For over two decades, I have helped independent school administrators and teachers prepare for life after school with financial confidence. This article outlines both wealth savings and intergenerational wealth maximization strategies for those currently in a comfortable net worth position.
Next-Generation Wealth Strategies for
Private School Administrators & Teachers
Many educators hesitate to discuss or disclose personal wealth, fearing it might set them apart from colleagues. The reality is that private school educators who are beneficiaries of generational wealth often grapple with how to extend and optimize their financial legacy while earning a modest salary and living comfortably.
This article explores strategies designed to help forward thinking educators build long-term financial security by maximizing government-provided tax advantages and ensuring their wealth continues to grow for future generations without compromising their values or lifestyle.
Building and Sustaining Generational Wealth
Regardless of whether you earn a high salary or have significant assets, employing smart tax strategies can help strengthen your financial position. Reducing your lifetime tax burden is a cornerstone of effective wealth preservation.
These strategies assume:
- A minimum liquid net worth of approximately $1,000,000+ in a taxable account (individual, joint, or trust brokerage) for support of major purchases such as a home, car, travel, or education as well as tax-efficient strategies discussed below.
- A desire to prioritize responsible spending and long-term wealth preservation across generations.
- A willingness to spend from your taxable account in order to maximize savings in more tax-efficient vehicles.
By leveraging tax-efficient strategies, educators can extend the longevity of their assets and pass on a greater inheritance.
Key Tax-Efficient Strategies
📈 Maximize Contributions to a Health Savings Account (HSA)
If you have access to a High-Deductible Health Plan (HDHP), fully funding an HSA offers triple tax advantages (exempt from federal, state, and FICA taxes). For the 2025 tax year, contribution limits are:
- $4,300 for individuals
- $8,550 for families
- $1,000 extra for those over age 55
Instead of using HSA funds immediately, invest these funds and allow them to grow tax-free and use them later for medical expenses in retirement, ensuring compounded tax-free growth over time.
💼Max Out Your School Retirement Plan (403(b) or 401(k))
The 2025 tax-year maximum contribution is $23,500 (plus additional catch-up amounts for those over age 50). If your marginal tax rate is 15% or lower, contributions should be made post-tax to a Roth 403(b)/401(k). At higher tax rates (22-24% and above), consult a financial planner to determine whether pre-tax or post-tax deferrals are most efficient for your specific situation.
For those seeking to eliminate or minimize IRA/401(k)/403(b) Required Minimum Distributions (RMDs), converting retirement savings to Roth accounts can be an effective strategy. Roth assets provide an additional 10 years of tax-free growth for heirs after your death—making them an essential component of wealth preservation.
🔄Strategic Roth IRA Contributions & Conversions
- Contribute to an IRA alongside your 403(b)/401(k) to further defer to tax-advantaged accounts.
- Consider Backdoor Roth Contributions if your income exceeds IRA tax-deductibility limits. But be sure to be aware of IRS aggregation rules when taking these steps.
- Spousal IRAs allow IRA contributions on behalf of a non-working spouse, further maximizing tax advantaged savings (including a Spousal Backdoor Roth Contribution).
If you have amassed $1.5–$2.0 million in tax-deferred retirement accounts, consider shifting all future contributions to Roth accounts to avoid excessive RMDs that may push you into higher tax brackets in retirement. For couples, this $1.5-$2.0 million threshold should still be closely considered. None of us can predict when we are going to die. And although we would all like to think we would pass within a short period of our spouse (remember the book Where the Red Fern Grows?), statistically that is uncommon. As a result, the second to die will be filing taxes single for the remainder of their life (baring remarriage) which adjusts all the tax bracket thresholds lower.
🔁Roth Conversions: A Powerful Wealth Strategy
A Roth conversion is the process of converting tax deferred assets (Traditional IRA or 401(k)) to a Roth account and paying the associated taxes now as opposed to waiting to withdraw your tax deferred money when required or it is needed. Roth conversions enable educators to shift tax-deferred assets into a tax-free account, optimizing financial security in retirement while reducing tax burdens across generations. Timing conversions during lower tax years is key to maximizing the Roth Conversion benefits.
Additionally, Roth IRA assets enjoy 10 years of additional tax-free growth after you pass and they are inherited, providing future generations with significant added compounded gains.
🎓529 College Savings Plans
529 College Savings Plans provide a flexible, affordable and tax-advantaged way to save for future educational expenses whether it be for funding a masters or doctorate degree for yourself or funding a child’s (or grandchild’s) school or college education. These tax-advantaged accounts:
- Allow for $19,000/year of giving (or $38,000 per couple) per beneficiary in 2025
- Allow for superfunding (also known as 5-year gift tax averaging). Depending on your financial level of comfort and desire to drawdown money from your estate, a 529 can be “superfunded” with up to 5 years of gifts at inception—$95,000 ($190,000 per couple). If you are a grandparent or parent with a significant estate and want to help a family member pay for college, superfunding a 529 plan can be a great option.
- Enables the beneficiary to rollover up to $35,000 from their 529 to their Roth IRA free of income tax or tax penalties enabling further wealth preservation (subject to federal conversion rules).
529 funding is also useful for controlling your estate size if you expect to be subject to the federal estate tax at end of life or if your state has a state estate tax.
Legacy Wealth Strategies: Beyond Personal Savings
For those with substantial net worth ($10-30M+) and a desire to maximize future generation wealth, early gifting to adult children can help lower overall taxes while safeguarding wealth. If your children are just starting their careers and lack resources to fully fund their retirement accounts, consider supporting or matching their Roth contributions to take advantage of the child’s lower tax brackets and affirm to them the importance of saving for retirement.
Similarly, matching an adult child’s retirement contributions can ensure that assets remain tax-efficient across generations. Remember, the annual gifting limit per child for 2025 is $19,000 per parent.
For those with even greater financial comfort and little concern of FORO (Fear Of Running Out), there are protective trust strategies that can be implemented for your loved ones. Please consult your estate attorney and financial advisor for the most appropriate form of trust for your situation and loved ones.
Navigating Potential Conflicts with Financial Advisors
Financial professionals sometimes hesitate to prioritize tax-efficient strategies due to potential conflicts of interest. Investment advisors may focus more on assets under management (AUM) rather than hypothesizing about future tax rates or HSA and Roth growth potential.
It’s critical to consult advisors who fully understand tax-advantaged wealth-building strategies and can independently tailor recommendations to your specific financial goals.
Two Examples of Asset Shifting and the income and/or financial resources required
Scenario #1: Married, non-working spouse, under age 50, two children
- School/Employer HSA funding: $8,550
- School/Employer 403(b)/401(k) funding: $23,500
- IRA/Backdoor Roth IRA funding: $7,000
- Spousal IRA/Backdoor Roth IRA funding: $7,000
- College 529 funding: $10,000 (assume $5,000/child)
Total 2025 funding required from savings and/or your brokerage account to fully fund all tax deferred or tax-free accounts: $56,050.00*
Scenario #2: Married, spouse working in education, both age 60-63, children out of college
- School/Employer HSA funding: ($8,550 + $1,000 catch-up) $9,550
- School/Employer 403(b)/401(k) funding: ($23,500 + $11,250 catch-up) $34,750
- IRA/Backdoor Roth IRA funding: ($7,000 + $1,000 catch-up) $8,000
- Spouse’s IRA/Backdoor Roth IRA funding: ($7,000 + $1,000 catch-up) $8,000
- Spouse’s School 403(b)/401(k) funding: ($23,500 + $11,250 catch-up) $34,750
- College 529 funding: $0.00 (assumes no grandchildren or other funding) $0
Total 2025 funding required from savings and/or your brokerage account to fully fund all tax deferred or tax-free accounts: $95,050.00*
* Excludes any associated tax cost that may result from liquidating brokerage assets (resulting in long or short-term capital gains, etc)
Can you mentally and emotionally handle any brokerage portfolio reduction hurdle to accomplish this tax-efficient strategy? You can if you are focused on your liquid net worth in entirety over long periods of time.
Final Thoughts
Private school educators that come from a comfortable financial position have a unique financial profile—one that often blends modest income with meaningful inherited wealth. By applying advanced tax strategies, maximizing retirement options, and embracing legacy tools like Roth IRAs and 529 plans, educators can uphold the values they’ve taught for decades: stewardship, foresight, and care for future generations.
David Brown was the Chief Financial Officer/Business Administrator at Blanchard Memorial School, Groton School, Alexander Dawson School, Rippowam Cisqua School, and Portsmouth Abbey & School over a 23-year school career. During that time, he advised and/or helped heads and administrators assemble and negotiate benefit packages that would ensure a comfortable life through “end of plan”. For over 10-years Dave has helped his clients effectively plan, save, and invest to and spend appropriately through retirement.
For personalized financial planning and/or investment guidance, contact Clear Skies Planning & Wealth Strategies at www.clearskieswealthplanning.com or directly at 720-833-8611.
Clear Skies Planning & Wealth Strategies, Inc provides advisory services through XY Investment Solutions, LLC, an SEC registered investment advisor. All views included in this communication are subject to change. Please contact Clear Skies Planning & Wealth Strategies to receive a copy of our Form ADV and other disclosure information.