Transcript Document

Life lessons
MFS® 529 Savings Plan
Presented by:
Wayne R. Davies, CFP, ChFC
Davies Financial Services
288 Main Street, Milford, MA 01757-2521
508-478-2640 or toll free in MA 800-648-1000
Securities offered through H. D. Vest Investment Services.SM
Member SIPC.
A wholly owned non-bank subsidiary of Wells Fargo & Company.
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
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.
© 2005 MFS Investment Management®. MFS® investment products are offered through
MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116.
05-05
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.
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Lesson one:
the simpler, the better
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, 2002.
• 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.
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Key 529 features
•
•
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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.
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Lesson two:
the reward often outweighs the cost
The rising cost of college
Private
Public
newborn
$ 299,690
$123,662
3 yrs.
$ 258,883
$106,824
6 yrs.
$ 223,633
$ 92,278
9 yrs.
$ 193,183
$ 79,713
12 yrs.
$ 166,878
$ 68,859
15 yrs.
$ 144,156
$ 59,483
17 yrs.
$ 130,754
$ 53,953
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.
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Reap the rewards
Education level
Mean annual
earnings
Not a high school grad
$ 18,568
High school grad
$ 26,817
Bachelor’s degree
$ 50,758
Master’s degree
$ 61,419
Ph.D.
$ 84,021
Professional
(business, law, medicine)
$ 104,596
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
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Lesson three:
do the right thing
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.
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A little goes a long way
Annual return: 6%
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.
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Lesson four:
share the wealth
A plan to
pass it on
(turn to page 7
of the brochure)
This presentation may not be handed out and must be accompanied by the MFS Investment Management 529 Brochure –
529-MFSP-BRO-01-04.
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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.
• Connor’s 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 Lily’s 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.
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Lesson five:
ask an expert
Comparison shop
MFS 529 Savings Plan
UGMA/UTMA
Education IRA
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
beneficiary’s rate
Tax deferred. Nonqualified
withdrawals subject to income
taxes and 10% federal tax
penalty. Withdrawals are tax
free if used for qualified
higher education expenses.
Contribution
limits
Up to $250,000 per
beneficiary
None
$2,000 per child per year
Income
limits
No 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.
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.
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Comparison shop
MFS 529 Savings Plan
UGMA/UTMA
Education IRA
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 owner’s estate. Owner
retains control.
Uses
Can be used for almost any
accredited post-secondary
school
No restrictions
Can be used for any qualified
educational expense, including
elementary, secondary,
and post-graduate
Ability to change Can be transferred to another
beneficiaries
member of the same family
without penalty
Not permitted
Can be transferred to another
member of the same family
without penalty
Penalties on
nonqualified
withdrawals
State tax
deduction
Ordinary income taxes and a
10% IRS penalty on earnings
None
Ordinary income taxes and a
10% IRS penalty on earnings
$2,000 for joint filers and $1,000
for single filers – Oregon
residents only
No
No
Fees
$25 annual fee, waived for
accounts valued over $25,000
and for Oregon residents
Differs, depending upon
funding vehicle
Differs, depending upon
funding vehicle
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.
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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
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Complete owner control
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Retain control over the assets
Change the designated beneficiary
Roll over other college savings accounts
Name contingent account owner
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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.
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Age-based investment option
For more information on risk associated with these options, please see a prospectus.
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Built-in allocation approach
Agressive growth
20%
Growth
20%
80%
Moderate
5%
20%
60%
U.S. stocks
Conservative
Bonds
10%
35%
35%
50%
50%
10%
International stocks
Cash
5%
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.
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Convenient access
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Daily pricing
MFS® Access
Toll-free representative assistance
Contribution confirmations
Quarterly statements
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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
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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 BabyMintTM advantage
BabyMintTM is a registered trademark of BabyMint, Inc..
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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
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Life lessons
MFS® 529 Savings Plan
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.
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