Choices Today for a Brighter Tomorrow. COLLEGE SAVINGS PROGRAM

Transcription

1 Choices Today for a Brighter Tomorrow. COLLEGE SAVINGS PROGRAM

2 A Lifetime of Learning Starts Now. As your children grow, it is critical to take the steps necessary to help them succeed as adults. That s where saving for college comes in. You re taking an important first step by getting started with the Bright Directions College Savings Program. You ll work with your investment professional to design a program that works best for you with this advisor-sold 529 Plan. Bright Directions is a tax-advantaged 529 college savings plan that allows you to get started today by contributing any amount that works best for you and your budget. When the time comes, funds can be used at schools nationwide and even some foreign schools. Plus, working with your investment professional you ll have a number of quality fund families and investment choices to choose from. The time to start is now...with Bright Directions! The Bright Directions College Savings Program is part of the Illinois College Savings Pool and is designed to qualify as a qualified tuition program under the provisions of Section 529 of the Internal Revenue Code. The Bright Directions College Savings Program is sponsored by the State of Illinois and administered by the Illinois State Treasurer, as Trustee. Union Bank & Trust Company serves as Program Manager, and Northern Trust Securities, Inc. acts as Distributor. An investor should consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing. The Program Disclosure Statement (issuer s official statement) is available from your financial advisor and should be read carefully before investing. 1

3 It s Never Too Early to Start Begin Saving Today. As education costs continue to rise and the job market ebbs and flows, saving for college has never been more vital. When your child has options, they can attend the college of their choice to earn the degree they need. A college degree will open up a world of possibilities for your child. Reduce Your Taxes When You Save for College. The money you invest with Bright Directions offers several tax benefits: Illinois taxpayers can deduct up to $10,000 ($20,000 for a married couple filing jointly) per year on contributions made to Bright Directions! 1 Withdrawals are tax-free (federal and State of Illinois) if they are used for qualified college expenses including tuition, fees, certain room and board expenses, books, supplies, and equipment required for enrollment. 2 Important Note: If the money is used for other purposes, the earnings portion of the withdrawal is subject to federal income tax, any state income tax, and may be subject to a 10% federal tax penalty. With these potential tax savings opportunities, your child or loved one may benefit even more from your foresight and planning. Take advantage of these benefits by opening and contributing to an account today. Relax: You ve Got a Professional On Your Side. You don t have to be an investment expert to send your loved one to college. We know that you may have questions about which investment options are right for you. Not to worry: Your investment professional is here to help ensure that your Bright Directions account is straightforward and worthwhile. $1,500 $1,250 $1,000 MEDIAN WEEKLY EARNINGS OF FULL-TIME WORKERS (Age 25 and Older) $750 $500 $250 0 $488 Less Than a High School Diploma $681 High School Graduate $762 Some College or Associate Degree $1,068 Bachelor s Degree $1,359 Advanced Degree Source: Bureau of Labor Statistics, U.S. Department of Labor, News Release (October 24, 2014) You should consider, before investing, whether your home state or the designated beneficiary s home state offers any state tax deduction or other benefits that are only available for investments in such state s qualified tuition program. You should consult with a tax advisor about state and local taxes. 1 Individuals who file individual Illinois state income tax returns can deduct up to $10,000 per tax year ($20,000 if filing jointly) for their total, combined contributions to the Bright Directions College Savings Program, the Bright Start College Savings Program, and College Illinois! during that tax year. The $10,000 (individual) and $20,000 (joint) limit on deductions will apply to total contributions made without regard to whether the contributions are made to a single account or more than one account. The amount of any deduction previously taken for Illinois income tax purposes is subject to recapture in the event an Account Owner takes a Nonqualified Withdrawal from an Account or if such assets are rolled over to a non-illinois 529 plan. 2 Withdrawals used to pay for qualified higher education expenses are income tax-free (federal and State of Illinois). Qualified higher education expenses include tuition, fees, books, supplies, and equipment required for enrollment at a qualified institution of higher education. Room and board is considered a qualified higher education expense if the student is enrolled on at least a half-time basis.

4 There are Lots of Options, but the Choice is Easy. Bright Directions offers many ways to plan for higher education. We ve got more than 40 portfolios to choose from, all of which let you customize your investments to your risk comfort level. Whatever plan you decide to invest in, you re taking an important first step toward your educational savings goals by starting today! Bright Directions offers: Age-based portfolios that automatically adjust investments as your child grows older Target portfolios with a set percentage of equity and fixed income investments Individual fund portfolios that allow you to customize your strategy The Bright Directions Fund Family: INVESTMENTS 3

5 You ll Be There Before You Know It. Investing early and often can make a noticeable difference in your child or grandchild s future. Not only will it give them the potential opportunity to further their higher education; it can set them up for success for the rest of their lives. Signing up for an automatic monthly investment program can help as you look to save for college.* The hypothetical example below illustrates the potential benefits when saving at different monthly contribution levels. ASSUMED ANNUAL RETURN AT 7% 18 Years Invested 15 Years Invested Monthly Contribution $50 $100 $250 $ Years Invested 5 Years Invested $23,017 $13,704 $7,134 $10,724 $22,383 $38,911 $21,494 $48,422 $86,594 $39,445 $91,819 $166,066 $30,380 $51,979 $116,776 $224,770 This hypothetical example illustrates the accumulation potential with a $2,500 initial investment and an ongoing monthly contribution plan (starting approximately 15 days after the initial investment) at a 7% average annual return. Results shown are hypothetical and are not intended to represent an investment in a specific Bright Directions Portfolio. If fees were included, the returns would be lower. Your actual results may be more or less. *Regular investing does not assure a profit and does not protect against loss in declining markets. Overseeing Your Investments All portfolios benefit from the investment oversight of Wilshire Associates, a leading global investment consulting firm that provides Bright Directions with portfolio design, asset allocation, manager due diligence, and ongoing monitoring services. Wilshire was among the first to introduce a comprehensive stock index (the Wilshire 5000 Total Market Index SM ) to the marketplace. Wilshire has helped institutions and people achieve their goals for more than 30 years.

6 Three Age-Based Portfolios: Looking Toward the Future. Bright Directions offers three age-based tracks: Aggressive Option Growth Option Balanced Option The early-year portfolios include more in stock funds in comparison to the portfolios when the student (the beneficiary) is closer to college age. The 0- to 8-year-old portfolios are designed for younger children with more than a decade until they go to college. To provide the potential for growth, these early-year portfolios are weighted from stocks in the Balanced Option to all stocks in the Aggressive Option. Historically, stock investments have provided the potential for growth over time but with the risk of more ups and downs. As the student gets closer to college age, the portfolios become more heavily oriented toward bond investments. The following chart illustrates how each of these three tracks adjusts over time, and how the asset allocations shift as the child nears college age. AGE-BASED PORTFOLIOS 0 8 Years 9 12 Years Years Years 21+ Years 3% 1.5% 13.5% Aggressive 33% 64% 27% 51% 20.5% 37.5% 27% 11% 5% 1.5% 13.5% 7.5% 2.5% Growth 27% 51% 20.5% 37.5% 27% 11% 5% 1.5% 13.5% 7.5% 2.5% Balanced 20.5% 37.5% 27% 11% 5% U.S. Equity International Equity Fixed Income Real Estate Money Market Investments in the Bright Directions College Savings Program are not guaranteed or insured by the State of Illinois, the Illinois State Treasurer, Union Bank & Trust Company, Northern Trust Securities, Inc., the Federal Deposit Insurance Corporation, or any other entity. An investor should consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing. The Program Disclosure Statement (issuer s official statement) is available from your financial advisor and should be read carefully before investing. 5

7 Seven Target Portfolios: Invest at Your Comfort Level. These diversified portfolios provide a targeted or static asset allocation of equity (stock), fixed income (bond), and money market investments. You can choose from seven portfolio options, ranging from aggressive to conservative. U.S. Equity International Equity Fixed Income Real Estate Money Market FUND 100 FUND 80 FUND 60 FUND 40 3% 33% 64% 27% 51% 20.5% 37.5% 27% 11% FUND % FUND % 2.5% FIXED INCOME 13.5% 5% A Word About Risk: Keep in mind you can lose money by investing in a portfolio. Each of the agebased, target, and individual fund portfolios involves investment risks, which are described in the Program Disclosure Statement and which should be considered before investing. For example, international investing, especially in emerging markets, has additional risks such as currency fluctuation, economic and political risks, and market volatility. Investing in small, medium, and international companies may increase the risk of fluctuations in the value of your investment and involves greater risks than investing in more established companies. Portfolios that invest in specific industries or sectors, such as real estate, have industry concentration risk. As an example, the portfolios that invest in real estate may perform poorly during a downturn in the real estate industry. Portfolios that invest in bonds are subject to risks such as interest rate risk, credit risk, and inflation risk. In particular, as interest rates rise, the prices of bonds generally will fall which can impact performance. It is important to note that the value of your account will fluctuate with market conditions. When you withdraw funds you may have more or less than your actual investment. For more information on the portfolios and the underlying funds in which they invest, see the Program Disclosure Statement.

8 Individual Fund Portfolios Along with age-based and target portfolios, Bright Directions offers a number of individual fund portfolios representing multiple asset classes. These portfolios allow you to customize your investments to help meet your unique educational goals. The portfolios range from lower risk/lower return to higher risk/higher return. Work with your investment professional to design an investment strategy that incorporates and respects your risk tolerance and time horizon. Money Market BlackRock Cash Funds 529 Portfolio* Fixed Income PIMCO Short-Term 529 Portfolio Baird Short-Term Bond 529 Portfolio Northern Funds Bond Index 529 Portfolio MainStay Total Return Bond 529 Portfolio American Century Short Duration Inflation Protection Bond 529 Portfolio BlackRock Inflation Protected Bond 529 Portfolio Templeton International Bond 529 Portfolio Balanced T. Rowe Price Balanced 529 Portfolio Socially Responsible Calvert Equity 529 Portfolio International Equity Dodge & Cox International Stock 529 Portfolio Northern Funds International Equity Index 529 Portfolio Oppenheimer International Growth 529 Portfolio DFA International Small Company 529 Portfolio Causeway Emerging Markets 529 Portfolio U.S. Equity Large-Cap MFS Value 529 Portfolio T. Rowe Price Equity Income 529 Portfolio American Century Value 529 Portfolio American Century Equity Growth 529 Portfolio Northern Funds Stock Index 529 Portfolio Sit Dividend Growth 529 Portfolio American Century Growth 529 Portfolio T. Rowe Price Instl. Large-Cap Growth 529 Portfolio Mid-Cap T. Rowe Price Extended Equity Market Index 529 Portfolio William Blair Mid Cap Growth 529 Portfolio Ariel Fund 529 Portfolio Small-Cap Northern Funds Small Cap Value 529 Portfolio Northern Funds Small Cap Index 529 Portfolio Delaware Small Cap Core 529 Portfolio Harbor Small Cap Growth Opportunities 529 Portfolio Real Estate T. Rowe Price Real Estate 529 Portfolio Voya Global Real Estate 529 Portfolio *An investment in the security is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the security seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the security. 7

9 15 Exchange-Traded Fund (ETF) Options Available Under Fee Structure F Exclusively Through Your Registered Investment Advisor Bright Directions offers 15 additional portfolios exclusively through registered investment advisors and fee-only planners. These new options, which utilize Vanguard ETFs, are only available through Fee Structure F. Options include Fixed Income, U.S. Equity, International Equity, and Real Estate portfolios. Fixed Income Vanguard Short-Term Bond ETF 529 Portfolio Vanguard Total Bond Market ETF 529 Portfolio Real Estate Vanguard REIT ETF 529 Portfolio Vanguard Global ex-u.s. Real Estate ETF 529 Portfolio International Equity Vanguard FTSE Developed Markets ETF 529 Portfolio Vanguard FTSE Emerging Markets ETF 529 Portfolio U.S. Equity Large-Cap Vanguard Mega-Cap Value ETF 529 Portfolio Vanguard Mega-Cap ETF 529 Portfolio Vanguard Mega-Cap Growth ETF 529 Portfolio Mid-Cap Vanguard Mid-Cap Value ETF 529 Portfolio Vanguard Mid-Cap ETF 529 Portfolio Vanguard Mid-Cap Growth ETF 529 Portfolio Small-Cap Vanguard Small-Cap Value ETF 529 Portfolio Vanguard Small-Cap ETF 529 Portfolio Vanguard Small-Cap Growth ETF 529 Portfolio

10 Ways to Add to Your 529 Account The Little Things Add Up. Investing early and often can make a difference in the amount you have for your loved one s future college expenses. Bright Directions offers multiple ways to set dollars aside for college, including: Easy investing with an automatic contribution plan. Funds can be conveniently deposited to Bright Directions from your bank account. Use the Bright Directions 529 College Savings Visa Card and earn 1.529% rewards on everyday purchases and automatically deposit those rewards in your Bright Directions account.* Bright Directions GiftED, which allows you to invite family and friends to contribute to your Bright Directions account online or via check. Start early. Encourage family and friends to contribute. Take advantage of the Bright Directions Rewards Visa. Use Bright Directions to save for college the smart way. College costs are on the rise. Make sure you re educated on all possible funding options so your Bright Directions account lives up to its full potential. Get started today! *Subject to credit approval. Full details appear in the Bright Direction 529 College Savings Visa Card Brochure, Application, Credit Disclosures, Agreement, and Rewards Program Terms and Conditions. The card is administered and issued by Union Bank & Trust Company. All terms, including reward points, fees and APRs for transactions, may be subject to change. Net purchases are defined as the dollar value of goods and services purchased with a card beginning with the first day of the billing cycle that includes the cardholder s enrollment date minus any credits, returns, or other adjustments as reflected on the monthly billing statement. Rewards of at least $50 must accumulate for an automatic transfer to the designated Bright Directions account(s) each quarter. 9

11 FAQs Get the answers to some of the most frequently-asked questions. If you still have questions or would like to learn more about Bright Directions, please speak with your investment professional. Who can open an account? An account can be established by a parent, grandparent, aunt, uncle, or friend. In addition, a UGMA/UTMA custodian, certain legal entities, or the trustee of a trust can establish a Bright Directions account. There are no income limitations and you do not have to be a resident of Illinois to open an account. How do I open an account? Your investment professional will guide you through the enrollment process. Who can be a beneficiary? Anyone, including the person opening the account, can be named as a beneficiary. There are no age or income limitations or residency requirements. Each account has one designated beneficiary. How can I contribute? Bright Directions makes it easy, you can contribute multiple ways: Send a check Establish an automatic investment plan Roll over funds from an out-of-state 529 plan Establish a payroll deduction at work Transfer reward dollars earned with a Bright Directions 529 Rewards Visa card Send online invitations for family and friends to contribute through Bright Directions GiftED Who can contribute? Parents Grandparents Relatives and friends Anyone can contribute on behalf of the beneficiary Can you transfer assets from another 529 plan? Yes. Investors can roll over assets from an out-of-state plan, and in doing so will gain the benefits of the Illinois state income tax deduction. A same-beneficiary rollover/transfer is allowed once in a 12-month period. Additional transfers are allowed but require a change of beneficiary. Check with your investment professional for assistance and the steps needed to complete this process. Does the beneficiary have to attend a school in Illinois? No. Many beneficiaries will attend Illinois schools; however, funds may be used at eligible schools around the country (as well as at some schools abroad). Which schools are eligible? Any school that meets accreditation criteria and can participate in Federal Financial Aid Programs is eligible. This includes public and private colleges and universities, as well as vocational, trade, technical, and professional institutions. Visit us at BrightDirections.com for a list of eligible schools. What are qualified expenses? Qualified expenses are certain education-related expenses for which you may make federal- and Illinois state-tax-free withdrawals. Qualified college expenses include: Tuition Fees Supplies Equipment Books Reasonable room and board (if the student is enrolled at least half-time) Help Them Down the Path to Their Dreams: Take the First Step Today!

12 SEAL OF THE STATE OF ILLINOIS COLLEGE SAVINGS PROGRAM AUG. 26 T H 1818 Distributor Trustee & Administrator Program Manager BrightDirections.com (866) Not FDIC Insured May Lose Value No Bank Guarantee October 2015