Here are four examples.
You want to save for your child's college education
Who: Any parent
Need: Long-term investing (12-18 years)
What: If you want to minimize taxes, a 529 college savings account might be the right vehicle for you — your savings will grow tax-free if you use the money for educational expenses. But there's a penalty if you decide to use the money for other expenses. If you want the ability to change your mind, and you don't want to be locked into an investment specific for college savings, a managed account may be a wise choice. It gives you the chance to invest in a diversified portfolio you can tap into for a chosen expense in the future.
You have an aging parent
Who: Anyone with an aging parent
What: You can plan for a variety of things — retirement, college — but you may not have accounted for the costs associated with caring for an elderly parent. That may include helping them manage a chronic condition or pay for medication, or assisting with the costs of long-term care at home or in a nursing home. By creating and funding an account for this purpose, you'll have the flexibility to handle any big or surprise expenses without having to draw down retirement accounts, which can incur penalties. And because a managed account is designed to meet your specific needs, it may be adapted as your needs — and those of your parent — change.
You got a raise (Congrats!)
What: A bump in salary is cause for celebration, but don't spend it all in one place. In fact, now is a great time to evaluate what you'd like to be saving more toward. A new home? A renovation? A trip to graduate school? A managed account allows you to invest your newfound cash in a well-diversified portfolio of investments, depending on how much risk you want to take and how you think you'll use that money.
You're planning a big-ticket purchase when your kids are older
Who: Young family
Need: Mid-term investing (3-10 years)
What: Some goals have longer timeframes — a bar/bat mitzvah, sweet 16 or even a jaunt to Disney World once your newborn’s old enough to remember it. For goals you want to hit several years down the line, a managed account may be just the thing. The portfolio is monitored on an ongoing basis, and rebalanced when necessary to ensure the investments continue to align with your goals. Find a managed account with lower fees to keep costs down; the lower the bill, the more money you keep in your wallet.