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Interests in CollegeAmerica are sold through unaffiliated intermediaries. © 2007 American Funds Distributors, Inc.AI-99974.

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Presentation on theme: "Interests in CollegeAmerica are sold through unaffiliated intermediaries. © 2007 American Funds Distributors, Inc.AI-99974."— Presentation transcript:

1 Interests in CollegeAmerica are sold through unaffiliated intermediaries. © 2007 American Funds Distributors, Inc.AI-99974

2 © American Funds Distributors, Inc.AI-90002

3 Planning for college © American Funds Distributors, Inc.AI-90003

4 Agenda Paying for college is harder than ever Saving for college is easier Introducing CollegeAmerica ® © American Funds Distributors, Inc.AI-90004

5 Paying for college is harder than ever © American Funds Distributors, Inc.AI-90005

6 Cost of college Based on figures from the College Board for the school year and assuming college costs increase an average 6% per year. For illustration only. Expenses for four years of college Today Private college$145,679 Public college$71,556 In 18 years $415,818 $204,244 © American Funds Distributors, Inc.AI-90006

7 Saving for college is easier © American Funds Distributors, Inc.AI-90009

8 New ways to save for college Coverdell Education Savings Accounts 529 college savings plans © American Funds Distributors, Inc.AI-90010

9 Coverdell Education Savings Accounts Earnings can grow free from tax Qualified withdrawals for K-12 education expenses are free from federal tax Qualified withdrawals for higher education expenses are free from federal tax $2,000 annual contribution limit Investment flexibility Income limits apply © American Funds Distributors, Inc.AI-90011

10 529 college savings plans Earnings can grow tax free Withdrawals for qualified higher education expenses are free from federal tax Maximum flexibility –Investor maintains control –No income limits –Can be opened for anyone © American Funds Distributors, Inc.AI-90012

11 Based on a hypothetical $300 monthly investment earning 8% annually, compounding monthly, for 18 years in both a taxable account (assuming a tax rate of 25%) and a tax-free account. The typical mutual fund investor falls into the 25% tax bracket. Your tax rate may differ. The current lower tax rates on capital gains and dividends would make the return for the taxable investment higher, thus reducing the difference between the two ending values shown. The results shown here are not intended to represent an investment in a specific fund. Investors’ investment experiences may differ. Paying no federal taxes can make a big difference 18 years 0 $144,984 Tax-free account $116,787 Taxable account Hypothetical Growth of a college savings plan Difference: $28,197 $150,000 90,000 60, ,000 30,000 © American Funds Distributors, Inc.AI-90013

12 529 college savings plans Withdrawals for non-qualified higher education expenses will be subject to federal income taxes and a 10% federal tax penalty on earnings Holdings could reduce a beneficiary’s ability to qualify for grants and student loans Some states offer residents a tax incentive to invest in their state-sponsored 529 college savings plans Investment changes limited to one per year A few things to note © American Funds Distributors, Inc.AI-90014

13 She wants to be a doctor Invest for the long term Your college savings guide Featuring CollegeAmerica, ® a 529 college savings plan © American Funds Distributors, Inc.AI-90016

14 CollegeAmerica Sponsored by the Virginia College Savings Plan SM Available nationwide American Funds –Proven investment management –22 funds © American Funds Distributors, Inc.AI-90017

15 American Funds Long-term, value-oriented approach Extensive global research effort Multiple portfolio counselor system Experienced investment professionals Commitment to low operating expenses © American Funds Distributors, Inc.AI-90018

16 CollegeAmerica: investment flexibility Invest in a U.S. or global growth fund Select a single “all-weather” fund Diversify with a portfolio of funds With 21 investment choices, investors can: © American Funds Distributors, Inc.AI-90499

17 Getting a head start Asset allocation This sample asset allocation is for illustrative purposes only. 45% Growth 40% Growth-and- income 15% Equity- income/ balanced © American Funds Distributors, Inc.AI-70112

18 Newborn to 7 years old Asset allocation This sample asset allocation is for illustrative purposes only. 25% Growth 35% Growth-and- income 20% Equity-income/ balanced 20% Bond © American Funds Distributors, Inc.AI-70113

19 8 – 12 years old Asset allocation 15% Growth 25% Growth-and- income 20% Equity-income/ balanced 40% Bond This sample asset allocation is for illustrative purposes only. © American Funds Distributors, Inc.AI-70114

20 13 – 15 years old Asset allocation 5% Growth 15% Equity-income/ balanced 20% Growth-and- income 60% Bond This sample asset allocation is for illustrative purposes only. © American Funds Distributors, Inc.AI-70115

21 16+ years old Asset allocation This sample asset allocation is for illustrative purposes only. 10% Equity-income/ balanced 10% Growth-and-income 80% Bond © American Funds Distributors, Inc.AI-70116

22 Planning for college College is expensive 529 savings plans make paying for college easier Get started with CollegeAmerica © American Funds Distributors, Inc.AI-90024

23 Investors should carefully consider the investment objectives, risks, charges, expenses and tax implications of the American Funds and CollegeAmerica. This and other important information is contained in the prospectus(es) and/or program description, which can be obtained from their financial adviser and should be read carefully before investing. American Funds Distributors is the distributor of CollegeAmerica. © American Funds Distributors, Inc.AI-99978

24 If you reside in a state other than Virginia, there may be an in-state plan that provides tax and other benefits not available through CollegeAmerica. You should discuss the tax implications of 529 plans with your legal and/or tax advisers, as features may vary significantly from state to state. You should read the appropriate 529 Plan Program Description before investing. It includes details about the plan’s risks, charges and tax treatment. Most 529 plans will accept both “in-state” and “out-of-state” applicants. While federal tax treatment of 529 plans is identical regardless of the state plan, state tax treatment varies. State tax treatment may also vary for in-state and out-of-state residents. Generally, state tax laws affect the contributor by way of deductibility of money going into the account, and the beneficiary by way of the possible taxation of distributions coming out of the account. Each state’s 529 plan must be evaluated based upon its own merits relative to your needs, including the tax effects on the contributor and the beneficiary. © American Funds Distributors, Inc.AI-90189

25 © American Funds Distributors, Inc. The return of principal in bond funds, as well as in funds with significant bond holdings, is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the fund(s). Bond prices and a bond fund's share price will generally move in the opposite direction of interest rates. Diversifying investments does not ensure against market loss. Investing outside the U.S. (especially in developing countries) entails additional risks, such as currency fluctuations, as more fully described in the prospectus. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal. AI-44440

26 © American Funds Distributors, Inc. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. AI-44440

27 © 2007 American Funds Distributors, Inc.AI-99997


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