ILLINOIS 529 COLLEGE SAVINGS PLAN

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1 ILLINOIS 529 COLLEGE SAVINGS PLAN

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3 529 college savings plans are a great way for individuals and families to make college more affordable. That s because money saved in a 529 plan has significant tax advantages, is professionally managed and may benefit from compounded growth. Whether you are saving modest amounts each month in a 529 plan, or incorporating it into your estate planning, money in the account can be used to pay for qualified higher education expenses, including tuition, room and board, books, as well as other expenses. By opening a Bright Start 529 account, you can take a smart, pragmatic approach toward this important goal. Bright Start is among the most affordable 529 plans in the country and offers a variety of world-class investment options. Getting started is easy and can be done with as little as $25. There are many reasons to put off saving for a child s college education but not many good reasons. Saving early and often even in small, affordable amounts can make a big difference. Today s a good day to start saving with Bright Start College Savings. Today s a good day. VISIT BRIGHTSTARTADVISOR.COM TO LEARN MORE.

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5 Start preparing today for a brighter tomorrow. Three Pillars of Paying for College For the vast majority of families, paying for a child s education is rarely an all-or-nothing proposition. Because only a select few students receive full scholarships, most families typically take a three-pronged approach: Savings Financial Aid Student Loans The exact mix matters because it greatly influences the true cost of college. Families who save even modest amounts early and often can potentially reduce their out-of-pocket cost significantly. 3

6 Saving a little now can save you a lot in the long run. In the hypothetical example shown in the chart to the right, a family who saves $190 a month in a 529 plan for their child from birth to age 18 may pay $60,000 out-of-pocket for a $100,000 education. Meanwhile, the family who didn t save paid nearly $116,000 out-of-pocket for that same education. The difference between these two approaches approximately $56,000 is dramatic and due to Total out-of-pocket cost $120k $90k $60k $30k $115,752 $107,698 $87,940 $100k Total Estimated cost of a 4-year college education $60,128 $41,040 a few factors. First, a 529 plan gives your money $20,520 the opportunity to grow. Second, those who wait typically rely more heavily on loans and are stuck with the potentially significant added interest for decades following graduation. $0 $5,040 0 $25 $95 $190 Monthly amount contributed to a tax-advantaged account* Total out-of-pocket cost Monthly amount contributed to a tax-advantaged account Determining Financial Aid Most families will receive some financial aid, but the exact amount and form won t be determined until the student approaches college age. However, that doesn t mean you should delay planning and saving. Your financial advisor can help you understand the many factors involved in determining financial aid, including the potential benefits of a 529 plan. 4 *The four scenarios show the out-of-pocket cost based on an estimated $100,000 4-year college education at a public university, (source: OppenheimerFunds 2015), and assume the receipt of approximately $25,000 in financial aid, which will vary depending upon how much parents save in a tax-advantaged account. The loan portion of each column is calculated to include a fixed interest rate of 6.2 to be repaid over 180 months (as defined by Sallie Mae) following graduation with 54 monthly payments of $25 made during college. All savings in the tax-advantaged account depicted in this chart assume monthly compounded growth from the beneficiary s birth until age 18. The hypothetical examples are for illustrative purposes only and do not predict or depict the performance of any specific investment. Actual results may vary. Systematic investing does not assure a profit and does not protect against loss in declining markets. Before investing, investors should read the Program Disclosure Statement and evaluate their long-term financial ability to participate in such a plan.

7 Tax Benefits: Another Way to Save Money you invest in a 529 college savings plan may grow at a faster pace than if it were invested the same way in a taxable account. That s because the money you save has the potential to grow tax-free for the life of the account. Rather than paying taxes on any investment gains, you can keep your earnings in the account so they have the potential to grow even more. Over time, your money may benefit from compounded growth, which means your earnings may generate additional earnings, potentially multiplying the impact of the money you save. The Benefits of Tax-Free Growth* Exclusively for Illinois residents $30,000 $20,000 $10,000 In addition to federal tax benefits, Illinois residents enjoy state tax benefits through Bright Start. You can deduct contributions of up to $10,000 ($20,000 if married and filing jointly) per year from Illinois state taxable income. That includes the contributions (but not earnings) portion of rollovers from other state 529 plans Years Earnings accumulate tax-free for the life of the account and are exempt from Illinois state tax as long as they are used for qualified higher education expenses. 2 Tax-advantaged (Tax-free) Account $24,066 Taxable Savings Account $18,096 *This hypothetical illustration assumes an initial investment of $10,000 and a annual rate of return. The taxable account assumes a 28% federal and a state tax rate. (Please check with your tax advisor to learn if this applies to your state of residence.) The illustration does not represent the performance of any specific account or investment and does not reflect any plan fees or sales charges that may apply. If such fees or sales charges had been taken into account, returns would have been lower. Important Tax Considerations for All 529 Plans Residents of several other states may also be eligible for a state tax deduction from their own state when investing in Bright Start regardless of where their student plans to go to school. However, some states provide favorable tax treatment to their residents only if they invest in the state s own plan. Before investing, you should consider whether your, or your beneficiary s, home state offers any state tax or other benefits available only for investments in that state s 529 college savings program. Consult your tax advisor for additional guidance. 1 Based on informal guidance from the Illinois Department of Revenue that is not binding on the Department. 2 The amount of any deduction previously taken for Illinois individual income tax purposes is subject to recapture if such assets are rolled over to a non-illinois 529 plan. 5

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9 8 More Reasons to Open a Bright Start College Savings 3 Account Bright Start offers a number of advantages that make it easier to save money, grow assets and pay for a child s higher education. 1 - Low Fees Put More of Your Money to Work for You Bright Start is among the nation s most affordable 529 plans, which means that more of your money goes toward your investment goals, not the plan s operating costs Pay for Tuition, Room, Board and Books Withdrawals can be used to pay for qualified educational expenses, including tuition, fees, books, supplies and room and board Extensive School Choice You can use your Bright Start savings at most accredited public and private institutions in the U.S., as well as some foreign institutions. 4 - Broad Eligibility Any U.S. resident, regardless of income or state residency, can open an account. Parents, grandparents, aunts and uncles and even family friends are eligible to contribute to your account. 5 - Low Minimum Contributions You can open an account with an initial contribution as little as $25 and make additional investments of $15 or more. 6 - High Account Balance Limits The combined account balance per beneficiary for Bright Start and all other Illinois 529 programs may be as high as $350,000. Once this limit is reached, earnings can continue to accrue, but new contributions will not be allowed. 7 - Gift and Estate Tax Benefits You can contribute up to $14,000 ($28,000 for married couples) annually, per beneficiary, or up to $70,000 ($140,000 for married couples) prorated over a five-year period without having to pay gift taxes. In addition, contributions are excluded from the account owner s estate when taxes are assessed, making Bright Start an attractive option for grandparents Control Your Savings Bright Start assets remain in your name for the life of the account. If your beneficiary does not pursue a college education, you may change the beneficiary to another qualified family member without penalty 7. You can also leave the account to grow for future use or make a non-qualified withdrawal (taxes and a federal tax penalty may apply). 3 This product is neither FDIC insured nor guaranteed and may lose value. 4 Please see the Program Disclosure Statement for more details. 5 If the money is used for other purposes, the earnings portion of the withdrawal is subject to federal income taxes, any state income tax and may be subject to a federal tax penalty. 6 If the account owner dies before the end of the five-year period, a prorated portion of the contribution allocable to the remaining years in the five-year period, beginning with the year after the contributor s death, will be included within his or her estate for federal estate tax purposes. 7 There may be gift or generation-skipping tax consequences depending on who the new beneficiary is. See the Program Disclosure Statement for more information. 7

10 Investment Options Bright Start offers a range of portfolios and asset allocation strategies designed to help you and your financial advisor find the right fit for your savings goal, financial situation and risk tolerance. You may invest in the Age-Based Portfolios, the Choice-Based Portfolios or a combination of the two. You have the opportunity to change how your savings are allocated among investment options should your needs and goals change. However, certain rules apply. You may adjust your allocations for money previously invested twice per calendar year, and you may at any time allocate new contributions among any combination of available investment options. The portfolios investments are managed by OppenheimerFunds, Inc., its affiliates and American Century Investments. Age-Based Portfolios Your account is placed in one of six portfolios based on the beneficiary s age. As your child grows older, the money in the account automatically shifts from more aggressive portfolios seeking a higher degree of growth to increasingly conservative portfolios aimed at reduced volatility and capital preservation. 2% 2% 13% 6% 2 21% 12% 1 18% % 16% 4% % % 3% Advisor Age-Based 0 6 Years Portfolio Seeks long-term growth by investing mostly in equities. Advisor Age-Based 7 9 Years Portfolio As the child gets older, the portfolio still seeks growth, but the equity allocation is decreased in an attempt to lower overall portfolio volatility. Advisor Age-Based Years Portfolio Seeks moderate growth as equity allocation continues to decrease. U.S. EQUITY OFIPI Rising Dividends Strategy OFIPI Value Strategy OFIPI Capital Appreciation Strategy OFIPI Main Street Mid Cap Strategy OFIPI Main Street Small Cap Strategy NON-U.S. EQUITY Oppenheimer International Growth Fund Oppenheimer Developing Markets Fund MONEY MARKET Oppenheimer Institutional Money Market Fund FIXED INCOME American Century Diversified Oppenheimer International Bond Fund Oppenheimer Senior Floating Rate Fund OFIPI Enhanced Short Term Gov t Index Strategy 8

11 3% 2% 1% 2% 1. 20% % 9% % 7% % 20% 1. 4 Advisor Age-Based Years Portfolio Seeks moderate growth as equity and fixed income allocations are equal. Advisor Age-Based Years Portfolio Seeks conservative growth as fixed income makes up the bulk of the portfolio and a money market allocation is introduced. Advisor Age-Based 18+ Years Portfolio Seeks capital preservation with minimal growth by investing primarily in fixed income and money market investments to help maintain stability. Experienced Investment Managers American Century Investments has built its investment management business on the belief that it succeeds by making others successful. This multi-disciplined, activelymanaged investment management firm offers diverse strategies for its clients. Since its founding in 1960, OppenheimerFunds, Inc. has become a leading financial services company, offering investors comprehensive solutions through mutual funds and other investment vehicles. 9

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13 Choice-Based Portfolios With this approach, you and your financial advisor can customize your investment options. As your savings goals change, your exact mix of investments can, too. You may choose one or more of the portfolios that best suit your needs and, unlike Age- Based Portfolios, the asset allocation of Choice-Based Portfolios will not change unless you actively pick a different portfolio % 6% % 1 7% 9% 9% 2% % Advisor Equity Portfolio Seeks long-term capital appreciation by investing all of its assets in equity investments. Advisor Balanced Portfolio Seeks moderate growth by investing in a balanced asset allocation weighted between equity investments and fixed income and money market investments. Advisor Fixed Income Portfolio Seeks current income by investing primarily in investment-grade bonds and U.S. Government securities. 9 Advisor Conservative Fixed Income Portfolio Seeks total return by investing primarily in short-term government securities. 100% Advisor Money Market Portfolio Seeks preservation of capital by investing all of its assets in a money market mutual fund. U.S. EQUITY OFIPI Rising Dividends Strategy OFIPI Value Strategy OFIPI Capital Appreciation Strategy OFIPI Main Street Mid Cap Strategy OFIPI Main Street Small Cap Strategy NON-U.S. EQUITY Oppenheimer International Growth Fund Oppenheimer Developing Markets Fund FIXED INCOME American Century Diversified Oppenheimer International Bond Fund Oppenheimer Senior Floating Rate Fund OFIPI Enhanced Short Term Gov t Index Strategy MONEY MARKET Oppenheimer Institutional Money Market Fund 11

14 A Portfolio may invest its assets in mutual funds, have its assets managed in a separate account by OFI Private Investments Inc. for the benefit of the Bright Start Trust, or a combination of the two. Each underlying investment has its own risks. For example, the prices of small-cap stocks are generally more volatile than large company stocks. There are special risks inherent to international investing, including currency, political, social and economic risks. Investments in growth stocks may be more volatile than other securities. With value investing, if the marketplace does not recognize that a security is undervalued, the expected price increase may not occur. Fixed income investing entails credit and interest rate risks. When interest rates rise, bond prices generally fall, and the underlying fund s or account s value can fall. Senior Loans are typically lower-rated and may be illiquid investments (which may not have a ready market). Diversification does not guarantee a profit or protect against loss. For more details and associated risks, please see the Program Disclosure Statement. The actual mix of assets in portfolios that invest in more than one underlying investment will vary over time due to market performance and will be rebalanced at least quarterly to help maintain the portfolio s target asset allocation. None of the portfolios are designed to provide any particular total return over any particular time period or investment time horizon. Account owners own interests in a portfolio; they do not have a direct beneficial interest in the separate accounts, mutual funds or other instruments held by that portfolio, and therefore, do not have the rights of a shareholder or owner of those investments. *An investment in the Oppenheimer Institutional Money Market Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Oppenheimer Institutional 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. This material is provided for general and education purposes only, and is not intended to provide legal, tax or investment advice, or to avoid penalties that may be imposed under U.S. federal tax laws. Clients should contact their own legal or tax advisors to learn more about the rules that may affect individual situations. The Bright Start College Savings Program is administered by the State Treasurer of the State of Illinois and distributed by OppenheimerFunds Distributor, Inc. OFI Private Investments Inc., a subsidiary of OppenheimerFunds, Inc., is the program manager of the Plan. Some states offer favorable tax treatment to their residents only if they invest in the state s own plan. Investors should consider before investing whether their or their designated beneficiary s home state offers any state tax or other benefits that are only available for investments in such state s qualified tuition program and should consult their tax advisor. These securities are neither FDIC insured nor guaranteed and may lose value. Before investing in the Plan, investors should carefully consider the investment objectives, risks, charges and expenses associated with municipal fund securities. The Program Disclosure Statement and Participation Agreement contain this and other information about the Plan, and may be obtained by visiting brightstartadvisor.com or calling BRIGHT ( ). Investors should read these documents carefully before investing. The Bright Start College Savings Program is distributed by OppenheimerFunds Distributor, Inc. Member FINRA, SIPC 225 Liberty Street, New York, NY OppenheimerFunds Distributor, Inc. All rights reserved. IL May 5,

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16 I was taking a different look at the familiar rather than adhering to conventional wisdom. Leon Levy, founder, (the original) OppenheimerFunds OppenheimerFunds Founded in 1959, OppenheimerFunds offer investment portfolios in every major asset class through a variety of vehicles including retirement and college saving plans. Our staff of 2,000 employees includes more than 160 investment professionals who are committed to serving the needs of the individual and institutional investors and financial advisors who entrust us as the stewards of their capital. The Right Way to Invest We believe investors are best served by adhering to four key principles that, in our view, constitute the Right Way to Invest. Make Global Connections Throughout our history, we have been pioneers in global stock and bond investing. Today, we are one of the largest managers of global assets. We have long experience with finding opportunities for investors around the world. Look to the Long Term Invest with Proven Teams We recognize the value of having experienced teams who have managed assets through a variety of market conditions. Our investment teams are led by some of the most respected and successful managers in the industry. They have long tenures with the firm. Our 13 investment teams have the independence to exercise their expertise in the markets where they invest, but they also work collaboratively, sharing ideas across teams so that every decision is informed by multiple perspectives. Take Intelligent Risks We understand that investment rewards only come with risks, but we seek to understand and manage the risks we assume. Our risk management team makes their risk assessments with complete independence from our investment staff, but they still evaluate risks at every stage of our investment process. Our investment horizons are aligned with our clients interests. We invest for the long term because we know investors are trying to meet long-term goals. We are active managers because we believe our experience and expertise seek to help investors realize their financial goals.