College Funds and Asset Allocation: All You Need To Know

Retirement desires are nourished by good planning. The more you delay the planning process, the more unfavourable the outcomes turn out to be. Planning includes tax saving, availing social security benefits, opening an IRA, asset allocation, and saving for college funds. While getting on the road as early as you can, is important, it is also essential to make sure that things are done in a systematic manner.

Developing a well-framed strategy for asset and college funds collection helps reduce costs, save time, and maximize resources. Aiming for a college fund helps secure a generous future for your children, whereas asset allocation gives way to a smoother post-retirement life. Hence, planning for these should be inscribed in bold letters in your list of pre-retirement goals. Here are some tips to follow:

College Funding Tips

When looking for methods to save for college, you must keep a track of the following points:

1. Get Financial Aid

Financial aid is real and has helped 85% of full-time undergraduates as per the National Center of Education Statistics. This also demystifies the conflict about the ever so tough process of qualifying to get financial aid. While financial aid procedures can be tricky, nearly every family can get relief from it. Your probability of getting financial aid increases if you have two or more children attending college simultaneously. It is always lucrative to consider financial aid, no matter the state of your family. Even if your child fails to qualify for the first year, they may get it, the next year. Some points to consider while applying for financial aid include:

Filling out the Free Application for Federal Student Aid in a timely manner and maintaining your child’s student profile.
Staying up to date with the financial aid process, while taking help from college planning advisors.
Asking your child to complete the College Scholarship Service Financial Aid Profile to get non-federal financial help from the college directly.
Motivating your child to contribute some percentage of their income or savings towards college funding.

2. IRA Advantages – 529 College Saving Plan

Families failing to be eligible for financial aid can take the help of an IRA or Roth IRA plan. Various tax-free savings are introduced by these savings (529) plans. The Roth IRA also offers tax and penalty-free withdrawals including original contribution. One can look up to these to save for college funds and attain more flexibility in their financial journey. As per the 529 college savings plan, you can avail earning withdrawal for education expenses qualified in the plan limiting to $2,000 annually. Here, expenses of secondary and elementary school can also be compensated, as the contributor has investment flexibility.

3. Coverdell Education Savings Account

This is an education savings account that can be opened with any firm that provides IRA services. Here, the annual contribution is capped at just $2,000. However, the major advantage is that these savings can be utilized for things other than a college education, such as tuition fees, private elementary school fees, and high school, or middle school fees. However, in this plan, you can contribute only if the income is below $110,000 for singles and $220,000 for couples.

4. Social Security and Debts

Preparing the next generation for retirement goals is always a bright idea. For instance, your children should know how and when to claim their social security benefits. Keeping track of income and savings for the future will determine how much impact their social security will pose on their life. You should also urge your children to plan to pay debts themselves. Factoring the loans and debts into your college funding calculations will make the road easier later. Children can then plan on estimates required to pay the debts and start saving in an assuring manner.

Asset Allocation

Apart from the basic college savings strategies, here’s what you should know about asset allocation:

1. Use Retirement Funds

Retirement funds are a sure shot way to secure your financial life after retirement. These are distributed in varied funnels of markets amongst different bonds and stocks. Such funds often help produce a genuine income on a monthly basis and can be customized as per your needs. Retirement funds can be used to generate income or can be allocated to contribute to a bigger financial goal. They also give you withdrawal access at any point in time.

2. Consider a Part-Time Job

Some people travel a direction opposite to the retirees who enjoy sunny weather and leisure time. If you have a passion for a job, you can carry on a part-time occupation or even start a small business after getting retired. The income will help you delay the social security benefits till the age of 70. You can even add extra investment resources that provide a cushion against inflation. Furthermore, asset collection including stocks and bonds becomes a sinecure if you have a regular monthly income.

3. Capital Preservation

The process of investing in accounts and plans that provides assured returns is called capital preservation. But all that glitters is not gold. One should understand that the process accompanies some amount of risk too. You can easily fall prey to capital loss over a time period. The ideal way out is to analyze the exposure to equity considering varying market limits. Overpaying can be avoided to elude permanent capital losses. Evaluating an asset to be of more value than its worth remains a common mistake that needs to be evaded.

4. Buy Annuity

By considering an annuity plan, you are, in a way, securing your life with a regular pension payment. The simple process of paying a sum of money to an insurance company, in return for monthly income, works wonders for many individuals. You can even buy the annuity before retirement and save more to get good payouts when you retire. The persistence pays you well here with larger paybacks.

To Sum it Up

Saving for college funds and collecting the right assets is an important chapter in the guide to retirement. Since your children’s lives depend on it to a great degree, the process should not be commenced without proper planning. Holding a step back to start in the most intuitive manner can give you a factual estimate of goals to aim for.

If you are facing problems in putting together the pieces of college funding and asset allocation, you can get in touch with financial advisors. They can offer you help in figuring out reasonable strategies to meet your goals.