interests in collegeamerica are sold through unaffiliated intermediaries. © 2007 american funds...
TRANSCRIPT
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Interests in CollegeAmerica are sold through unaffiliated intermediaries. © 2007 American Funds Distributors, Inc. AI-99974
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© American Funds Distributors, Inc. AI-90002
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Planning for college
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Agenda
Paying for college is harder than ever
Saving for college is easier
Introducing CollegeAmerica®
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Paying for college is harder than ever
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Cost of college
Based on figures from the College Board for the 2006-2007 school year and assuming college costs increase an average 6% per year.For illustration only.
Expenses for four years of college
Today
Private college $145,679
Public college $71,556
In 18 years
$415,818
$204,244
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Saving for college is easier
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New ways to save for college
Coverdell Education Savings Accounts
529 college savings plans
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Coverdell Education Savings Accounts
Earnings can grow free from tax
Qualified withdrawals for K-12 education expenses are free from federal tax
Qualified withdrawals for higher education expenses are free from federal tax
$2,000 annual contribution limit
Investment flexibility
Income limits apply
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529 college savings plans
Earnings can grow tax free
Withdrawals for qualified higher education expenses are free from federal tax
Maximum flexibility– Investor maintains control– No income limits– Can be opened for anyone
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Based on a hypothetical $300 monthly investment earning 8% annually, compounding monthly, for 18 years in both a taxable account (assuming a tax rate of 25%) and a tax-free account. The typical mutual fund investor falls into the 25% tax bracket. Your tax rate may differ. The current lower tax rates on capital gains and dividends would make the return for the taxable investment higher, thus reducing the difference between the two ending values shown. The results shown here are not intended to represent an investment in a specific fund. Investors’ investment experiences may differ.
Paying no federal taxes can make a big difference
18 years0
$144,984Tax-free account
$116,787Taxable account
Hypothetical Growth of a college savings plan
Difference: $28,197
$150,000
90,000
60,000
0
120,000
30,000
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529 college savings plans
Withdrawals for non-qualified higher education expenses will be subject to federal income taxes and a 10% federal tax penalty on earnings
Holdings could reduce a beneficiary’s ability to qualify for grants and student loans
Some states offer residents a tax incentive to invest in their state-sponsored 529 college savings plans
Investment changes limited to one per year
A few things to note
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She wants to be a doctorInvest for the long term
Your college savings guide
Featuring CollegeAmerica,® a 529 college savings plan
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CollegeAmerica
Sponsored by theVirginia College Savings PlanSM
Available nationwide
American Funds– Proven investment management– 22 funds
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American Funds
Long-term, value-oriented approach
Extensive global research effort
Multiple portfolio counselor system
Experienced investment professionals
Commitment to low operating expenses
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CollegeAmerica: investment flexibility
Invest in a U.S. or global growth fund
Select a single “all-weather” fund
Diversify with a portfolio of funds
With 21 investment choices, investors can:
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Getting a head start
Asset allocation
This sample asset allocation is for illustrative purposes only.
45%Growth
40%Growth-and-
income
15%Equity-income/
balanced
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Newborn to 7 years old
Asset allocation
This sample asset allocation is for illustrative purposes only.
25%Growth 35%
Growth-and-income
20%Equity-income/
balanced
20%Bond
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8 – 12 years old
Asset allocation
15%Growth 25%
Growth-and-income
20%Equity-income/
balanced40%Bond
This sample asset allocation is for illustrative purposes only.© American Funds Distributors, Inc. AI-70114
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13 – 15 years old
Asset allocation
5%Growth
15%Equity-income/
balanced
20%Growth-and-
income
60%Bond
This sample asset allocation is for illustrative purposes only. © American Funds Distributors, Inc. AI-70115
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16+ years old
Asset allocation
This sample asset allocation is for illustrative purposes only.
10%Equity-income/
balanced
10% Growth-and-income
80%Bond
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Planning for college
College is expensive
529 savings plans make paying for college easier
Get started with CollegeAmerica
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Investors should carefully consider the investment objectives, risks, charges, expenses and tax implications of the American Funds and CollegeAmerica. This and other important information is contained in the prospectus(es) and/or program description, which can be obtained from their financial adviser and should be read carefully before investing.American Funds Distributors is the distributor of CollegeAmerica.
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If you reside in a state other than Virginia, there may be an in-state plan that provides tax and other benefits not available through CollegeAmerica.
You should discuss the tax implications of 529 plans with your legal and/or tax advisers, as features may vary significantly from state to state. You should read the appropriate 529 Plan Program Description before investing. It includes details about the plan’s risks, charges and tax treatment.
Most 529 plans will accept both “in-state” and “out-of-state” applicants.While federal tax treatment of 529 plans is identical regardless of the state plan, state tax treatment varies. State tax treatment may also vary for in-state and out-of-state residents.
Generally, state tax laws affect the contributor by way of deductibility of money going into the account, and the beneficiary by way of the possible taxation of distributions coming out of the account.
Each state’s 529 plan must be evaluated based upon its own merits relative to your needs, including the tax effects on the contributor and the beneficiary.
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© American Funds Distributors, Inc.
The return of principal in bond funds, as well as in funds with significant bond holdings, is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the fund(s). Bond prices and a bond fund's share price will generally move in the opposite direction of interest rates.
Diversifying investments does not ensure against market loss.
Investing outside the U.S. (especially in developing countries) entails additional risks, such as currency fluctuations, as more fully described in the prospectus.
Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal.
AI-44440
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Although a 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.
AI-44440
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