The more they grow, the more you SHARE.

Transcription

1 The more they grow, the more you SHARE.

2 Share more. All parents want to give their children or other loved ones a good education and brighter future. Higher education whether a four-year college, a community college, or a technical school offers students a chance to open their minds, develop their talents, acquire knowledge and hone their skills. Higher education can also translate into stronger earning power and steadier employment over the course of one s career. PREPARE TO SHARE A person who goes to college usually earns more than a person who does not. High School Diploma $33,801 Associate Degree Bachelor s Degree Master s Degree Professional Degrees $42,046 $55,656 $67,337 $100,000+ $0 $50,000 $100,000 PARENTS AUNTS & UNCLES EDUCATION GRANDPARENTS 2 SCHOLARSHARE Share More for Their Future 3 How ScholarShare Works 4 Tax Advantages 5 ScholarShare Is Flexible to Use 6 Investment s 8 Answers to Your Questions 12 Start Sharing Today 14 This information is based on the U.S. Census Bureau s 2008 median earnings for full-time workers who are at least 25 years old. Source: The College Board, Why Get a College Degree? 2010 Planning is the key to achieving a college education or other types of schooling. Planning for higher education involves both academic and financial preparedness. There are many excellent resources available to help you navigate the path toward college, starting as early as when your loved one is in elementary school. Helpful resources for families with children of all ages include: and SCHOLARSHARE MAKES SHARING SIMPLE Whether your child or loved one is a newborn or entering high school, ScholarShare, California s 529 College Savings Plan, can help you achieve your college savings goals. In 2010, college graduates in the United States completed their education with an average debt of $24,000 (CNNMoney.com, October 22, 2010). Starting a career with this amount of debt can limit your loved ones retirement savings, delay their first home purchase or even impact their ability to provide for their own families. ScholarShare provides you with the power to contribute to your family s financial well-being. While some may find the very thought of higher education overwhelming, you should remember that relatives, especially grandparents, may want to help out as well. You may also aim to fund just a portion of your loved one s education with the understanding that every dollar invested is potentially one less dollar borrowed later. Your loved one s brighter future can start today. TURN YOUR CHILD S GIFTS INTO CONTRIBUTIONS It s customary for relatives and friends to give your child gifts on birthdays and other special occasions. So tell them you ve opened a ScholarShare Account and ask if they would be willing to make a contribution toward your child s college education or open an Account instead of gifting the typical toy. At ScholarShare.com, Account owners, as well as friends and family, can download a Gift of Education Certificate to include with a card or wrap it with a bow. SCHOLARSHARE scholarshare.com Like ScholarShare on Facebook and follow us on Twitter for inspiration on everything from saving money to running a more efficient household. CALIFORNIA S 529 COLLEGE SAVINGS PLAN 3 scholarshare.com

3 How ScholarShare works Who can participate Anyone can open a ScholarShare Account for anyone else including you and other adults who want to go back to school later in life. Parents, grandparents, friends or relatives at any income level are all eligible to set up an Account. Plus, more than one person can contribute to an Account. Minimum contribution Open an Account with as little as $25 per Account. Tax advantages can boost your account ScholarShare is a 529 plan providing federal and state tax deferral on any earnings. Money you withdraw to pay for qualified higher education expenses is also free from state and federal income tax.* WEBSITE TIP: HOW MUCH WILL COLLEGE COST? Start your college plan by calculating your savings needs. Check out our College Savings Planner at ScholarShare.com. The calculator projects hypothetical college costs in your child s time frame and calculates how much you may need to save on a regular basis to help meet those costs. The Planner also includes a college cost database look-up with approximately 3,800 colleges. Our Saving4College App may be downloaded to your smartphone for free from the ScholarShare website to keep track of your college savings goals wherever you are. Maximum account balance There is a lifetime maximum account balance limit of $371,000 per beneficiary for all Accounts opened in ScholarShare. Your Account may continue to grow beyond the maximum Account balance limit, but no further contributions would be allowed. Remember: Starting early gives your money more opportunity to grow. Once your child is nine years old, he or she is already halfway to college age! A MEANINGFUL CONTRIBUTION IS SIMPLER THAN YOU THINK Sharing today can make all the difference in your child s future. $100,000 60,000 20,000 0 Monthly Contribution $50 $100 $200 6 Years 12 Years 18 Years Years of Accumulation GIFTING BENEFIT Federal Estate and Gift Tax Benefits: Contributions to ScholarShare may reduce the taxable value of your estate. For example, money placed in a grandchild s ScholarShare Account, together with all the other gifts you give that grandchild in one year, may qualify for an annual federal gift tax exclusion of $14,000**. Ask your tax advisor about your own situation. Couples filing jointly can contribute up to $140,000 per child and take advantage of five years worth of tax-free gifts at one time** ($70,000 for individual filers). Completed gifts are removed from your estate for tax** purposes, so your investment goes toward a child s education, not taxes. Consult your tax advisor about your own situation. THE BENEFITS OF TAX-FREE GROWTH POTENTIAL $80,000 60,000 40,000 $66,676 $55,092 WHAT IS A 529 PLAN? The number 529 refers to the federal tax code section that provides federal tax advantages for qualified tuition programs. 401(k) plans are named after a federal tax code section as well. A 401(k) plan helps you save for retirement. A 529 plan helps you save for a college education. 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 ScholarShare and does not reflect the benefits of any California or federal tax benefits. 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, a 30% combined federal, state and local income rate and a 6% annual investment return. The hypothetical example results presented are for illustrative purposes only and does not reflect past performance or guarantee future performance results of the ScholarShare College Savings Plan, the Investment s offered through the ScholarShare College Savings Plan and does not reflect any reduction for expenses. * Withdrawals that are not used for qualified higher education expenses may be subject to federal and state taxes and penalties on the earnings. In addition to the federal 10% penalty, non-qualified withdrawals may also be subject to an additional 2.5% California tax on earnings. ** 2014 annual exclusion for gifts. 4 SCHOLARSHARE CALIFORNIA S 529 COLLEGE SAVINGS PLAN 5

4 WEBSITE TIP: COMPARE COLLEGE SAVINGS OPTIONS Use our Web-based tool at ScholarShare.com to compare many popular ways to save for college, such as custodial accounts (UGMA/ UTMA) and Coverdell Education Savings Accounts, as well as 529 plans. ScholarShare is flexible to use YOU CAN USE SCHOLARSHARE FUNDS: At thousands of eligible educational institutions nationwide and abroad including community colleges, trade schools and many post-secondary programs. For tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. For certain room and board expenses. CONTROL OF THE MONEY As the participant and owner of the account: You maintain complete control of the Account regardless of your beneficiary s age. You make the decisions from selecting the ScholarShare investment portfolios to making withdrawals from your Account. You can name a successor Account owner, and you can transfer the ownership to another person. 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. You can roll over the money from another 529 plan into your ScholarShare Account to take advantage of all the benefits of ScholarShare. Note: Transfers and rollovers may be subject to differences in features, costs and surrender charges. Indirect transfers may be subject to taxation and penalties. Consult your tax advisor about your own situation. LOW FEES ScholarShare is among the lowest cost 529 plans in the country. There are no application fees, sales or maintenance charges for your ScholarShare Account, just a total annual asset-based fee. The total annual asset-based fee is less than 0.5% for most of the investment portfolios. Low fees give you the opportunity to put more of your money toward future college expenses. The annual asset-based fee varies across each of the nineteen investment portfolios, and there is no asset-based fee on the Principal Plus Interest. For more information, refer to the Fee Table in the enclosed Disclosure Booklet. POWER OF COMPOUNDING When you add the power of compounding to ScholarShare s tax-free earnings and low fees, you ll see that your investments have a stronger chance to grow and help you reach your higher education savings goals. ScholarShare s 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 program management services for ScholarShare. With combined assets under management of nearly $469 billion as of June 30, 2011, TIAA-CREF is a national financial services group of companies and a leading provider of retirement services in the academic, research, medical and cultural fields. WEBSITE TIP: WHAT YOU CAN DO ONLINE When you set up online access to your ScholarShare Account, you can: Access Account information Make contributions Set up an Automatic Contribution Plan (ACP) Sign up for e-delivery of your statements and disclosure material Request withdrawals online from your bank account on file and even have funds sent directly to your beneficiary s school Download Account data into Quicken Visit the ScholarShare mobile optimized secure website to access Account information and execute various transactions from your smartphone Join California s 529 online community by following ScholarShare on and liking us on Facebook at facebook.com/ scholarshare529 6 SCHOLARSHARE CALIFORNIA S 529 COLLEGE SAVINGS PLAN 7

5 ScholarShare investment portfolios How do age-based options work? SELECT THE INVESTMENT PORTFOLIO(S) THAT IS RIGHT FOR YOU Although Age-Based investments are very popular, some investors prefer to create their own asset allocation strategy. You can customize an investment strategy that more directly matches your tolerance for risk, your time horizon or other factors. Unlike the Age-Based Options, your unique investment allocations will not automatically change as the beneficiary ages. You can invest contributions in any one or a combination of Scholar Share s 19 investment portfolios. These portfolios vary in their investment strategy and degree of risk, allowing you to select an option or combination of options that fits your needs. SCHOLARSHARE OFFERS THREE BROAD CATEGORIES OF INVESTMENT OPTIONS Active investment options The fund manager selects the securities to buy for the fund. Age-Based Option, actively managed Seven single-focus actively managed portfolios Passive investment options Securities are selected to mirror a specific market index. Age-Based Option, passively managed Nine single-focus passively managed portfolios Principal plus interest portfolio Assets allocated to a guaranteed Funding Agreement issued by TIAA-CREF Life Insurance Company (TIAA-CREF Life). An age-based investment uses the age of your beneficiary to determine the appropriate investment allocation. The age-based approach invests aggressively when the child (the beneficiary) is young and more conservatively as the child gets older. SAMPLE ALLOCATION OF AN AGE-BASED PORTFOLIO DESIGNED FOR A CHILD AGE 0 4* Allocation Today 80.00% Stocks 20.00% Fixed Income Allocation College Age 20.00% Stocks 30.00% Bonds 50.00% Funding Agreement REVISIT YOUR INVESTMENT STRATEGY Re-examine your ScholarShare Account when: Your goals, time period for college investing, and personal financial situation change. There are long-term changes in the economy that will affect how you save or invest. The balance in your Account changes significantly due to varying performances of different investment portfolios over time. A WORD ABOUT RISK Each investment portfolio has its own risks. For example, international investing poses special risks 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. Investment returns over your investment period could be lower than the rate of increase in higher education costs during that period. It s also possible to lose all or part of the value of your Account. * Allocations automatically change over time. For illustrative purposes only and not representative of any specific age band for either the Active Age-Based Option or the Passive Age-Based Option. 8 SCHOLARSHARE CALIFORNIA S 529 COLLEGE SAVINGS PLAN 9

6 Active investment portfolios ScholarShare offers eight actively managed investment portfolios. An actively managed portfolio invests primarily in Underlying Funds that are actively managed. An actively managed fund is different from a passively managed fund in that an actively managed fund is not managed to track its benchmark index, but rather, managed pursuant to the investment style and strategy of its investment manager. This means that the performance of an actively managed fund can vary greatly from that of its benchmark index in either a positive or negative direction. Passive investment portfolios ScholarShare offers ten passively managed investment portfolios and a Principal Plus Interest which invests in a Funding Agreement. A passively managed investment portfolio invests primarily in Underlying Funds that are index funds. An index fund is managed to track a specific securities index that the fund uses as a benchmark. Refer to the enclosed Disclosure Booklet for details about each Investment and its allocations. Active Investment s Investment Objective and Strategy Passive Investment s Investment Objective and Strategy Active Age-Based Active Diversified Equity Active Growth 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. Invests primarily in Underlying Funds that are actively managed. Seeks to provide a favorable long-term total return by investing primarily in actively managed equity Underlying Funds. Seeks to provide a favorable long-term total return, mainly from capital appreciation, by investing primarily in a combination of actively managed equity and fixed-income Underlying Funds. Passive Age-Based Passive Diversified Equity Passive Growth 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. Invests primarily in Underlying Funds that are index funds. Seeks to provide a favorable long-term total return, mainly from capital appreciation, by investing in Underlying Funds that are primarily equity index funds. Seeks to provide a favorable long-term total return, mainly from capital appreciation, by investing in Underlying Funds that are primarily equity index funds. The seeks to invest a relatively small percentage of assets in Underlying Funds that invest primarily in fixed-income securities. Active Moderate Growth Seeks moderate growth by investing primarily in a combination of actively managed equity and fixed-income Underlying Funds. Passive Moderate Growth Seeks moderate growth by investing primarily in a combination of equity and fixed-income Underlying Funds. Active Conservative Seeks to provide preservation of capital along with a moderate rate of return. Approximately half of the invests in actively managed Underlying Funds that invest primarily in fixed-income securities. The rest of the is allocated to a Funding Agreement. Passive Conservative Seeks to provide preservation of capital along with a moderate rate of return. Approximately half of the invests in active and index Underlying Funds that invest primarily in fixed-income securities. The rest of the is allocated to a Funding Agreement. Active International Equity Active Diversified Fixed Income Seeks to provide a favorable long-term total return by investing in actively managed international equity Underlying Funds. Seeks to provide preservation of capital along with a moderate rate of return by investing primarily in actively managed Underlying Funds that invest in a diversified mix of fixed-income investments. Passive Diversified Fixed Income Index International Equity Seeks to provide preservation of capital along with a moderate rate of return by investing primarily in Underlying Funds that invest in a diversified mix of fixed-income investments. The majority of the is invested in an Underlying Fund that is an index fund. Seeks to provide a favorable long-term total return, mainly from capital appreciation, by investing in international equity index Underlying Funds. Social Choice Seeks to provide a favorable long-term total return. Invests 100% of its assets in the TIAA-CREF Social Choice Equity Fund, which invests primarily in equity securities of companies that meet certain social criteria. Index Bond Seeks to provide preservation of capital along with a moderate rate of return from interest income and capital appreciation. Invests 100% of its assets in the TIAA-CREF Bond Index Fund, which employs a passive management strategy and seeks to match the total return of the Barclays Capital U.S. Aggregate Bond Index. SHARE MORE NOW. BENEFIT MORE LATER. The more you invest and the earlier you start, the more opportunity your money has to grow. Index U.S. Large Cap Equity Seeks to provide a favorable long-term total return. Invests 100% of its assets in the TIAA-CREF S&P 500 Index Fund, which invests primarily in a portfolio of equity securities of large domestic companies selected to track U.S. equity markets based on a market index. Underlying funds for ScholarShare investment portfolios include Dimensional Fund Advisors (DFA), PIMCO, T. Rowe Price and TIAA-CREF. Calculate how much you need to save. Set your goals. Set up an Automatic Contribution Plan (ACP) and have your contributions electronically sent from your bank account to your ScholarShare Account. Contribute through payroll deduction, if your employer offers it. Index U.S. Equity Principal Plus Interest * Seeks to provide favorable long-term growth, mainly from capital appreciation. Invests 100% of its assets in the TIAA-CREF Equity Index Fund, which employs a passive management strategy and seeks a diversified portfolio selected to track the overall market of common stocks publicly traded in the United States, as represented by the Russell 3000 Index. Seeks to preserve capital and provide a stable return. Assets are allocated to a Funding Agreement issued by TIAA-CREF Life to the Board on behalf of the Plan. 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. * The Principal Plus Interest is not passively managed. 10 SCHOLARSHARE CALIFORNIA S 529 COLLEGE SAVINGS PLAN 11

7 Answers to your questions Who can open an Account? Anyone can open an Account regardless of income. This includes parents, grandparents, friends or relatives. 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. Who can be an Account beneficiary? As the participant and owner of the Account, you can designate anyone as the beneficiary even yourself! The beneficiary must have a valid Social Security Number or federal Taxpayer Identification Number. Only one person may be listed as beneficiary for each Account. Can more than one person contribute to the Account? Anyone can contribute to an Account as long as the maximum Account balance does not exceed $371,000 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. 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 the beneficiary to an eligible family member. Consult your tax advisor about whether this may create a taxable gift. Make a non-qualified withdrawal. Earnings will be subject to federal income tax and any applicable state income tax, as well as an additional 10% federal tax and 2.5% California tax on earnings. Will having a ScholarShare 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 parent 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. 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 higher education expenses, you can withdraw up to the scholarship amount free of the 10% additional federal tax and the additional 2.5% California tax on earnings. However, the earnings portion of the withdrawal is subject to federal and California income tax. If I leave California, what will happen to my Account? If you move to another state, you can still keep your money invested in your ScholarShare Account, and you can continue contributing to it. Remember, 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 ScholarShare? You can transfer funds for the same beneficiary once per 12-month period without triggering federal or state income tax. Remember, 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. How do I make withdrawals? It is easy to withdraw funds when your beneficiary is ready for college. Withdrawals can be processed online, from your phone or smartphone or by completing and submitting a Withdrawal Request Form. STILL HAVE QUESTIONS? Call toll free: One of our college savings plan specialists will answer your questions. Take five minutes and visit ScholarShare.com to view our ScholarShare webcast, which is a recorded video on the features and benefits of ScholarShare. Go to ScholarShare.com to schedule a one-on-one meeting with one of our California-based college saving consultants. Review the enclosed Disclosure Booklet. 12 SCHOLARSHARE CALIFORNIA S 529 COLLEGE SAVINGS PLAN 13

8 A college savings plan is important. Choose the right college savings plan for you. ScholarShare California s 529 College Savings Plan offers these advantages: READY TO ENROLL? TWO EASY WAYS: 1. Enroll online at ScholarShare.com 2. Complete and mail the enclosed paper application, along with your initial contribution, to: ScholarShare College Savings Plan PO Box Boston, MA Tax deferral on any earnings Withdrawals for qualified higher education expenses are tax free Choice of schools nationwide and many abroad Funds may be used for tuition, fees, supplies, required equipment and certain room and board expenses Gift- and estate-tax breaks Low minimum contribution; high Account maximum Low fees Family and friends may contribute Open your ScholarShare Account today Online: ScholarShare.com. Click on Open an Account on the home page. We re here to help. Call us toll-free at Mail: Complete and sign the ScholarShare Account Application and return with your initial contribution in the enclosed envelope. What you will need 14 SCHOLARSHARE The beneficiary s, Account owner s and successor Account owner s date of birth, Social Security Number or federal Taxpayer Identification Number. Designating a successor Account owner, the individual who will take over the Account in the event of the Account owner s death, is optional. Select an investment portfolio(s) that match your investment objectives. CALIFORNIA S 529 COLLEGE SAVINGS PLAN 15

9 scholarshare.com PO Box Boston, MA Consider the investment objectives, risks, charges and expenses before investing in the ScholarShare College Savings Plan. Visit ScholarShare.com, or call the Plan, for a Disclosure Booklet containing this and other information. Read it carefully. Before investing in a 529 plan, consider whether the state where you or your Beneficiary resides has a 529 plan that offers favorable state tax benefits that are 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 advice, based on their own particular circumstances, from an independent tax advisor. Non-qualified withdrawals may be subject to federal and state taxes, the additional federal 10% tax and a 2.5% California tax on earnings. Investments in the Plan are neither insured nor guaranteed except for TIAA-CREF Life Insurance Company s guarantee to the ScholarShare College Savings Plan under the Funding Agreement for the Principal Plus Interest, and there is a risk of investment loss. Account values will fluctuate based on a number of factors, including general market conditions. TIAA-CREF Tuition Financing, Inc., Program Manager. The ScholarShare College Savings Plan enrollment book contains references to other websites. Neither the Plan nor TFI and its affiliates are responsible for the content of those other websites. The accuracy of information on those sites cannot be confirmed. C571 A13092 CA1111.XXB