Building Bucks: Saving for College

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Transcript Building Bucks: Saving for College

Building Bucks: Saving for College
Why invest for college?
 Why is investing for college important?
 College can help a child or grandchild have a brighter future
 Reduces reliance on student loans
 Uses time and the power of compounding to your advantage
 Keeps your options open by planning ahead
Will you have enough for college?
The rising costs of a four-year college
 Tuition, books, room & board add up quickly
$450,000
$400,000
$350,000
$435,816
$300,000
Private
Private
University
University
$250,000
$200,000
$150,000
$199,424
Public University
Public University
$100,000
$50,000
$0
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
Costs based on 2010-2011 estimate of average tuition and room and board in current dollars for four-year public and
private universities according to the 2010 Trends in College Pricing, published by the College Board. Projected pricing
assumes a 6 percent annual increase in college costs.
The power of planning ahead
$350
$300
Invest now or borrow later:
To cover $25,000 in college
expenses, investing for 10 years
before college is a lot cheaper than
paying back loans for 10 years after
college.*
Advantage of Investing
vs. Student Loans
$165.56/month
$301.31
$250
$200
$150
$135.75
$100
$50
$0
Monthly Investment
Monthly Loan Repayment
*Assumptions: Total cost of college $25,000; 8% annual return on investment and 8% loan interest rate, compounded monthly;
10-year investing period and 10-year loan payback period. Annual return does not represent the performance of any specific
investment.
Putting time on your side
Regular contributions of any amount can really add up over time.
$100,000
This chart shows an account
with monthly contributions
over a 10-year period.
$301.31
$92,083
$80,000
$60,000
$46,041
$40,000
$23,021
$20,000
$0
$125
per month
$250
per month
$500
per month
A program of regular investment cannot assure a profit or protect against a loss in a declining market.
This hypothetical illustration assumes an average annual return of 8%. Annual return does not represent the performance of
any specific investment.
Tools and Resources to Promote
Financial Planning
• FAFSA4caster
• ED’s My Future, My Way: How to Go, How to
Pay
• NASFAA’s Cash for College
• College savings resources
FAFSA4caster
• Comprehensive tool that gives students and
parents a jump start on planning for college
– Provides an early estimate of a student’s financial
aid eligibility
– Allows students and families to get an early start
on the financial aid process
• www.fafsa4caster.ed.gov
FAFSA4caster
• Students must provide their Social Security
number
– Site is secure and U.S. Department of Education
will not share information
• Students may save incomplete FAFSA4caster
with a password and retrieve later
– Must restart FAFSA4caster if password is lost
My Future, My Way
• Workbook for students in middle or junior
high school
• Provides information about how to go to
college and how to pay for college
• Includes charts, checklists, and other activities
• Download PDF at
www.FederalStudentAid.ed.gov/pubs
NASFAA’s Cash for College
Booklet that includes the following information:
• Helpful financial aid hints
• Information about college costs
• What is financial aid and financial need
• What kinds of financial aid are available
• How the EFC is calculated
NASFAA’s Cash for College
You can make NASFAA’s Cash for College
available in number of ways:
• Link to on-line brochure at
http://www.nasfaa.org/AnnualPubs/cashfor
college.pdf
• Order copies from NASFAA
College Savings Plan Network
• www.collegesavings.org
• Provides information about saving for college
and 529 plans, including:
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–
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Why saving for college is important
What is a 529 plan
A college cost calculator
Links to state 529 plans
A 529 plan comparison tool
Common questions
EdVest – A Wisconsin 529 plan
 A flexible, tax-advantaged investing program
 A state-sponsored “Section 529” College Savings Program
 Administered by the Wisconsin Office of the State Treasurer
 Managed by Wells Fargo Funds Management, LLC
 An easy, effective way to invest for higher education regardless
of income level
The benefits of EdVest
While not all investors may be able to take advantage of all the tax
and other benefits of EdVest, here are four key features that may
benefit you.
 Tax advantages
 Wisconsin state tax deductions
 Income tax benefits
 Gift and estate tax benefits
 Flexibility
 Control of the account
 Eligibility
Tax advantages
 Wisconsin state tax deduction
 Up to $3,000 annually from taxable state income
beneficiary
per
 Available for parents, grandparents, great-grandparents, aunts and
uncles
 Also available for individuals who open accounts
themselves
 Contribute by December 31 of the current tax year
for
Tax advantages
 100% Federal and Wisconsin state income tax-free
withdrawals
qualified
 Qualified education expenses include:
 Tuition
 Room and board
 Books
 Certain special needs services
This hypothetical illustration shows the growth of an annual investment of $5,000 made at the beginning of each year. It
assumes a 28% tax bracket and a hypothetical annual return of 8%, compounded monthly. This chart is for illustration only
and does not predict or guarantee the performance of any investment. Investors should consider their personal
investment horizon and their current and anticipated income tax brackets when making an investment decision.
Gift and estate tax benefits
 Contributions are considered a completed gift and are eligible for the
annual $13,000 ($26,000 for married couples) gift tax and generationskipping exemptions
 For larger contributions, up to a $65,000 ($130,000 for married
couples) one-time gift may be prorated over five years
 IRS form 709 should be filed to report this contribution
 All contributions are removed from the contributor’s
estate
taxable
If donor contributes more than $13,000 in one year, and elects to apply the gift tax exclusion ratably over 5 years, but dies
before the close of the 5-year period, the portion allocable to calendar years beginning after the date of death is included in the
decedent’s estate.
Gift and estate tax benefits
$195,000
Gifts $65,000 per
grandchild
Grandfather Smith
+
Gifts $65,000 for
same grandchildren
$195,000
= $390,000
Grandmother Smith
removed from the couple’s taxable
estate
The gift tax exclusion can be very powerful. In this example, a grandfather and grandmother each
provide 3 one-time gifts of $65,000 to 3 grandchildren. The gifts are prorated over five years and a
total of $390,000 is removed from the couple’s taxable estate.
Flexibility
 Funds can be used at thousands of colleges, universities, technical
schools, graduate schools, and trade schools nationwide, and many
abroad
 Money can be used for tuition, room and board (the student must
be enrolled at least half-time), books, and other expenses
 High contribution limit
 Can use an Automatic Investment Plan or payroll deduction
A program of regular investment cannot assure a profit or protect against a loss in a declining market.
Control of assets
 Control remains with the person who establishes the account
 There is no obligation to distribute the funds
 If the child doesn’t go to college, the owner can change the
beneficiary or withdraw the funds*
 The owner can:
 Choose a successor owner
 Make distribution decisions concerning the assets
*The earnings portion of non-qualified withdrawals is treated as income and is subject to applicable federal and state income
tax as well as an additional 10% federal tax.
Eligibility
 Everyone is eligible!
 Anyone of legal age can open an account for anyone else
 There are no age limits on beneficiaries
 Anyone can contribute to an existing account
 You can even open an account for yourself
 No income limits for contributors
 Transfers allowed tax-free and penalty-free to eligible
members
family
SAGE Scholars Tuition Rewards
 Allows EdVest account owners to receive discounts for
undergraduate school tuition at participating private schools
throughout the country
 Awards tuition points based on your account balances – up to
10% annually
 Each reward point equals $1 in guaranteed tuition discounts at
participating private colleges and universities
 Over 265 member schools
 No fee to join
 Enroll online at EdVest.com/sage
The Tuition Rewards program is offered and administered by SAGE Scholars, Inc., a private for-profit corporation. SAGE
Scholars is not sponsored by or affiliated with Wells Fargo or the EdVest college savings plan.
12th Grade - 2nd semester
• Fill out FAFSA after January 1st
• Check Career Center for scholarships
• Receive acceptance/rejection letters from
colleges
• Contact Financial Aid offices at proposed
colleges
• Develop a plan to finance college
• Make final decisions and respond with your
deposit by the deadline