CollegeAmerica is sponsored by Virginia College Savings Plan. Figures are past results and are not predictive of results in future periods. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value. Interests in CollegeAmerica are sold through unaffiliated intermediaries.
[ Note to presenters : You can tell your own opening story about how you (or someone you know) paid for college. You can also use the following excerpt from the book Next by Michael Lewis. New College in Oxford, England, was built in 1386. In the ceiling of the common room of the college were giant oak beams. At the end of the 19th century, the time had come to replace the oak beams. The folks at New College had a problem; they did not know where they would get the wood to replace the beams. The Oxford forester informed them that the man who had built the original ceiling back in the 14th century had also planted the trees to replace the beams. They stood on Oxford University land, waiting to be cut down.] That brings us to our subject today … Planning for college. Everyone wants to help their children, grandchildren, nieces and nephews realize their dreams — whether it’s to become an astronaut, an artist, a teacher or a doctor. Before you know it, today’s toddlers will be ready for college. And putting a child through college takes planning and foresight.
Today we’ll discuss how: 529 college savings plans provide higher education savers with an unmatched combination of benefits. CollegeAmerica, a 529 college savings plan offered by American Funds, is an attractive option for many investors. You can work with your adviser to build a CollegeAmerica plan appropriate to your higher education savings objectives.
An investment in higher education is an investment in the future — for your child, grandchild or even yourself. A 529 college savings plan can help brighten that future by providing a variety of benefits and tax advantages for most higher education savers. Because of these benefits, 529 plans have become the savings vehicle of choice for millions of investors. That’s why, as of the end of 2010, investors had established more than 10 million college savings accounts containing assets totaling more than $100 billion.
A 529 college savings plan facilitates saving for college with an attractive combination of benefits, including: Flexibility You can open a 529 plan for anyone — a child, grandchild, stepchild, spouse or friend. And if a return to school is in your future, you can even establish an account for yourself. There are no income limits. You can contribute no matter how much you earn. Assets in a 529 savings plan can be used to pay for a variety of higher education expenses, including tuition, room and board, books and supplies. Though most plans are administered by individual states, investors can choose from any state’s plan regardless of their state of residence. In addition, account assets can be used to pay qualified higher education expenses at thousands of eligible institutions nationwide, not just schools in the state where the account owner or beneficiary lives. Depending on your state of residence, there may be an in-state plan that provides tax and other benefits not available through CollegeAmerica. Tax advantages Earnings in 529 accounts can grow free from federal tax. If you withdraw money from your 529 college savings plan account for purposes other than higher education, your earnings will be subject to federal income tax and possibly a 10% federal tax penalty. A number of states allow a deduction from or a credit against state taxes for all or part of a contribution to certain 529 plans. Oversight The account owner rather than the beneficiary maintains oversight of account assets and determines the timing and amount of distributions. Account owners can change the beneficiary to another member of the previous beneficiary’s family without penalty.
529 plans offer significant tax benefits because dividends and capital gains are not taxed as long as plan assets are used to pay for qualified educational expenses. This represents a potentially significant advantage over saving for college in a taxable account — namely, a bigger college-savings nest egg. Consider the following example. This chart illustrates the value of investing in a tax-free account by showing the growth after 18 years of a hypothetical $100-per-month investment in a tax-free account as well as an account taxed at 25%, where both earned 8% a year compounded monthly. The taxable account assumes a 25% tax rate because the typical mutual fund investor falls into the 25% tax bracket. Your tax rates may vary. In dollar terms, this means that assets in the 529 plan would exceed those in a taxable account by almost $10,000, nearly the cost of one semester of college at a public university. Of course, if investors withdraw money from a 529 college savings plan and use it for something other than higher education expenses, they’ll face taxes and penalties. The results shown here are not intended to represent an investment in a specific fund, and, of course, a program of regular investing does not ensure a profit or protect against loss. Investors’ investment experiences will differ.
When it comes to significant savings challenges like higher education, good planning can help you meet your goals. Let’s talk about how CollegeAmerica can help you meet the higher education savings challenge.
CollegeAmerica is the nation’s largest 529 college savings plan and the only one to feature the American Funds. With CollegeAmerica, investors get: A program designed for use with your adviser CollegeAmerica was designed to allow you to work together with your financial adviser to customize a program appropriate to your needs. Competitive operating expenses CollegeAmerica provides exceptional value for shareholders, with operating expenses that are competitive in the mutual fund industry. In addition to fund expenses, you will incur a $10 fee for each CollegeAmerica account established as well as an annual $10 account maintenance fee. The fees of the American Funds available through CollegeAmerica are described in each fund’s prospectus and the CollegeAmerica Program Description . Diverse investment options Investors can choose a single fund from 25 of the American Funds, select from any one of our model portfolios — we call them foundations — or design a portfolio of American Funds that fits their financial plan, time horizon and tolerance for risk. Experienced investment management Only CollegeAmerica offers the experience and knowledge of American Funds. For 80 years, American Funds has invested with a long-term perspective and a consistently prudent approach. Low start-up amounts Minimums are higher for the money market fund.
When it comes to college savings, getting an early start is key. However, it’s never too late to begin saving for educational objectives. Doing so could potentially reduce the amount you’ll need to borrow to pay for higher education. Just look at how a monthly investment can grow over time. Importantly, you can invest up to $13,000 a year ($26,000 for married couples) for each beneficiary without gift-tax consequences. Under a special election, you can accelerate up to five years’ worth of investments and put up to $65,000 ($130,000 for married couples) into CollegeAmerica at one time without gift-tax consequences. Once a CollegeAmerica account’s value reaches $350,000 per beneficiary (across all plans administered by Virginia College Savings Plan) through contributions, growth or transfers, no more contributions will be accepted.
When creating your American Funds CollegeAmerica plan, it’s important to work with a financial adviser to select the funds that are appropriate to your needs.
Everyone has a different time horizon and tolerance for risk. CollegeAmerica offers investors 25 American Funds with a full range of investment objectives. You may either select a single fund, opt for one of our investment foundations or develop a customized portfolio of funds. You may want to keep it simple and invest in a single fund that you can buy and hold for many years. If the person you’re saving for won’t be starting college for a while, you might consider investing in one of the seven American Funds in the growth category. If you’re more conservative or have a shorter time frame, you may want an “all-weather” equity-income or balanced fund that invests in both stocks and bonds. You may wish to choose an investment foundation appropriate to your beneficiary’s objectives and time horizon and, as enrollment draws nearer, transition those assets into one of the more conservative foundation options. You may prefer to build a customized portfolio of funds that you can adjust as the beneficiary gets closer to enrolling in school.
Whichever CollegeAmerica fund options you select, you’re getting American Funds’ time-tested investment approach. The following five factors are at the heart of the American Funds philosophy: American Funds invests with a long-term, value-oriented approach based on extensive research. Instead of asking, “Where will this security be in three to six months ?” American Funds analysts prefer to ask, “Where will this company or issuer be in five to 10 years ?” American Funds doesn’t cut corners when it comes to global research. Our investment professionals travel the globe each year to meet with business executives, industry specialists, economists and government officials. They also speak with a company’s suppliers, buyers, bankers, consultants, customers and competitors. Created in 1958, American Funds’ multiple portfolio counselor system combines the best attributes of single-manager and committee systems: Each portfolio is divided into smaller, more manageable segments. Segments are assigned to individual portfolio counselors who make independent decisions. A group of investment analysts also manages a segment. All investment decisions are monitored to ensure consistency with fund objectives and overall guidelines. American Funds portfolio counselors have an average of 27 years of investment experience. They have a depth of experience in both good markets and bad. More than 60% were in the investment industry before the October 1987 crash, and one in five experienced the 1973–74 bear market. American Funds is committed to providing exceptional value for shareholders, with management fees that are among the lowest in the mutual fund industry, according to Lipper.
The following slides illustrate three model portfolios that you can use as guides to help you get started. Depending on when your beneficiary plans to enroll in college, one of these foundations may be appropriate.
If enrollment is a long way off, consider Conservative Equity Foundation.
If your time horizon is shorter or you are seeking increased stability, consider Income Foundation.
If enrollment is near, consider ABC Foundation. Of course, you may prefer different investment options which can be changed according to a timetable you develop with your adviser.
If you and your adviser choose a customized approach, CollegeAmerica offers 25 different American Funds. Here is a complete list of the equity funds available for your CollegeAmerica plan. They fall under the categories of growth, growth-and-income, equity-income and balanced funds.
Here is a complete list of the bond and money market funds available for your CollegeAmerica plan.
Higher education delivers priceless benefits. That’s why investing for higher education is a key financial goal for so many people. However, as the cost of college continues to climb, the goal has become more challenging. A 529 savings plan can help. With 529 plans, earnings can grow free from federal tax and withdrawals for qualified higher education expenses are free from federal tax. CollegeAmerica, the 529 college savings plan offered by American Funds, gives higher education investors an attractive combination of benefits and options. CollegeAmerica is designed for use with your adviser, who can help you develop an investment plan appropriate to your objectives and time horizon. CollegeAmerica is the only 529 savings plan that offers the experienced investment management of American Funds. CollegeAmerica’s expenses are competitive among 529 college savings plans. Finally, a college investment is serious money. Investors want an experienced investment manager. So, the most important question they can ask is, “Who will manage my assets?” For 80 years, American Funds has helped millions of shareholders reach their investment objectives.
(Refer to slide.)
(Refer to slide.)
American Funds: The right choice for the long term.
![She wants to be a doctor AI-90016 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],© American Funds Distributors, Inc. V1](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)