Invest Today for a Brighter Tomorrow. The Only 529 Plan with an Oklahoma Income Tax Deduction!

Transcription

1 Invest Today for a Brighter Tomorrow The Only 529 Plan with an Oklahoma Income Tax Deduction!

2 Their Future Higher education is an important ingredient for success. It offers students the opportunity to discover mind-expanding ideas and to gain knowledge, skills and friendships that will last a lifetime. The benefits of higher education are everywhere and more far-reaching than you might guess. College graduates may have better health, longer lives, and higher earnings. Higher education may translate into substantially higher earning power over the course of a career. For most families, saving enough to pay for the costs of higher education can seem overwhelming, especially since tuition costs have historically risen faster than the overall rate of inflation. But family members, especially grandparents, may help out. And you could aim to fund at least a portion of college expenses. With proper planning, funding a college education, like any major financial goal, may be easier to achieve. How Much Will College Cost? When you go to check out our College Savings Planner. The calculator projects college costs in your child s or loved one s time frame and calculates how much more you need to save on a periodic basis to meet those costs. The Planner includes a college cost database with approximately 3,800 colleges. Be sure to use the College Savings Planner at least once a year to make sure your college savings goals are on track. Don t Do It Alone Some of your relatives and friends may give your child gifts on birthdays and other occasions. Tell them you ve opened an Oklahoma 529 College Savings Plan (OCSP) Account for your child, and ask if they would be willing to give just a small toy or book, for example, and give the rest as a cash contribution toward college savings. Gift of education certificates for various special occasions may also be printed at Simply click on Give a Gift, complete the certificate, print and present to your loved one. Earn More Money A person who goes to college usually earns more than a person who does not. High School Diploma $33,904 Associate Degree $40,820 Bachelor s Degree $55,420 Master s Degree $67,600 Doctoral Degree $84,448 Professional Degrees $84,448 $90,220 $100,000+ $0 $20,000 $40,000 $60,000 $80,000 $100,000 This information is based on the Bureau of Labor Statistics 2012 mean earnings for persons at least 25 years old.

3 Their Future A Little Savings Can Score a Touchdown According to Curtis grandmother Jeanne, he was born to play football. He began tossing the pigskin with his dad at age 4, then joined the grade school and high school teams, where he excelled. Early on, the grandparents opened a college savings account for Curtis and contributed a small amount each month. The savings grew, and it was a lucky thing. When as a teenager, Curtis came to live with his grandparents, Jeanne discovered that she and her husband John s investments for the boy were the only college savings he had. Determined to get Curtis into college, Jeanne sent out DVDs of his game highlights to coaches across the nation. He got some scholarship offers from out-of-state schools, but not enough to cover tuition and living expenses. Finally, a smaller university within commuting distance offered Curtis a partial tuition scholarship; the rest will be made up with funds from the grandparents OCSP account plus a student loan. Curtis attended his first live games this past season, and guess what his career goal is? To join the pros as a quarterback! Plan B includes teaching and coaching at the high school from which he graduated.

4 Tax Advantages What is a 529 College Savings Plan? With section 529 of the Internal Revenue code, Congress allows states to sponsor tax-favored higher education savings programs so families can save for college more easily. When you contribute to the OCSP, any Account earnings are federal and Oklahoma income tax deferred until withdrawn. When you withdraw money to pay for qualified higher education expenses, the earnings portion of the withdrawal is also free from federal and Oklahoma income tax. Oklahoma taxpayers may deduct from their Oklahoma adjusted gross income up to $10,000 in contributions to the Oklahoma 529 College Savings Plan for individual taxpayers and up to $20,000 for taxpayers filing a joint return with a five-year carry forward (to the extent a taxpayer does not take a deduction from contributions made for that tax year, they may make a deduction over the following five years, provided the amount deducted each year does not exceed the deduction limit). Amounts deducted may be subject to recapture if a nonqualified withdrawal or rollover is taken (depending on the timing of such transactions), resulting in adverse Oklahoma income tax consequences. Read the Disclosure Booklet carefully. Grandparent Alert Federal Estate and Gift Tax Benefits: Contributions to OCSP may reduce the taxable value of your estate. Contributions to OCSP, together with all other gifts from the Account Owner to the beneficiary, may qualify for an annual federal gift tax exclusion of $14,000 per donor, per beneficiary. If an Account Owner s contribution to an OCSP Account for a beneficiary in a single year exceeds $14,000, the Account Owner may elect to treat up to $70,000 of the contributions ($140,000 for joint filers) as having been made over a period of up to five years for the federal gift tax exclusion. Please consult your tax advisor about your own particular situation. The Best 529 College Savings Plan for You Before investing in a 529 college savings plan, find out whether the state in which you or your designated beneficiary reside or have taxable income has a 529 plan that offers favorable state income tax or other benefits that are available only if you invest in that state s 529 plan. The Benefits of Tax-Free Growth Potential $80,000 60,000 40,000 $66,676 $55,092 Tax Deduction Filing Deadline April 15 is the deadline for filing contributions to OCSP. 20, Account Taxable Account This hypothetical example illustrates the growth of an annual investment of $2,000 made at the beginning of each year for 18 years. It assumes there are no withdrawals of contributions and earnings. It also assumes a 30% combined federal, state and local income tax rate and an annual investment return of 6%. It is presented for illustrative purposes only to show the effect of compounding and tax deferral and does not represent the actual performance or predict the future results of the Oklahoma 529 College Savings Plan or any Investment Portfolio in the Oklahoma 529 College Savings Plan and does not reflect any reduction for expenses. Account value in the Investment Options is not guaranteed and will fluctuate based upon a number of factors, including general market conditions. 2 TAX ADVANTAGES

5 Discipline The Path Leading Toward Your Goal Kate aspired to be like her grade school gymnastics coach. Practice sessions were the high point of her school week, and she didn t mind the discipline and exacting effort required to be really good. At home, Kate s parents were also teaching discipline about savings. They matched a portion of her contributions to her home-made bank and encouraged her to direct a percentage of birthday and other gift money toward her college savings account. Children can participate in saving for their own future. It raises their awareness of what money can buy and why it s worth the sacrifice of waiting to be able to have what you want. It s a lot like the consistent effort required to develop athletic skill. Tax Advantages Although young children may not understand the cost of college and the value of the opportunities college can bring, starting the savings habit today can mature into their financial security in the future. How to Get Started Who Can Open an Account? OCSP is open to everyone. Parents, grandparents, friends or relatives may open an account or accounts for their loved one. You can even open an account for yourself! The same tax advantages apply to all regardless of income. Account Owners must be a U.S. citizen or resident alien of legal age with a valid Social Security number or Federal Taxpayer Identification number. The beneficiary must have a valid Social Security number or Federal Taxpayer Identification number. Only one person may be listed as a beneficiary for each Account. Low Minimum Contribution You can open an account with as little as $100 per Investment Option. The minimum subsequent contribution to an Account is $25 per Investment Option. If your employer allows payroll deduction, the minimum initial contribution to an Account is $100 per Investment Option and the minimum subsequent contribution may be as low as $15 per Investment Option, per pay period. Maximum Account Balance While annual contributions to an Account are not limited, there is a lifetime maximum account balance limit of $300,000 per beneficiary for all Accounts opened in the OCSP. Your Account may continue to grow beyond the maximum account balance limit, but no further contributions are allowed. Accounts that have reached the Maximum Account Balance Limit may continue to accrue earnings.

6 OCSP Is Flexible Choice of Schools Funds in your OCSP account may be used at thousands of eligible educational institutions nationwide and at many abroad, including community colleges, trade schools, undergraduate and graduate programs. Use for a Variety of Qualified Expenses Your investment can be used for tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution, as well as for certain room and board expenses. Control of the Money As the Account Owner, you maintain complete control of the account regardless of your child s or loved one s age. You decide on all withdrawals from the Account. You can name a successor Account Owner, and you can transfer the ownership to another person. Making a Contribution is Simple Write a personal check Set up an Automatic Contribution Plan (ACP) from a checking or savings account Contribute automatically online from a checking or savings account by establishing an Electronic Funds Transfer (EFT) Set up payroll deduction (if allowed by your employer) Rollover money from another 529 plan or Coverdell Education Savings Account into your OCSP to take advantage of all the benefits of the OCSP.* Transfer to Another Beneficiary If your designated beneficiary decides not to attend college, or has other funding options, you may transfer funds in your Account to certain eligible family members of the original beneficiary, including siblings, a spouse, first cousins even yourself. Transfers to ineligible family members or nonfamily members will result in taxes. (Please refer to the OCSP Disclosure Booklet for more information.) Investment Option Changes You can transfer funds from one Investment Option to another once per calendar year for the same beneficiary, or anytime you change your beneficiary. Please read the OCSP Disclosure Booklet for more information. Low Fees To put more of your investment to work for you, you pay no application fees, sales or maintenance charges for your OCSP Account. You will pay a total annual asset-based management fee of less than 1% of the average daily net assets (excluding assets held in the Guaranteed Option). Please read the Fees and Expenses of the OCSP Disclosure Booklet for additional detail. Power of Compounding When you add the power of compounding to OCSP s tax-deferred earnings, tax-free qualified withdrawals and low fees, you ll see that your investments have a stronger chance to grow and help meet your higher education savings goals. * Transfers and rollovers may be subject to differences in features, costs, and surrender charges. Indirect transfers may be subject to taxation and penalties. Please consult your tax advisor about your particular situation. Website Tips Compare College Savings Choices Use our Web-based tool at to compare many popular ways to save for college, such as custodial accounts (UGMA/UTMA) and Coverdell Education Savings Accounts. Give the Gift of Education The OCSP offers gift certificates for all occasions suitable for wrapping. Gift of Education certificates can be printed at and presented along with the giver s check payable to OCSP. 4 OCSP IS FLEXIBLE

7 Appearances Matter When Nancy started first grade, her teachers noticed that she had learning disabilities. Soon, her teachers saw something else in Nancy: She had a flair for color and design. In high school, she styled her friends hair and experimented with her own, adding highlights to emphasize her natural blonde color. Nancy s parents had been saving for college and hoped she would at least attend a community college, but Nancy wanted to go to a nearby top-notch hair dressing school. She simply refused to be burdened with academic subjects anymore. OCSP is Flexible When Nancy s parents found out the cost of the beauty school, they were glad they had opened an OCSP account: Tuition was as high as one year at a private college. It was worth it though, because all the best salons in the area snapped up the graduates. Nancy fit right in and excelled. Now she s happy to be working at a local beauty salon, where she already has a following. OCSP Program Manager: TIAA-CREF Tuition Financing, Inc. TIAA-CREF Tuition Financing, Inc., (TFI), part of the TIAA-CREF group of companies, is a leader in 529 college savings plan management. TFI provides investment management and administration for the OCSP. TIAA-CREF, which managed $564 billion in combined assets as of December 31, 2013, is a national financial services group of companies and a leading provider of retirement services in the academic, research, medical and cultural fields.

8 Investment Portfolios Building a 529 Plan account that is right for you takes planning. The Oklahoma 529 College Savings Plan offers you a choice of nine Investment Options. These options vary in their investment strategy and degree of risk, allowing you to select an option or combination of options that may fit your needs. You can invest new contributions in any one, or a combination, of these Investment Options: Conservative Managed Allocation Moderate Managed Allocation Aggressive Managed Allocation U.S. Equity Index Diversified Equity Global Equity Index Balanced Fixed Income Guaranteed Once you invest in a particular option, you can transfer contributions and any earnings to another investment option once per calendar year or upon a transfer of funds to an Oklahoma 529 College Savings Plan account for a different beneficiary. A Word About Risk Each Investment Portfolio and underlying fund has its own risks. For example, there are special risks inherent in international investing, including currency, political, social and economic. Investments in growth stocks may be more volatile than other securities. Fixed income investing entails credit and interest risks. When interest rates rise, bond prices generally fall, and the underlying fund s share price can fall. Diversification doesn t guarantee profit or protect against loss. Investment returns over your investment period could be lower than the rate of increase in the costs of higher education during that period. It s also possible to lose part or all of the value of your Account. 6 INVESTMENT PORTFOLIOS

9 Ask Our Accountant! Gino s father, a mechanic at a high-end car dealership, often took the family out on weekends for long drives, sometimes through affluent suburbs, where the cars he worked on were likely to be parked in the driveways. Once when Gino spotted a beautiful house he admired, he asked his dad, What does the owner of this house do for a living? How does he make that kind of money? His father knew that the owner had a local accounting firm. Gino, who was good at math, proclaimed that this was the career for him! When Gino finished high school, he attended an out-of-state college known for its accounting program. He planned to go directly for an MBA in accounting after graduation. His parents will be able to use funds in his OCSP account to pay for both his undergraduate and graduate school expenses. Ultimately, he hopes to be hired by a CPA firm and prepare for the CPA exam. Investment Portfolios

10 Age-Based Investment Options Investing in the Managed Allocation Options (Conservative, Moderate and Aggressive) follows the method of using the number of years an investor has for saving to determine the appropriate investment allocation. Although there is no guarantee that the investment objectives will be met, this option offers the opportunity to invest aggressively when the beneficiary is young, and over time, more conservatively, thus creating a balanced approach. Aged-based Investment Options combine equity, real estate, fixed income, and money market mutual funds offered by the TIAA-CREF Funds Institutional Class. Younger beneficiaries will have a higher exposure to equities and real estate investments which will decrease significantly as they approach college age. The below charts illustrate sample investment allocations among three age bands. AGE 0 3 AGE 8 11 AGE 18+ Conservative Managed Allocation 65% 35% 45% 55% 80% 20% Moderate Managed Allocation 80% 20% 55% 45% 20% 70% 10% Aggressive Managed Allocation 100% 70% 30% 30% 70% Equities Bonds Money Market Allocations for all investments are as of August Allocations are reviewed and adjusted periodically. Consider the investment objectives, risks, charges and expenses before investing in the Oklahoma 529 College Savings Plan. Please call toll-free , or visit for a Disclosure Booklet containing this and other information. Read it carefully. 8 INVESTMENT PORTFOLIOS

11 Multi-Fund Investment Options Each multi-fund Investment Option has a different investment objective and strategy, described below. Allocations to the underlying Mutual Funds in the multi-fund Investment Option do not change automatically as the Beneficiary ages. Investments remain in the multi-fund Investment Options until the Account Owner decides to move them to another Investment Option. Diversified Equity Option: This Investment Option seeks to provide a favorable long-term total return, mainly from capital appreciation, by allocating to a diversified portfolio of mutual funds that include actively managed domestic and international equity funds and a real estate-related securities fund. Given the higher volatility of this Investment Option, the risk of loss may be greater over a shorter investment horizon. However, this Investment Option may provide greater investment return opportunities over the long term. This Investment Option may be appropriate for you if you already have substantial college savings from less volatile investments (such as fixed-income investments) or you have a long investment horizon and you can tolerate a higher level of risk. 100% Global Equity Index Option: This Investment Option seeks to provide a favorable long-term total return, mainly through capital appreciation. This Investment Option allocates to a portfolio of Mutual Funds, including domestic and international equity index funds and a real estate-related securities fund. Given the higher volatility of this option, the risk of loss can be greater over a shorter investment horizon. However, this Investment Option may provide greater investment return opportunities over the long term. This Investment Option may be appropriate for you if you already have substantial college savings from less volatile investments (such as fixed-income investments) or you have a long investment horizon and you can tolerate a higher level of risk 100% Balanced Option: This Investment Option seeks to provide a favorable long-term total return that reflects the broad investment performance of the financial markets by allocating to a diversified portfolio of Mutual Funds, including a mix of equity funds, a bond index fund, other fixed-income funds and a real estaterelated securities fund. Because of the exposure to domestic and foreign equities, and the corresponding degree of risk, this Investment Option may be appropriate for you if you can tolerate a moderate degree of volatility in exchange for potentially higher returns over time. 60% 40% Fixed Income Option: This Investment Option seeks to provide preservation of capital along with a moderate rate of return through a diversified mix of fixed-income investments. This Investment Option may be appropriate for you if you have a medium-term investment horizon and can tolerate a moderate level of risk. 100% Equities Bonds Single Fund Investment Option This Investment Option invests in shares of one underlying Mutual Fund, the U.S. Equity Index Option, described below. Its performance may be more volatile than the age-based Investment Options or the multi-fund Investment Options. Account Owners do not own shares of the underlying Mutual Fund directly. U.S. Equity Index Option: This Investment Option seeks to provide favorable long-term growth, mainly from capital appreciation. The U.S. Equity Index Option invests 100% of its assets in the TIAA-CREF Equity Index Fund, which employs a passive management or indexing strategy and seeks a diversified portfolio selected to track the overall market for common stocks publicly traded in the United States, as represented by a broad stock market index. Because of the high exposure to equity investments, and the corresponding high degree of risk, this Investment Option may be appropriate for you if you already have substantial college savings from less volatile investments (such as fixed-income investments) or you have a long investment horizon and you can tolerate a higher level of risk. Principal Protection Investment Option Guaranteed Option: This Investment Option seeks to preserve capital and provide a stable return. It may be appropriate for you if you have a short investment horizon and want a conservative investment with a low risk level. Contributions to this Investment Option are directed to the funding agreement that TIAA-CREF Life issues to the OCSP. The agreement provides for a return of principal plus a guaranteed rate of interest; additional interest may be credited as declared periodically by TIAA-CREF Life. The rate of any additional interest is declared in advance for a period of up to 12 months and is not guaranteed for future periods. Annual interest rates for the Guaranteed Option are posted at Allocations for all investments are as of August Allocations are reviewed and adjusted periodically. INVESTMENT PORTFOLIOS 9

12 Starting Early Can Make a Difference In Reaching Your College Savings Goals. The more you invest and the earlier you start, the more opportunity your money has to grow. In addition to what you contribute to financing a college education through the Oklahoma 529 College Savings Plan, other factors come into play, such as the availability of financial aid and any contributions from your savings account. Revisit Your Investment Strategy Re-examine your OCSP Account when: Your goals, time period for college investing and personal financial situation change. Long-term changes in the economy will affect how you save or invest. The balance in your account changes significantly due to varying performances of different Options over time. The Advantages of Starting Early Assumes initial contribution of $5,000 and an annual investment return of 6%. $100,000 $92,541 Monthly Contribution $50 $100 $200 60,000 $52,493 $53,612 20,000 $11,502 $15,844 $24,528 $20,814 $31,374 $34, Years 12 Years 18 Years Years of Accumulation This hypothetical example illustrates the future values of different regular monthly investments for different time periods and assumes an annual investment return of 6% with an initial investment of $5,000. It is presented for illustrative purposes and does not reflect actual performance or predict future results of OCSP and does not reflect any deduction for expenses or taxes or the benefits of any Oklahoma income tax deduction that may apply. Account values will fluctuate with market conditions and the specific Investment Options that are selected. Website Tips Online Options Access your account information Make contributions Set up an Automatic Contribution Plan (ACP) View pending contributions Change your address Rebalance funds among Investment Options Sign up for e-delivery of your statements and disclosure material Request a withdrawal and/or verify current withdrawals Manage your account while on the go with OCSP mobile account access 10 A MEANINGFUL CONTRIBUTION IS SIMPLER THAN YOU THINK.

13 Your Questions Answered Can more than one person contribute to the Account? Anyone can contribute to one Account as long as the total contributions don t exceed $300,000 per beneficiary. The Account Owner has sole control over the assets and decides when to withdraw them. Can I change the beneficiary? You can change your beneficiary at any time or transfer a portion of your investment to a different beneficiary. The new beneficiary must be an eligible member of the previous beneficiary s family. How do I withdraw money to pay for college? When you want to withdraw money (take a distribution) from your Account, you may request a withdrawal from your Account online that will be sent to your bank account typically within 3 business days. You may also request a withdrawal by completing a Withdrawal Form (allow 7-10 days for mail and processing time). What if my child or loved one decides not to attend college? You have three choices: Keep the funds in the account, and the investments will be available in future years if the beneficiary changes her or his mind about school. Change beneficiaries, but the new beneficiary must be an eligible family member. See the Disclosure Booklet for details and consult your tax advisor about whether this may create a taxable gift. Make a nonqualified withdrawal. Earnings will be subject to federal income tax and any applicable state income tax, as well as an additional 10% federal tax (except in the event of a beneficiary s death, disability, scholarship or attendance at a military academy). Nonqualified withdrawals are also subject to the recapture of contributions previously deducted from state income tax. Will having an OCSP Account hurt my child s or loved one s chances for financial aid? If the parent is the Account Owner, the Account assets will be treated as belonging to the parents, for federal financial aid purposes. If a dependent child is the Account Owner, or the beneficiary of an account holding UGMA/UTMA assets, Account assets are treated as a parent asset for financial aid purposes. In both cases, 529 plan withdrawals that are exempt from federal income tax aren t counted as either the parent s or student s income and don t reduce federal financial aid eligibility. Financial aid policies vary across post-secondary institutions, so check with the institution directly for more information. What if my child or loved one gets a full or partial scholarship? If the child receives a scholarship that covers the cost of qualified expenses, you can withdraw up to the scholarship amount free of the 10% additional federal tax. You will owe federal and Oklahoma income taxes on the earnings portion of the withdrawal, however. If I leave Oklahoma, what will happen to my Account? If you move to another state, you can still keep your money invested in your OCSP account, and you can continue contributing to it. Before making additional investments to your OCSP account, consider whether the state in which you or your designated beneficiary now resides has a 529 plan that offers favorable state income tax or other benefits that are available only if you invest in that state s 529 plan. Can I roll over funds from another 529 plan into the OCSP? You can transfer funds for the same beneficiary once per 12-month period without incurring federal or state income tax. The 529 college savings plan from which you transfer funds may be subject to differences in features, costs and surrender charges. Consult your tax advisor or the other 529 college savings plan provider before requesting a rollover. YOUR QUESTIONS ANSWERED 11

14 How Do I Set Up My College Savings Strategy with OCSP? Oklahoma s 529 College Savings Plan can be the financial foundation for building your child s or loved one s educational future. The sooner you start saving, the sooner you may take advantage of the potential compounding effects of time on your investment. We are Here to Help. Call toll-free When you call to learn more about OCSP, you ll speak with consultants who are college savings plan specialists. Our college savings consultants are available to answer your questions and to mail you an OCSP enrollment kit. Visit to Learn More About: Estimating your family s projected college savings needs Determining the projected future cost of college tuition Two Easy Ways to Open an Account 1. Online Click on Open an Account on the OCSP home page. Please read the Disclosure Booklet. 2. Mail Complete and sign the OCSP Account Application and mail it using the envelope provided in the OCSP enrollment kit. 12 HOW DO I SET UP MY COLLEGE SAVINGS STRATEGY WITH OCSP?

15 Stay connected with the OCSP by visiting our social media sites. Ken Miller, Oklahoma State Treasurer Invest in your child and our state s future!

16 Consider the investment objectives, risks, charges and expenses before investing in the Oklahoma 529 College Savings Plan. Please call toll-free for a Disclosure Booklet containing this information. Read it carefully. Before investing in a 529 plan, you should consider whether the state you or your designated beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state s 529 plan. The tax information contained in this material is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. It was written to support the promotion of the products and services offered by the Oklahoma 529 College Savings Plan. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor. Nonqualified withdrawals are subject to income taxes and the federal additional 10% tax. Account value in the Investment Options is not guaranteed and will fluctuate based upon a number of factors, including general market conditions. Social media platforms managed by the State of Oklahoma. TIAA-CREF Tuition Financing, Inc., Program Manager. C15530 A12466 (3/14)