DC College Savings Plan Helping Children Reach a Higher Potential

Transcription

1 529 DC College Savigs Pla Helpig Childre Reach a Higher Potetial

2 reach Sposored by Govermet of the District of Columbia Office of the Mayor Office of the Chief Fiacial Officer Office of Fiace ad Treasury 2012 Govermet of the District of Columbia The DC College Savigs Pla is a Sectio 529 pla created to help families prepare for the substatial cost of higher educatio. Sposored by the Govermet of the District of Columbia ad maaged by Calvert Ivestmets, the Pla offers special tax advatages that eable participats to maximize their savigs potetial. Featurig affordable program fees ad competitive ivestmet optios maaged by Calvert ad other premier istitutioal moey maagers, this 529 pla is amog the fastest growig i the coutry.

3 Ivest i the FUTURE You wat oly the best for your loved oes, ad you kow how importat a college educatio ca be. But figurig out how to pay for college is becomig icreasigly difficult. Now there is a educatio savigs program that has sigificat beefits for ayoe who wats to help provide the gift of higher educatio. The DC College potetial Savigs Pla, a 529 savigs pla sposored by the District of Columbia ad maaged by Calvert Ivestmets, offers a compellig combiatio of beefits that eables you ad your fiacial advisor to build a successful pla for meetig your educatioal goals. 1

4 $400,000 $350,000 $300,000 $250,000 $200,000 Public Four-Year (I-State) School Private Four-Year School The Educatio CHALLENGE The cost of a four-year college educatio is already high, presetig a challege to may families. College costs have typically rise at a rate that is substatially above iflatio. This has bee the case cosistetly for over 20 years, ad experts predict that it is likely to cotiue. $150,000 $100,000 $50,000 If your child starts college i year Assumes 6% aual icreases LOOKING AT THE FUTURE COST OF COLLEGE College costs cotiue to icrease at a staggerig rate. For a child eterig kidergarte today, the projected cost of a four-year public i-state college educatio is early $170,000 ad a four-year private uiversity educatio exceeds $380,000. Fudig your childre s educatio is ot the oly challege you face. A comfortable retiremet, a ew home purchase, perhaps carig for older parets the list ca go o ad o. All of these eeds ad goals must also be take ito cosideratio whe figurig out how to save for college. Decidig what to save for ad how to do it ca be a overwhelmig task. AN INVESTMENT WITH A PROVEN RETURN Despite these hurdles ad the risig cost of educatio, the fiacial beefits of ivestig i a college educatio are udeiable. Overall, the earigs power for college graduates is much greater tha for high school graduates. Those with bachelor s degrees ear o average 60% more tha idividuals who have oly eared a high school diploma. Ad, the greater the level of postsecodary school educatio, the higher the potetial earig power. So, a degree may more tha pay for itself over time. 2 Source: The College Board, 2012

5 The 529 Pla ADVANTAGE There is a way to esure that you will be able to help pay for your child s college educatio. A 529 college savigs pla offers sigificat flexibility i who ca participate. Ad, it ca offer substatial tax ad other beefits. Earigs o fuds accumulate tax free, which ca really make a differece over time. Fuds ca be withdraw free of federal ad, i most cases, state taxes, if they are used to pay for qualified expeses at ay accredited istitutio. There are o icome or age level restrictios o cotributios, such as there are with a Coverdell Educatio Savigs Accout, so ayoe ca participate i a 529 pla. A beeficiary* ca eve ope a 529 accout for himself or herself. You may cotribute up to $14,000 aually without beig subject to gift taxes, ad you ca do this for a ulimited umber of beeficiaries. Ulike a UGMA or other accouts iteded to beefit miors, you retai full cotrol over a 529 accout, so you ca withdraw fuds or eve trasfer fuds to aother beeficiary at ay time. As a uique tax plaig beefit, 529 plas offer a special tax provisio which allows you to cotribute $70,000 i oe year (five years of the allowable aual $14,000 gift tax exclusio) ad to treat that cotributio as if it were made ratably over five years for gift tax purposes. This ot oly helps your tax situatio, but allows the beeficiary to beefit eve more from the power of compoudig! (See chart). If the door dies durig the five-year period, a pro-rata portio of the gift will be icluded i the door s gross estate based o the umber of years remaiig i the fiveyear period, ot icludig the year i which the door died. * Must possess a valid social security umber. $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Taxable 529 Program 5 Year 10 Year 15 Year 18 Year TAX-DEFERRED SAVINGS COMBINED WITH COMPOUNDED GROWTH Savig i a tax-deferred accout ad the power of compoudig ca really make a differece. Assumig a 8% rate of retur, a combied federal ad state tax rate of 28.5%, a iitial cotributio of $10,000, ad aual cotributios of $3,000 for 18 years, the differece betwee savig i a 529 accout ad a taxable accout could be as much as $33,704. This chart is for illustrative purposes oly ad does ot reflect actual performace or predict future results. 3

6 A PLAN TO FEEL GOOD ABOUT itegrity The DC College Savigs Pla is the oly 529 pla maaged by Calvert Ivestmets, a firm reowed for its commitmet to supportig corporate social resposibility. Calvert s philosophy is that some of the best ivestmet opportuities are foud i compaies that ot oly have soud fiacials but also operate with itegrity toward the eviromet, atural resources, ad idividuals everywhere. A ivestmet i the Pla ca go a log way toward esurig a bright future for our youth. 4

7 DC College Savigs Pla: DISCOVER THE DIFFERENCE Natioally, there are may excellet 529 plas that deliver tax ad other beefits oly available through 529 plas. But the DC College Savigs Pla is the oly pla i the coutry which offers you a uique combiatio of sigle fud strategies or age-based portfolios, which iclude a full rage of socially resposible (sustaiable) ivestmet optios. Calvert offers: The ability to create a customized portfolio through idividual equity, bod, ad pricipal stability ivestmet optios, icludig SRI strategies. A professioally diversified portfolio available i oe simple ad coveiet step with age-based portfolios. YOUR CHOICE The DC College Savigs Pla offers a array of equity, bod, ad stability-of-pricipal ivestmet strategies, both actively ad passively maaged, so you ad your fiacial advisor ca costruct the best portfolio for you. All of the strategies offer the ivestmet maagemet expertise of Calvert ad other carefully selected premier istitutioal moey maagers. A rage of traditioal ad SRI ivestmet optios allows you to ivest i a maer that reflects your values. Our sustaiable ad resposible equity fuds use Calvert s thorough review process, which provides a added level of research. This uique process has two distict compoets: beefit A rigorous, fudametal review of fiacial performace, busiess prospects, ad maagemet. Plus, a thorough assessmet of evirometal, social, ad goverace performace to determie corporate itegrity. Oly whe a compay meets Calvert s stadards for both will we ivest. 5

8 A Rage of DIVERSIFICATION OPTIONS The DC College Savigs Pla offers two ways to create the portfolio most appropriate for you. You ca develop a customized portfolio. Or, choose a oe-step solutio by simply selectig oe of Calvert s five age-based portfolios, ad we will deliver professioal asset allocatio ad rebalacig. CUSTOMIZING YOUR PORTFOLIO Calvert offers a variety of Sigle Fud Ivestmets, each of which focuses o a differet ivestmet strategy or asset class. Your fiacial advisor ca help you costruct a diversified portfolio usig the Sigle Fud Ivestmets that meets your persoal asset allocatio goals. Ivestors lookig for a guaratee of pricipal ad steady geeratio of icome may wat to cosider the Stability of Pricipal Strategy maaged by Calvert. It is a coservative strategy with a pricipal guaratee ad a miimum iterest rate of 3.00%. The Stability of Pricipal Strategy seeks to produce a retur greater tha the retur o a high-quality fixed icome bechmark by ivestig prudetly i high-quality fixed icome securities. LOWER RISK, LOWER RETURN POTENTIAL Stability of Pricipal Portfolios* Icome Fuds Balaced Fuds Large Cap Equity Fuds Mid-Cap Equity Fuds Small Cap Equity Fuds Iteratioal Equity Fuds GREATER RISK, GREATER RETURN POTENTIAL 6 * Guaratee based o Acacia Life Isurace Compay s ability to meet its obligatios uder a fudig agreemet.

9 A ONE-STEP SOLUTION* Age-based portfolios adjust the relative risk of the ivestmets to the beeficiary s time remaiig to college age. There are five age bads which, i geeral, become more coservative over time. Accout assets are automatically shifted to the ext age bad portfolio as the beeficiary reaches certai ages, makig this a very coveiet ivestmet optio. As the beeficiary gets older, a smaller portio of the portfolio is ivested i stocks, which ted to be more volatile. AGE-BASED YEARS TARGET ASSET ALLOCATION Large Cap 39.0% Mid-Cap 5.0% Small Cap 4.0% Iteratioal Stocks 17.0% Bods 35.0% AGE-BASED 0 5 YEARS TARGET ASSET ALLOCATION Large Cap 50.0% Mid-Cap 6.0% Small Cap 9.0% Iteratioal Stocks 25.0% Bods 10.0% AGE-BASED YEARS TARGET ASSET ALLOCATION Large Cap 18.0% Mid-Cap 4.0% Iteratioal Stocks 8.0% Bods 40.0% Cash Equivalets 30.0% AGE-BASED 6 10 YEARS TARGET ASSET ALLOCATION Large Cap 45.0% Mid-Cap 5.0% Small Cap 6.0% Iteratioal Stocks 25.0% Bods 19.0% AGE-BASED 17+ YEARS TARGET ASSET ALLOCATION Large Cap 7.0% Iteratioal Stocks 6.0% Bods 31.0% Cash Equivalets 56.0% * Diversificatio either assures a profit or guaratees protectio agaist a loss. Ivestmet i mutual fuds ivolves risk, icludig possible loss of pricipal ivested. Equity ivestmets are subject to market risk ad may fluctuate as a result of specific evets related to the compaies or markets i which the fud ivests. Fixed icome ivestmets are subject to iterest rate risk. Whe iterest rates rise, the value of fixed icome securities geerally falls, ad, whe rates fall, the value of such securities geerally rises. Prices of small-cap stocks may respod to market activity differetly from ad ca be more volatile tha those of larger, more established compaies. Ivestmet i foreig securities ivolves greater risks tha U.S. ivestmets, icludig political ad ecoomic risks ad the risk of currecy fluctuatios. The Acacia Pricipal Plus Accout provides importat guaratees of pricipal ad iterest. It is ot aticipated that ivestors i the optio will experiece a loss of pricipal while ivested i this Accout, but the retur from icome is expected to fluctuate with loger-term fixed icome securities. The guaratee is based o Acacia Life Isurace Compay s ability to meet its obligatios uder a fudig agreemet. 7

10 $23,482 Start SAVING Early Help your childre prepare for the future by providig the potetial for success. Ope up the world of opportuity that oly the gift of higher educatio ca eable. $116,787 The sooer you start savig, the more opportuity your savigs $11,482 have to beefit from the power of compoudig. By savig oly $100 a moth, startig ow, for the ext 18 years, you could accumulate $38,929 toward a child s educatio. If you wait just six years to start savig, the amout you could accumulate, $21,120, is just over half the amout at the ed of the time period. Start Today Wait 6 Years $50 per moth for 18 years $50 per moth for 12 Years What does this mea? The earlier you start savig, the more likely you are to meet the educatio savigs challege. It s ever too early or too late to start savig for college ad with the beefits offered by the DC College Savigs Pla, ow is the time to start. Gettig Started is EASY Gettig started has ever bee easier. Your fiacial advisor ca walk you through the erollmet process ad help you select your ivestmet optios. $77,858 TAKE THE FIRST STEP TODAY 1) Talk to your fiacial advisor about your loved oe s educatio $38,929 fudig goals. $100 per moth $200 per moth $300 per moth 2) Determie your iitial cotributio ad select the ivestmets that best suit your savigs eeds with your fiacial advisor. 3) Review the Program Disclosure Booklet prior to completig the Assumes a hypothetical 6% rate of retur. A SMALL AMOUNT CAN GO A LONG WAY Cotributig oly $50 a moth ca add up to $19,465 over a participatio agreemet with the help of your fiacial advisor. 4) Review your 529 pla regularly with your fiacial advisor to esure that it is still appropriate for your eeds ad goals. 18-year period. Savig more ca result i a eve greater total at the ed of the 18-year period. So, the more you save ad the sooer you start, the more your ivestmet ca grow. 8 Source: CDA Wieseberger, 2010 Assumes a hypothetical 8% rate of retur.

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12 Pursuat to U.S. Treasury regulatios, we must iform you that ay tax advice cotaied i these materials is ot iteded or writte to be used, ad caot be used, by ay perso for the purpose of avoidig ay pealties that may be imposed uder the Iteral Reveue Code. I additio, ay U.S. federal tax advice cotaied i these materials was writte to support the promotio ad marketig of the D.C. College Savigs Pla. Each taxpayer should seek tax advice based o the taxpayer s particular circumstace from a qualified ad idepedet tax advisor. A ivestor should cosider, before ivestig, whether the ivestor s or desigated beeficiary s home state offers ay state tax or other beefits that are oly available to residets of that state. A ivestmet i aother state s 529 college savigs pla may ot offer comparable beefits. This booklet does ot provide all material iformatio cocerig the DC College Savigs Pla. Accouts represetig iterests i the DC College Savigs Pla are offered oly through a Participatio Agreemet ad a Disclosure Booklet that describes the DC College Savigs Pla. For more iformatio or additioal copies, cotact your fiacial advisor. The DC College Savigs Pla Program Disclosure Booklet should be read carefully before opeig a Accout. The District of Columbia, its agecies, Calvert, ad its affiliates do ot isure ay accout or guaratee its pricipal or ivestmet retur. Accout value will fluctuate based upo a umber of factors, icludig geeral fiacial market coditios. For more iformatio o the DC College Savigs Pla, please cotact your fiacial advisor or call A ivestor should cosider the ivestmet objectives, risks, charges, ad expeses of a ivestmet carefully before ivestig. The District of Columbia College Savigs Trust Program Disclosure Booklet cotais this ad other iformatio. Read it carefully before you ivest or sed moey. The Govermet of the District of Columbia does ot guaratee ivestmets i the program. Ivestmet ivolves risk, icludig possible loss of pricipal. The DC College Savigs Pla is uderwritte ad distributed by Calvert Ivestmet Distributors, Ic., member FINRA/SIPC ad subsidiary of Calvert Ivestmets, Ic Motgomery Aveue Bethesda, Marylad May Lose Value. Not FDIC Isured. Not a Deposit. No Bak Guaratee. Not NCUA/NCUSIF Isured. No Credit Uio Guaratee. BR