational interests?
Can we give students access to peers we respect in fields that interest them? (Networking, job shadows, etc.)
Are there resources we can invest in to help support this process for our family?

Families might do well to explore resources like college admissions counselor Dr. Brooks Imel and the team at Compass to College. He partners with families as early as freshman and sophomore years to create discovery-focused pathways for their students.

We think it’s worth exploring what resources like Dr. Imel might be available to your family to help you do more discovery during the high school years and maximize the value and focus of the college years. If you are a grandparent, this might be something worth talking about with your kids to help support successful launches for your grandchildren.

CONSUMER CONFIDENCE: “The Michigan Consumer Confidence poll showed that consumers are now more worried about things than they were 25 years ago during the tech bubble bursting, or in the depths of the Great Financial Crisis, or during a once in a century pandemic. Things aren’t nearly this bad and once again, this shows extremely low sentiment that is likely a reason for this rally to continue. In fact, the recent reading was the second lowest reading ever. The lowest ever? June 2022, the exact month that most stocks bottomed and started to rally from that bear market.”

-Ryan Detrick, market strategist

In addition, the majority of individuals view their personal financial situation as only fair (40%) or poor (17%):

PAUSE & CONSIDER: “People often ask a really stupid question—’what would you do with a million dollars?’ I can tell you what you would do with a million dollars. You would do exactly what you would do with a dime. If you would hoard a dime, you’d hoard a million dollars. If you would waste a dime, you’d waste a million bucks.  If you’d share a dime, you’d share a million bucks.”  

– Rich Mullins, singer-songwriter

PLANNING SPOTLIGHT: Net Unrealized Appreciation (NUA) is a special tax provision that allows you to separate the appreciation of employer stock from its original cost basis when you take a lump-sum distribution from your 401(k) or qualified retirement plan.

The difference between knowing about NUA and not knowing could literally be a Porsche or two extra years of retirement.

Here’s the magic: Instead of rolling everything into an IRA (where it’s all taxed as ordinary income when withdrawn), you can:

Pay ordinary income tax ONLY on the original cost basis
Pay long-term capital gains tax on ALL the appreciation—regardless of how long you actually held it

That spread between:

Ordinary state and federal income tax at 30-40%+
And capital gains rates at 15% or 20%

That’s your opportunity.

This strategy is ideal if you:

✅ Have highly appreciated company stock in your 401(k) or qualified plan
✅ Are separating from service (retiring, leaving your job, or over 59½)
✅ Have a low cost basis relative to current value (the bigger the appreciation, the bigger the win)
✅ Don’t need immediate liquidity from the entire balance
✅ Are in a high tax bracket (where the ordinary vs. capital gains spread is widest)

The Downsides (Yes, There Are Trade-Offs):

⚠️ Immediate tax bill: You pay ordinary income tax on the cost basis NOW, not later
⚠️ No do-overs: This is a one-time election. You can’t reverse it
⚠️ Complexity: You must take a lump-sum distribution in a single tax year
⚠️ Lost tax deferral: That appreciated stock leaves the tax-deferred account
⚠️ Concentration risk: You’re perpetuating your single-stock exposure.
⚠️ Step-up basis loss: If you die holding the stock, heirs will pay long-term capital gains tax on the specific gain. This is considered “income in respect of a decedent” or IRD.

This is complex, requires careful analysis, and doesn’t fit the “roll everything to an IRA” playbook. If you’re approaching retirement or a job transition with substantial company stock, you have a narrow window to evaluate this strategy. Once you roll that 401(k) into an IRA, the NUA opportunity is gone.

NUA isn’t right for everyone. It requires:

Detailed tax modeling
Consideration of state taxes
Analysis of your specific situation
Coordination between your CPA and planning team

But for the right situation, we’re talking about significant tax savings.

If you invest in your company stock in your 401(k), schedule a brief strategy session with me.

WHEN KEVIN IS YOUR DAD: Home Alone fans, watch this.

*The views expressed represent the opinions of Compass Ion Advisors, LLC, as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, an investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial, or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.

Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website here. Past performance is not a guarantee of future results.