Transcript Slide 1

Saving and
Paying for College
– the Time is Now
Kellee Krick –Retirement Plan Services
Jennifer Ainsworth – College Savings
November 2009
Agenda:
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•
•
•
•
College Costs
Funding Options
529 Plans
Tax Treatment
Next Steps
The Time is Now
Three things we know now….
• College will be here before you know it
• It’s going to be expensive!
• The time to save is now
Increasing College Costs
For the 2008-2009 academic year, the
average tuition and fees increased:
4-year Public
4-year Private
2-year Public
+5.7%
+5.6%
+4.7%
Average College Costs
(Tuition, Fees, Room & Board 2008-2009)
• Private 4-year college
$34,132 per year
• Public 4-year college
$14,333 per year
• Public 2 year college
$9,743 per year
Source: The College Board- Trends in College Pricing 2008
Expected Lifetime Earnings
$6,000,000
$5, 137, 355
$5,000,000
$3, 897, 650
$4,000,000
$2, 865, 460
$3,000,000
$2,000,000
$2, 498, 260
$1, 418, 890
$1,000,000
$0
Hi gh S c hool
B ac hel or's
M as t er's
Doc t orat e
P rof es s i onal
Degree
Degree
Degree
Degree
Source: The College Board - Education Pays
Common payment combinations
Most will use a combination of the following
to fund College expenses….
• Pay what you can
• Pay later by borrowing money
• Hoping to find another source to pay along the way
(scholarships, grants…)
College Savings Options
Traditional investment options:
Savings accounts
Taxable investment accounts
Annuities
U.S. Savings Bonds
Other Savings Vehicles
 Coverdell Education Savings Account (Education IRA)
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$2,000 annual maximum
Income and Age limits
K-12 Expenses and College Expenses
Investment Flexibility
 Roth IRA
• $5,000 annual maximum ($6,000 for 50+)
• Withdrawal for college expenses subject
to income tax on earnings portion
• Deplete your retirement savings
• Income Limits
 Taxable accounts
• UGMA/UTMA
• Education trusts
• Asset of the student
Tough Choices
Retirement vs. College
Paying for college is not your only financial concern.
Providing for your own retirement can be even more
important since no one offers grants, scholarships, or
federally guaranteed loans to support you when you
leave the workforce.
Source: Savingforcollege.com
Financial Aid Treatment
Student Asset
UTMA and assets in
students name
20%
Parental Asset
529 account owned
by the parent, ESA’s
5.6%
n/a*
Grandparental Asset
529 account owned
by the grandparent
Saving For College
Spring 2009
PlanForCollegeNow.com
888 - 993 - 3746
IMPORTANT INFORMATION
The College Savings Plan of Nebraska (the “Plan”) is sponsored by the State of
Nebraska and is intended to operate as a qualified tuition program, pursuant to
Section 529 of the U.S. Internal Revenue Code. The Plan offers a series of investment
Portfolios within the Nebraska Educational Savings Plan Trust (the “Trust”), which
offers other investment Portfolios not affiliated with the Plan.
Participation in the Plan does not guarantee that contributions and the investment
return on contributions, if any, will be adequate to cover the future tuition and
other higher education expenses or that a beneficiary will be admitted to or
permitted to continue to attend an eligible educational institution.
Returns on contributors’ investments in the College Savings Plan of Nebraska are
not guaranteed by the State of Nebraska, the Nebraska State Treasurer, the State
Investment Officer, the Nebraska Investment Council, or the Program Manager for
the Trust, and the contributors to the plan assume all investment risk, including the
potential loss of principal and liability for penalties such as those levied for
nonqualified withdrawals.
Investment Products * Not FDIC Insured * No Bank Guarantee * May Lose Value *
Agenda
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College Costs
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College Savings Plan of Nebraska Overview
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Tax Treatment
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State Income Tax
Federal Income Tax
Estate and Gift Tax
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Ownership and Beneficiary Considerations
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Withdrawals and Tax Treatment
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Next Steps
529 State Tax Treatment
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After-Tax Investment for College
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Tax-Deferred Growth
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Tax-Free Withdrawals for Qualified College
Expenses
$5,000 Nebraska State Income Tax Deduction*
Account Owners may deduct up to $5,000 in Plan contributions from their
federal adjusted gross income each year on their Nebraska tax return
($2,500 if married filing separately). You should consult with your tax
advisor about state and local taxes.
Tax Information
You should be aware that other states may sponsor
their own qualified tuition plans and may offer a
state tax deduction or other benefits that are
limited to residents who invest in that plan.
Please consult a tax advisor about state and local
taxes.
529 Federal Tax Treatment
 After-Tax Investment for College
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Tax-Deferred Growth
Tax-Free Withdrawals for Qualified College
Expenses
Federal Estate and Gift Tax
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Contribution is a completed gift
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Qualifies for $13,000 annual gift exclusion
($26,000 for married couples)
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Special 5 year / $65,000 Election*
($130,000 for married couples)
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Account is not includable in the account
owner’s estate (partial inclusion if five year election is made and death occurs
during the 5 year period)
Note: The account owner stays in control of the account.
* Please consult your tax advisor
Account Owner
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One per account
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No income or residency requirements
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Responsibilities include:
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Direct distributions
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Change investment options
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Change the beneficiary
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Direct non-qualified withdrawals
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Controls the Account
Beneficiary
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Student who will use the money
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No account control or access
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One per account
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Must be an individual
Who Can Be a Beneficiary?
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No Relationship Required
(note discussion later when changing a beneficiary)
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No Residency Requirements
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No Age Limits* (newborn to. . .)
* Several States have age limitations – Nebraska does not
What if the Beneficiary…?
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Account Owner chooses one of the following:
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Take the funds back as a non-qualified
withdrawal (earnings subject to income tax and
federal penalty tax)
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Change the beneficiary to another “Member of
the Family”
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Leave the funds in the Plan and name a new
beneficiary at a later date
Member of the Family
Parent
FIRST COUSIN
Uncle/Aunt
Beneficiary
Spouse
Brother/Sister
Spouse
In-laws
Nephew/Niece
Child
Spouse
Eligible Schools
Qualified Education Expenses
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Tuition
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Fees
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Books
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Supplies
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Equipment
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Special needs services/special needs beneficiary
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Room & Board (on-campus and off-campus)
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must be enrolled at least 1/2 time
Non-Qualified Withdrawal
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Withdrawals not used for higher education
expenses
• Personal expenses
• Transportation
• Repayment of student loans
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Earnings portion of withdrawal subject to
income tax and 10% IRS penalty tax
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Exempt from the 10% IRS penalty tax
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Death
Disability
Receipt of a Scholarship
Appointment to a Military Academy
Qualified Withdrawals
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Can be Paid to the Account Owner, School, or Beneficiary
Account Owner Indicates Online or on “Withdrawal Form”
 Nebraska State Treasurer is the Trustee
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Nebraska Investment Council
oversees the Investment Structure
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Union Bank is the Program Manager
Program Trustee
Program Manager
Investments

IRS allows one investment change per calendar
year, or upon a change of beneficiary (Note: A
special Rule will allow two changes in calendar year
2009 or upon a change of beneficiary)
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30 Investment Choices (6 fund families)
• 4 Age-Based Portfolios
• 6 Target Portfolios
• 20 Individual Fund Portfolios
Age-Based Portfolios
Target Portfolios
Individual Fund Portfolios
DOMESTIC EQUITY ASSET CLASS:
MONEY MARKET ASSET CLASS:
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American Century Equity Income 529 Portfolio
• Vanguard Prime Money Market 529 Portfolio*
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Fidelity Advisor Equity Growth 529 Portfolio
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Vanguard Institutional Index 529 Portfolio
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Vanguard Growth Index 529 Portfolio
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Vanguard Value Index 529 Portfolio
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Vanguard Mid-Cap Index 529 Portfolio
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Vanguard Extended Market Index 529 Portfolio
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Vanguard Small-Cap Value Index 529 Portfolio
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Vanguard Small-Cap Index 529 Portfolio
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Vanguard Small-Cap Growth Index 529 Portfolio
FIXED INCOME ASSET CLASS:
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• Vanguard Total Stock Market Index 529 Portfolio
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• Vanguard FTSE Social Index 529 Portfolio
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PIMCO Total Return 529 Portfolio
Vanguard Short-Term Bond Index 529 Portfolio
Vanguard Int.-Term Bond Index 529 Portfolio
Vanguard Total Bond Market Index 529
Portfolio
REAL ESTATE ASSET CLASS:
• Goldman Sachs Real Estate Securities 529
Portfolio
INT’L EQUITY ASSET CLASS:
• Fidelity Advisor Diversified Intl 529 Portfolio
• Vanguard Total Intl Stock Index 529 Portfolio
* An investment in the security is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the security seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing in the security.
Important Risk Disclosures
Investments in the College Savings Plan of Nebraska are not guaranteed or insured by the
State of Nebraska, the Nebraska State Treasurer, the Nebraska Investment Council, the State
Investment Officer, Union Bank & Trust Company, the Federal Deposit Insurance
Corporation, or any other entity.
Investors should read carefully and consider the investment objectives, risks, fees, and
expenses contained in the Enrollment Handbook (issuer’s official statement) before
investing. The Enrollment Handbook, which contains additional information about the
plan and municipal fund securities, is available by calling the Plan at 888 – 993 – 3746,
online at www.PlanForCollegeNow.com, or from your investment professional.
You can lose money by investing in a portfolio. Each of the Age-Based, Target, and
Individual Fund Portfolios involves investment risks, which are described in the
Enrollment Handbook and which you should consider before investing. International
investments involve risks such as currency fluctuations, economic instability, and political
developments. Additional risks may be associated with emerging markets. Small and
midsize companies may increase the risk of fluctuations in the value of your investment.
Portfolios that invest in bonds are subject to risks such as interest rate risk, credit risk, and
inflation risk. As interest rates rise, the prices of bonds will fall. The value of your account
will fluctuate with market conditions. When you withdraw funds, you may have more or
less than your total contributions to the account.
National Recognition
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# 1 Rated Direct Sold
Plan in the Nation!
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Elite 5 cap rating! The College Savings Plan of Nebraska received the highest rating (5
Joe Hurley and
SavingForCollege.com rated the College Savings Plan of Nebraska Direct Plan # 1 in
their 3 Year Performance Rankings, and the College Savings Plan of Nebraska
Advisor Plan was rated #2 in their 1 Year Performance Rankings and #3 in their 3
Year Performance Rankings (June 2008).
caps!) from Joe Hurley’s SavingForCollege.com for Nebraska residents, and an elite 4 ½ cap
rating for non-residents (September 2007).
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One of our 5 Favorites! Kiplinger’s Personal Finance rates the College Savings
Plan of Nebraska as one of the elite programs in the nation (September 2007).
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One of the Top Plans in the Nation. “…offers low-cost index funds from
Vanguard but supplements them with actively managed offerings from American
Century, Fidelity, and PIMCO as well—all at a decent cost.” (Morningstar Fund
Investor, March, 2007)
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One of the Top 3 Plans in the Nation. “…the College Savings Plan of Nebraska
provides an attractive mix of plans to suit various risk tolerances and investment
styles.” The Plan was also singled out for “below average” costs. (Morningstar Fund
Investor, February 2006)
National Recognition (cont.)
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“One of the Top 5 Plans in the Nation.” One of the five plans singled out for keeping
costs under control while turning in better-than-average performance in the past few years.
(MSN Money, October 31, 2005)
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Best State 529 Plans – College Savings Plan of Nebraska included on elite list with its
reasonable expenses, large number of investment options and solid lineup of investments
(Kiplinger.com)
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“Five 529 Plans with Stellar Investment Options”, College Savings Plan of Nebraska
included on elite list (Morningstar, May 14, 2004)
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"Who Offers the Best 529 College Savings Plans?" Easiest route to the best 529
deal? The College Savings Plan of Nebraska (direct-sold) listed as one of the top 529 plans in
the country (Bloomberg News, March 1, 2004)
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3 of the Top 12 Performing 529 Portfolios, performance as of March 31, 2003 (The Sunday
New York Times, May 25, 2003)
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Top Rated 529 College Savings Plan (Smart Money, The Wall Street Journal
Magazine of Personal Business, November 2002 and December 2001)
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# 1 Rated 529 College Savings Plan in America (USA TODAY, July 8, 2002)
Thank You
Questions…
www.PlanForCollegeNow.com
888 – 993 - 3746