Q: With all the hoopla about tax-free instruments to help one's children save for college, I would like to know how to save for myself as an older adult for future graduate school work. Would I be able to open one of these accounts for myself? I have already opened one for a nephew. I am 40 years old with a bachelor's degree that took 20 years to complete! I want to be able to continue, but will need to put money away for a few years first. Do you know the scoop on this?
C.K., via e-mail
A: You can certainly do for yourself what you'd do for a child, says Patricia Brennan, president of Key Financial Inc. in West Chester, Pa. Your choices would include an education IRA (subject to income limitations and a maximum annual contribution of $2,000), a 529 plan (no income limitations) that state governments sponsor, or even a Roth IRA, which might be tapped tax-free for education.
Depending on when you might start graduate school, Ms. Brennan thinks the Roth IRA bests suits you.
As long as the money stays in the Roth for five years and the distribution doesn't exceed higher-education expenses, you can receive that money tax free even if you're under age 59-1/2. Eligible expenses include tuition, room, and board for a person who is at least a half-time student, plus fees, books, supplies, and equipment.
And if you don't use the money for grad school, you can let it accumulate for your retirement. Otherwise, she'd opt for a 529 plan, which typically can be used as soon as money is put into the account.
Q: I've just transferred an investment portfolio from a major brokerage firm to my local bank, where I am more involved with decisions. The allocation is 70 percent stocks and 17 percent bonds. As I am in my 80s, I feel a need to reduce the stocks, but would welcome input on how best to do this.
A: That's a tall order since we don't know your risk tolerance, the type of account, and what stocks you own,
says James Spindler, senior financial adviser for Univest Corp., in Souderton, Pa.
"Work with your financial adviser at the bank to analyze your risk tolerance level and put together a plan that would help you reallocate your portfolio to an asset mix that makes sense based on your needs and goals," says Mr. Spindler.
An increased position in fixed income instruments or preferred stocks may reduce your account's volatility and risk, he says.
In addition to the allocation decision, Spindler recommends that you also consider the best investment vehicles to achieve adequate diversification.
Depending on the size of your investment account, mutual funds may provide more diversification than individual stocks and bonds, Spindler says.