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NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF 05-05 Life.

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Presentation on theme: "NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF 05-05 Life."— Presentation transcript:

1 NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF Life lessons MFS ® 529 Savings Plan Presented by: Wayne R. Davies, CFP, ChFC Davies Financial Services 288 Main Street, Milford, MA or toll free in MA Securities offered through H. D. Vest Investment Services. SM Member SIPC. A wholly owned non-bank subsidiary of Wells Fargo & Company. © 2005 MFS Investment Management ®. MFS ® investment products are offered through MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA For information about the MFS ® 529 Savings Plan, please read the Participant Agreement and Disclosure Statement, along with the prospectus for each investment fund available through the plan. You should read the prospectus carefully before investing as it contains complete information on the fund's investment objective(s), the risks associated with an investment in the fund, the fees, charges, and expenses involved. These elements, as well as other information contained in the prospectus, should be considered carefully before investing.

2 529 PUBLIC-PRES-REV General Notes The MFS ® 529 Savings Plan is a flexible college investing plan sponsored by the state of Oregon and is administered by MFS Investment Management ®. Depending on your state of residence and the state of residence of the beneficiary, an investment in the MFS 529 Savings Plan may not afford you or your beneficiary state tax benefits. This presentation must be accompanied by the MFS 529 Savings Plan brochure.

3 Lesson one: the simpler, the better

4 529 PUBLIC-PRES-REV Key 529 tax advantages Earnings are tax deferred. Withdrawals are free from federal tax through 2010 if used for qualified higher education expenses. You will be subject to federal income tax on your earnings and may face a 10% federal tax penalty if you withdraw money for something other than qualified higher education expenses. Unless Congress extends the law, the federal tax treatment of 529 plans will revert to its status prior to January 1, Gift and estate tax benefit allows you to contribute up to $11,000 a year ($22,000 per married couple) per beneficiary without paying federal gift-tax consequences. Or you may gift up to $55,000 ($110,000 per married couple) to each beneficiary. You will not incur federal gift taxes as long as no additional gifts are made to the beneficiary for four years after the year during which you make the one-time gift. 1

5 529 PUBLIC-PRES-REV Key 529 features Control over assets Wide range of investment options Additional fees are associated with 529 savings plans Investments in 529s involve risk. You should consider your financial needs, goals, and risk tolerance prior to investing. 1

6 Lesson two: the reward often outweighs the cost

7 529 PUBLIC-PRES-REV The rising cost of college PrivatePublic Participation does not guarantee that contributions and the investment return on contributions, if any, will be adequate to cover future tuition and other higher education expenses. Source: MFS calculations using data from College Board's Trends in College Pricing 2004 for tuition and fees and room and board. Calculations assume college costs will increase by 5% per year on average in all categories. For illustrative purposes only. newborn 3 yrs. 6 yrs. 9 yrs. 12 yrs. 15 yrs. 17 yrs. $ 299,690 $ 258,883 $ 223,633 $ 193,183 $ 166,878 $ 144,156 $ 130,754 $123,662 $106,824 $ 92,278 $ 79,713 $ 68,859 $ 59,483 $ 53,953

8 529 PUBLIC-PRES-REV Reap the rewards Not a high school grad High school grad Bachelors degree Masters degree Ph.D. Professional (business, law, medicine) $18,568 $26,817 $50,758 $61,419 $84,021 $104,596 Education level Mean annual earnings Participation in the plan does not guarantee that contributions and the investment return on contributions, if any, will be adequate to cover future tuition and other higher education expenses. Source: U.S. Census Bureau, March 2003

9 Lesson three: do the right thing

10 529 PUBLIC-PRES-REV Less taxing, greater growth potential Annual return: 6% Initial investment: $55,000 Tax bracket: 30% This example is for illustrative purposes only and is not intended to predict the returns of any investment choices. The performance of the investments will fluctuate with market conditions. If there were no earnings, the account value will not increase. Fees and expenses have not been taken into account. If they had been, the performance shown would be lower.

11 529 PUBLIC-PRES-REV A little goes a long way This example is for illustrative purposes only and is not intended to predict the returns of any investment choices. The performance of the investments will fluctuate with market conditions. Regular investing does not ensure a profit or protect against loss in declining markets. Investors should consider their ability to continue purchasing shares during periods of low price levels. Fees and expenses have not been taken into account. If they had been, the performance shown would be lower. Annual return: 6%

12 Lesson four: share the wealth

13 529 PUBLIC-PRES-REV (turn to page 7 of the brochure) A plan to pass it on This presentation may not be handed out and must be accompanied by the MFS Investment Management 529 Brochure – 529-MFSP-BRO

14 529 PUBLIC-PRES-REV Assumptions Married couple makes a gift of $110,000 to a 529 savings plan account for their eight-year-old son, Connor. Connor starts public college at 18, attends for four years. Once Conner graduates from college, Mrs. Anderson changes the owner of the account from herself to Connor with a simple letter of instruction. Connors daughter Lily is born when he is 28. At that time, Connor takes advantage of the gifting rule unique to 529 plans and gifts $55,000 in the year of Lilys birth and every successive fifth year, eventually moving the entire balance of his account to an account for Lily. Lily attends private college for four years. Hypothetical earnings are 6% per year for 40 years. Hypothetical examples are for illustrative purposes only and are not intended to represent the future performance of any MFS product.

15 Lesson five: ask an expert

16 529 PUBLIC-PRES-REV Comparison shop The investments you choose should correspond to your financial needs, goals, and risk tolerance. For assistance in determining your financial situation, please consult an investment professional. Income tax treatment Tax deferred. Nonqualified withdrawals subject to income taxes and 10%federal tax penalty. Withdrawals are tax free if used for qualified higher education expenses. Earnings taxed at beneficiarys rate Contribution limits Up to $250,000 per beneficiary None$2,000 per child per year Income limits No limits Phases out for single filers at $95,000 to $110,000; for joint filers $190,000 to $220,000 Control of assets Account owner Custodian until child reaches majority, then the child Account owner Investment flexibility You can change your assets among funds once each calendar year or when you change beneficiaries. You can move your assets as often as you want, but each transfer usually is a taxable event. You can move your assets as often as you want. MFS 529 Savings PlanUGMA/UTMAEducation IRA Tax deferred. Nonqualified withdrawals subject to income taxes and 10% federal tax penalty. Withdrawals are tax free if used for qualified higher education expenses.

17 529 PUBLIC-PRES-REV Comparison shop Estate planning features Assets are transferred out of the owner's estate. Owner retains control. Asset are transferred out of the estate. Assets are transferred out of the owners estate. Owner retains control. UsesCan be used for almost any accredited post-secondary school No restrictionsCan be used for any qualified educational expense, including elementary, secondary, and post-graduate Ability to change beneficiaries Can be transferred to another member of the same family without penalty Not permittedCan be transferred to another member of the same family without penalty Penalties on nonqualified withdrawals Ordinary income taxes and a 10% IRS penalty on earnings NoneOrdinary income taxes and a 10% IRS penalty on earnings State tax deduction $2,000 for joint filers and $1,000 for single filers – Oregon residents only No The investments you choose should correspond to your financial needs, goals, and risk tolerance. For assistance in determining your financial situation, please consult an investment professional. Fees $25 annual fee, waived for accounts valued over $25,000 and for Oregon residents Differs, depending upon funding vehicle MFS 529 Savings PlanUGMA/UTMAEducation IRA

18 529 PUBLIC-PRES-REV Flexibility High contribution limit of $250,000 Low minimum contribution of $250 Reallocate contributions and earnings among MFS funds once a year MFS Automatic Exchange Plan

19 529 PUBLIC-PRES-REV Complete owner control Retain control over the assets Change the designated beneficiary Roll over other college savings accounts Name contingent account owner

20 529 PUBLIC-PRES-REV More investment choice Age-based option Built-in allocation approach Customized approach For more information on risk associated with these options, please see a prospectus.

21 529 PUBLIC-PRES-REV Age-based investment option For more information on risk associated with these options, please see a prospectus.

22 529 PUBLIC-PRES-REV Built-in allocation approach Periodic rebalancing does not protect against loss in declining markets. Before selecting an asset allocation, you should understand the risks associated with investments in stock, bond, international, and small company funds. U.S. stocks International stocks Bonds Cash

23 529 PUBLIC-PRES-REV Convenient access Daily pricing MFS ® Access Toll-free representative assistance Contribution confirmations Quarterly statements

24 529 PUBLIC-PRES-REV Premier money management Global asset management expertise across all asset classes Time-tested money management process for pursuing consistent results Full spectrum of investment products backed by MFS Original Research ® Resources and services targeted to real-life needs

25 529 PUBLIC-PRES-REV Value-added resources MFS Heritage Planning ® –college savings options –choosing a college –financial aid mfs.com –Webcasts with MFS investment professionals and industry experts –links to 529 news, views, and more – Calculate for College interactive tool MFS educational series brochure – Jump Start The BabyMint TM advantage BabyMint TM is a registered trademark of BabyMint, Inc..

26 529 PUBLIC-PRES-REV Simple to start Determine which MFS investment options fit your goals and objectives Review the MFS ® 529 Savings Plan Participant Agreement and Disclosure Statement Complete the MFS ® 529 Savings Plan Account Application

27 The MFS ® 529 Savings Plan is a flexible college investing plan sponsored by the state of Oregon and is administered by MFS Investment Management ®. Depending on your state of residence and the state of residence of the beneficiary, an investment in the MFS 529 Savings Plan may not afford you or your beneficiary state tax benefits. There are additional fees with 529 savings plans. The MFS ® 529 Savings Plan is only available in conjunction with qualified tuition programs. Life lessons MFS ® 529 Savings Plan 529 PUBLIC-PRES-REV2 26


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