The general strategy for financial planning is to have separate goal-oriented “accounts” with its own asset allocation. But I have been using one big Vanguard brokerage account for my taxable retirement as well as kids’s college education contributions (kids 8 and 10 years away from entering college). The reason I am doing this is to retain flexibility regarding how to use the money (retirement or college education). Note that I am not considering College Savings 529 plan because I don’t want to restrict that money for college-only use. There are few scenarios if I stay this route:
- Happy path: If we are able to fund the college with cash flow or the child gets a scholarship, then we can use the common account and accumulated capital for our own retirement. This helps me avoid a separate account with its own asset allocation that glides down to very conservative ratio that will not be used for college at all. I would rather keep that money for our retirement at a right asset allocation.
- Not-So-Happy path: If we can’t fund the college using cash flow then we can take it out from the common account. By the time my kids enter college our asset allocation will be around 60% Stocks and 40% Bonds. We can have two situations in this case:
- Not-So-Happy but still a better path: If the economy is up then we can sell the stocks and fund the college.
- Worst case scenario: If the economy is down then we can use the bonds portion to fund the college for initial years and then dig into the stock portion. Hopefully, market starts to recover by then.