Your Plan for College

Transcription

1 Your Plan for College You can get there. We can help. COLLEGE SAVINGS PLAN TM

2 You can get there. We can help. All parents have hopes and dreams for their children, including a good education. To help you realize your dreams, the State of Oregon offers the Oregon College Savings Plan, with plan management by TIAA-CREF Tuition Financing, Inc., a leader in 529 college savings plan management. In this booklet, you ll see how affordable and easy it is to use the Oregon College Savings Plan. You ll learn about important tax advantages as you contribute money to your account and withdraw it to pay for qualified education costs. You ll read about how other families have used the Plan to support their goals. We ll tell you how to open an account and get more detailed information.

3 Table of Contents Their Future 2 Get Started Today 3 Tax Advantages 4 Flexible Features 5 Investment Portfolios 6 Your Questions Answered 10 Ready to enroll? Two easy ways. Enroll online at OregonCollegeSavings.com. Complete and mail the enclosed paper application. We re here to help. Call us toll-free at OregonCollegeSavings.com n 1

4 Their future Their plans depend on your plan Doctor. Teacher. Computer Programmer. Chef. No matter what children plan for the future, the Oregon College Savings Plan helps you save money to get them there. While it s true that college costs are high and rising, don t let that scare you. With a little planning today, any family can help their child get a college education. The Oregon College Savings Plan is a 529 Plan Section 529 of the Internal Revenue Code provides federal tax advantages to help people save for college. As a 529 Plan, the Oregon College Savings Plan gives you a tax-advantaged way to help save for a child s, a grandchild s or anyone s higher education costs. Any investment earnings, if used for qualified expenses, are free of federal and state income tax. Oregon s is the only 529 college savings program for which Oregon taxpayers may claim an Oregon state income tax deduction on contributions. See enclosed details for more information. Website tip: How much will college cost? When you go to OregonCollegeSavings.com, check out our College Savings Planner. The calculator projects college costs in your child 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. Managed by TIAA-CREF Tuition Financing, Inc. TIAA-CREF Tuition Financing, Inc. is a leader in 529 college savings plan management. With over $18 billion in 529 plan assets across 11 states as of December 31, 2013, TIAA-CREF Tuition Financing, Inc. has been managing college savings plans for over 10 years. Well known as a leading retirement plan provider, TIAA-CREF has been serving the academic, research, medical and cultural fields through retirement plans for over 90 years. Investments available through the Oregon College Savings Plan are made up of portfolios managed by TIAA-CREF as well as by other well known and well respected fund families around the country. Please refer to the enclosed Disclosure Book for details. 2 n OregonCollegeSavings.com

5 Get started today Who can open an account? The Oregon College Savings Plan is open to everyone. Parents, grandparents, friends or relatives at any income level can open an account for anyone. Contributions The Oregon College Savings Plan doesn t require a big up-front financial commitment. You can open an account with as little as: $25 $15 via payroll deduction (if your employer offers it)* If relatives and friends also contribute to your account, your savings can grow faster. How fast? As the hypothetical example below shows, an account opened in the Oregon College Savings Plan with an initial $2,500 contribution, and money added every month until the child turns 18, could make a meaningful difference in the final amount available for college. You can invest up to $310,000 for future higher education expenses per child. Consistent Saving Gives Your Money Time to Grow $100,000 60,000 20,000 0 Monthly Contribution $50 $100 $200 6 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 $2,500 and no withdrawals during the relevant time period. It is presented for illustrative purposes and does not reflect actual performance or predict future results and does not reflect any deduction for expenses or taxes or the benefits of any state tax credit that may apply. Account values will fluctuate with market conditions and the specific investment options selected. Others can help From a young age, Michael was fascinated with airplanes and other flying objects. As a child, his grandparents often took him to the airport to watch the planes take off and land. As he grew, Michael recognized that he wanted to become a professional pilot one day, and his grandparents fueled his dream by establishing a college savings account on his behalf. Every birthday and special occasion throughout Michael s life, his grandparents would make a contribution to his account, in addition to a book or a toy. They valued the opportunity to receive a tax deduction for each of their yearly contributions, and they especially valued the opportunity to help Michael realize his dream of attending professional aviation school and becoming a pilot. This hypothetical example is for illustrative purposes only. * Note that systematic investing doesn t guarantee a profit or protect against loss OregonCollegeSavings.com n 3

6 Recipe for success Valerie discovered her passion for cooking young, when as a toddler she helped her mother ice cakes made especially for her dad. In grade school, she baked pizza for her friends, then moved on to catering their birthday parties. Finally, in high school, she worked parttime for a wedding caterer. After high school, she decided to attend a local Culinary Arts School. Since Valerie chose to attend career school full-time, her parents were able to use funds in her Oregon College Savings Plan account to pay for not only tuition, but also living expenses. This hypothetical example is for illustrative purposes only. Tax advantages Save on federal and state taxes Assets invested in the Oregon College Savings Plan may grow faster than comparable taxable accounts because the assets can grow free of federal and state tax for the life of the account. You can withdraw the money tax free too, if it s used to pay for qualified higher education expenses.* State tax advantages for Oregon residents Oregon offers a 2014 state income tax deduction of up to $4,530 for married taxpayers filing jointly and $2,265 for single filers, adjusted annually. Recapture provisions apply. Refer to the Disclosure Booklet and consult your tax advisor. Oregon also provides a four-year carry-forward state tax deduction, allowing you to take a tax deduction in the year you make a lump sum contribution, plus every subsequent year for the next four years following the initial lump sum contribution. The Benefits of Tax-Free Growth Potential $80,000 60,000 40,000 20,000 0 $66,676 $55, 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 Oregon College Savings Plan or any Investment Portfolio in the Oregon College Savings Plan and does not reflect any reduction for expenses. * Non-qualified withdrawals may be subject to federal and state taxes, and an additional 10% federal tax. 4 n OregonCollegeSavings.com

7 Flexible features Choice of schools You can use your savings at most higher education institutions in the United States (and many abroad), including vocational schools, community colleges, universities and graduate schools. Control As the account owner, you maintain complete control of the account regardless of your child s age. You decide on all withdrawals from the account. You can also name a successor account owner or transfer the ownership to another person. Transfer to another beneficiary If your child decides not to attend college or does not use all the money in the account, you may transfer funds in your account to another eligible member of the original beneficiary s family tax free. Website tip: State tax deduction Did you know that the state income tax deduction for Oregon is adjusted for inflation every year? Visit OregonCollegeSavings.com to find out what the current year s tax deduction is. Remember, contributions made through April 15 may be eligible for a state tax deduction for the previous tax year OregonCollegeSavings.com n 5

8 Investment portfolios Website tip: Thinking of gifting Make your gift more meaningful by visiting OregonCollegeSavings.com to download a gift certificate template. Remember, the Oregon state income tax deduction can be a powerful incentive for friends and relatives wondering what to give your children as gifts on birthdays and other special occasions. Why not invite them to make a contribution to your child s college savings account? The right approaches for you The Oregon College Savings Plan offers four different investment approaches to choose from. Many consist of one or more underlying mutual funds. Each option varies in investment strategy and degree of risk: Age-Based Portfolio Multi-Fund Portfolios Single-Fund Portfolios Principal Plus Interest Portfolio Choose an option or combination of options that best fit your college savings needs and goals. Consider your time frame ( investment horizon ) and your ability to weather swings in investment earnings ( risk tolerance ). If you have more years to save, you can take more risk, which may give you a better chance of higher returns. You can switch existing funds from one Investment Portfolio to another once per calendar year, or anytime you change your beneficiary. Trusted investment management TIAA-CREF Tuition Financing, Inc., a leader in 529 college savings plan management, provides plan management and administration for the Oregon College Savings Plan. TIAA-CREF is a national financial services group of companies and the leading provider of retirement services in the academic, research, medical and cultural fields. As of December 31, 2013, TIAA-CREF had over $564 billion in combined assets under management. For more information, visit tiaa-cref.org. 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 n OregonCollegeSavings.com

9 Age-Based Approach This Investment Portfolio s risk level shifts from aggressive to conservative as the child ages. The Age-Based approach seeks to match the investment objective and level of risk to the investment horizon by taking into account the Beneficiary s current age and the number of years before the Beneficiary turns 18 and is expected to enter college. Depending on the Beneficiary s age, allocations to this portfolio will be placed in one of nine Age Bands, each of which has a different investment objective and investment strategy. The Age Bands for younger Beneficiaries seek a favorable long-term return by investing primarily in mutual funds that invest in equity securities, which have a higher level of risk, but greater potential for returns than more conservative investments. As a Beneficiary nears college age, the Age Bands allocate less to mutual funds that invest in equity securities and allocate more heavily to mutual funds that invest in fixed-income and money market securities seeking to preserve capital. As the Beneficiary ages, assets in your Account that are attributable to this portfolio are moved from one Age Band to the next on the first Rolling Date following the Beneficiary s 5th, 9th, 11th, 13th, 15th, 16th, 17th and 18th birthdays. The Rolling Dates are March 20, June 20, September 20 and December 20 (or the first business day thereafter) % 30.00% AGE 0-4 AGE % 61.00% AGE 16 Age-Based Portfolio 59.00% 41.00% AGE 5-8 AGE % 70.00% AGE % 53.00% 20.00% 80.00% AGE 9-10 AGE 15 AGE 18+ Show and tell Margaret aspired to be like her first grade teacher, especially when learning to make banks out of milk cartons. At home, Margaret s parents were also teaching her about money by matching a portion of her contributions to her bank and by encouraging her to direct some of her birthday gift money towards a college savings account. Children can participate in saving for their own future and many times will value money by being more involved. Although they may not understand the cost of college or what opportunities college can bring, planting a seed today can mature into their long-term financial security in the future. This hypothetical example is for illustrative purposes only % 85.00% 7.00% 84.00% 9.00% Money Market 70.00% 30.00% Money Market OregonCollegeSavings.com n 7

10 Multi-Fund Approach These seven portfolios seek to provide options for those who prefer to select an Investment Portfolio for its asset allocation. Each Multi-Fund Investment Portfolio has a different investment objective and strategy, which are described below. The allocations to the underlying mutual funds do not change automatically as the Beneficiary ages. Investments will remain in the Multi-Fund Investment Portfolio(s) until the Account Owner instructs the Plan to transfer them to another Investment Portfolio. The Multi-Fund Investment Portfolios include the Target Allocation Portfolios and the Diversified Portfolios. The Board may change the asset allocations and underlying Mutual Funds for these Investment Portfolios (as well as for the other Investment Portfolios) at any time. Target Allocation Portfolios The Target Allocation Portfolios include: the Aggressive Portfolio; the Moderate Portfolio; and the Conservative Portfolio. The Aggressive Portfolio seeks a favorable long-term return by investing primarily in mutual funds that invest in equity securities, which have a higher level of risk, but may generate potentially greater returns than more conservative investments. The Aggressive Portfolio seeks to allocate a small percentage of assets to mutual funds that invest in fixed income securities to provide some protection from equity volatility. Because of the high exposure to domestic and foreign equities, and the corresponding high degree of risk, this Investment Portfolio may be appropriate for you if you already have substantial college savings from less volatile investments (e.g., fixed-income) or you have a long investment horizon and you can tolerate a higher level of risk. The Moderate Portfolio seeks moderate growth by investing in a balanced asset allocation that is slightly weighted toward mutual funds that invest in equity securities, which have a higher level of risk, but may generate potentially greater returns than more conservative investments. The Moderate Portfolio seeks to balance the higher level of risk with investments in mutual funds that invest in fixed-income securities, which have a lower level of risk, but a lower potential for returns than more aggressive investments. This Investment Portfolio may be appropriate for you if you have a medium to short investment horizon and can tolerate a moderate level of risk. The Conservative Portfolio seeks preservation of income and protection of principal. The Conservative Portfolio invests primarily in mutual funds that invest in mostly high quality fixed-income securities and a money market mutual fund, which have a lower level of risk and corresponding lower potential for returns than more aggressive investments. This Investment Portfolio may be appropriate for you if you have a short investment horizon and are looking for a conservative investment with a lower level of risk. AGGRESSIVE PORTFOLIO MODERATE PORTFOLIO CONSERVATIVE PORTFOLIO 70.00% 30.00% 47.00% 53.00% 15.00% 85.00% 8 n OregonCollegeSavings.com

11 Diversified Portfolios The Diversified U.S. Equity Portfolio seeks to provide a favorable long-term total return by investing in a combination of index, quantitative and actively managed U.S. equity mutual funds. Because of the high exposure to equity investments, and the corresponding high degree of risk, this portfolio may be appropriate if you already have substantial college savings from less volatile investments (e.g., fixed-income investments) or you have a long investment horizon and you can tolerate a higher level of risk, or for use in conjunction with other Investment Portfolios offered by the Plan. The Diversified International Equity Portfolio seeks to provide a favorable long-term total return by investing in a combination of index and actively managed international equity mutual funds. Because of the high exposure to foreign equity investments, and the corresponding high degree of risk, this portfolio may be appropriate if you already have substantial college savings from less volatile investments (e.g., fixed-income investments) or you have a long investment horizon and you can tolerate a higher level of risk, or for use in conjunction with other Investment Portfolios offered by the Plan. The Balanced Index Portfolio seeks to provide favorable long-term growth, mainly from capital appreciation, by investing its assets in a balanced combination of U.S. equity index and bond index mutual funds. This portfolio employs a passive management or indexing strategy designed to track the investment performance of the underlying mutual funds benchmark indexes. This portfolio may be appropriate if you have a medium to short investment horizon and can tolerate a moderate level of risk. The Diversified Fixed Income Portfolio seeks to provide preservation of capital along with a moderate rate of return through a diversified mix of fixed-income investments. This Investment Portfolio may be appropriate for you if you have a medium to short investment horizon and can tolerate a moderate level of risk. Single-Fund Approach These Investment Portfolios are each invested solely in shares of a single underlying mutual fund. Therefore, their performance is entirely reliant on the performance of that underlying fund and may be more volatile than the Age-Based or Multi-Fund Investment Portfolios. Account Owners do not own shares of the underlying mutual fund directly. For more information about the underlying mutual funds, please refer to the accompanying Disclosure Booklet. Aggressive Moderate Conservative US Equity Index Inflation-Linked Bond Portfolio Money Market Portfolio International Equity Index Fixed Income Index Portfolio Social Choice Portfolio Principal Plus Interest The Principal Plus Interest Portfolio, as the name suggests, seeks to protect your investment and guarantee a return. The Portfolio interest rate is reset every year on April 1, and is guaranteed for the following 12 months. Please visit OregonCollegeSavings.com for the most current annual interest rate. This Portfolio may be appropriate if you have a short investment horizon and are looking for a conservative investment with a low level of risk.* * The assets in the Principal Plus Portfolio are allocated to a Funding Agreement issued by TIAA-CREF Life to the Board, which is the policyholder under the agreement. The Funding Agreement provides for a return of principal plus a guaranteed rate of interest and allows for the possibility that additional interest may be credited as declared periodically by TIAA-CREF Life. The interest rate guarantee is made to the Board only. The rate of any additional interest is declared in advance for a period of up to 12 months and is not guaranteed for any future periods. Please refer to the enclosed Disclosure Booklet for more information about the funds underlying the Investment Portfolios in the Oregon College Savings Plan OregonCollegeSavings.com n 9

12 Your questions answered Who can open an account? Any U.S. citizen or resident alien of legal age with a valid Social Security number or Federal Taxpayer Identification number can open an account and contribute on behalf of any beneficiary. You can even open an account for yourself. Who can be an account beneficiary? Only one person may be listed as beneficiary for each account. Any U.S. citizen or resident alien, including the account holder, can be the beneficiary. The beneficiary must have a valid Social Security number or Federal Taxpayer Identification number. Website tip: Online options When you go to OregonCollegeSavings.com, you can: Access your account information Make contributions Change your address Receive plan documents online Can more than one person contribute to the account? Anyone can contribute to one account as long as the total contributions don t exceed $310,000 per beneficiary. The account owner has sole control over the assets and decides when to withdraw them. Can an account owner 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. What if my child decides not to attend college? You can keep the funds in the account, and the investments will be available in future years if the young person changes her or his mind about school. You can change beneficiaries, but the new beneficiary must be an eligible family member. 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). Earnings may also be subject to recapture under certain circumstances. 10 n OregonCollegeSavings.com

13 Will having an Oregon College Savings Plan account hurt my child 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 or the 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 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 Oregon income taxes, however. Special tips Set up an Automatic Contribution Plan your monthly payment will be transmitted electronically to your Plan account. Contribute through payroll deduction, if your employer offers it. Sign up for e-delivery to save paper. If I leave Oregon, what will happen to my account? If you move to another state, you can still keep your money invested in your Oregon College Savings account, and you can continue contributing to it. Before investing in another 529 plan, consider whether the state in which you or your designated beneficiary 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 Oregon College Savings Plan? You can transfer funds for the same beneficiary once per 12-month period without incurring federal income tax. There may be differences in 529 plan features, costs and surrender charges, so please consider the differences carefully. Consult your tax advisor or the other 529 college savings plan provider before requesting a rollover OregonCollegeSavings.com n 11

14 An education savings plan is important. Choosing the right one for you is essential. The Oregon College Savings Plan is a 529 plan that offers these advantages: Ready to enroll? Two easy ways. Option 1: Enroll online at OregonCollegeSavings.com. Option 2: Complete and mail the enclosed paper application. We re here to help. Call us toll-free at Oregon taxpayers may be eligible for a state income tax deduction Savings can grow state- and federal-tax free; withdrawals for education expenses are also income tax free* Gift- and estate-tax advantages Low minimum contributions, high account maximums Low investment management fees Family and friends can contribute * Non-qualified withdrawals may be subject to federal and state taxes, and an additional 10% federal tax. 12 n OregonCollegeSavings.com

15 Set your Plan in motion The enrollment kit contains everything you need to open an Oregon College Savings Plan account today. All you need to do is review the program details in the Disclosure Booklet, select your investment option(s) and open your account in either of the following ways: 1. Enroll online at OregonCollegeSavings.com 2. Mail your completed paper account application(s) and initial contribution to: Oregon College Savings Plan, P.O. Box 55914, Boston, MA If you have questions about the Oregon College Savings Plan or would like help opening your account, please visit our website, OregonCollegeSavings.com, or call toll-free:

16 Consider the investment objectives, risks, charges and expenses before investing in the Oregon College Savings Plan. Please visit OregonCollegeSavings.com for a Plan Disclosure Booklet with this and more information. Read it carefully. Investments in the plan are neither insured nor guaranteed and there is the risk of investment loss. 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 herein is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding tax penalties. Taxpayers should seek tax advice from an independent tax advisor based on their own particular circumstances. Non-qualified withdrawals may be subject to federal and state taxes, and an additional 10% federal tax. The Plan is administered by the State of Oregon. TIAA-CREF Tuition Financing, Inc. is the Plan Manager. OregonCollegeSavings.com COLLEGE SAVINGS PLANTM C4178 A /14 OR1402.XXB