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New York’s 529 College Savings Program Direct Plan
Be Ready When the Bell Rings for College
Today’s Agenda
The goal of college
How New York’s 529 College Savings Program Direct Plan can help
Additional savings through Upromise® Rewards
Important considerations
To learn more…
The cost of college may be rising…
Estimated Cost of One Year at College
…but there is hope.
Most students receive some form of financial aid – either grants, scholarships, work-study or student loans.
In 2002-2003, total aid per full-time equivalent student averaged about $9,100 ($3,600 of which was in grant aid)†.
† The College Board, Trends in Student Aid 2003.
There are more ways than ever to save for college and more federal and state tax benefits for doing so.
Congress has enabled states to create savings plans under Section 529 of the Internal Revenue Code.
Each State can develop its own unique program.
Today’s Agenda
The goal of college
How New York’s 529 College Savings Program Direct Plan can help
Additional savings through Upromise® Rewards
Important considerations
To learn more…
A Partnership for New York
Higher Education Services Corporation (HESC)
George E. PatakiGovernor
Office of the State Comptroller (OSC)
Alan G. HevesiState Comptroller
Program Management By:
Upromise Investments, Inc.
Investment Management By:
The VanguardGroup
Key Features and Benefits of the Program
Significant Federal and State Tax Advantages
Broad Eligibility and Flexibility
Low Fees and Minimums, High Contribution Limit
Professional Investment Management by Vanguard
Additional Savings through the Free Upromise® Rewards Service
Convenient Online Account Opening and Account Management
Federal and State Tax Considerations
Only 529 program to offer New York taxpayers a State tax deduction
Can deduct up to $5,000 of contributions on state income tax return each year ($10,000 for married couples filing jointly)
* Unless extended, federally tax-free treatment of qualified withdrawals will expire after December 31, 2010.
Federal and State income tax-deferred growth
Earnings grow federal and State income tax deferred until withdrawn
Federal and State income tax-free qualified withdrawals for higher education*
Withdrawals for tuition, fees, room and board, books, and required supplies
Any qualifying post-secondary institution in the U.S., including public and private colleges and universities, 2- and 4-year programs, and vocational schools
Broad Eligibility and Flexibility
Any U.S. citizen or resident alien
Parents, grandparents, relatives, and even friends
No age or income limitations
Multiple account owners can open accounts for the same beneficiary
Account owner retains control of how and when the money is used
“Account Owner” (Person Who Controls the Account)
Any U.S. citizen or resident alien
Your children, yourself, your spouse, relatives, and even friends
No age or income limitations
Account owner can change beneficiaries to a qualifying family member of the current beneficiary without taxes or penalties
“Beneficiary” (Student for Whose Benefit the Account is Opened)
If beneficiary does not attend college, account owner can: (1) leave the money in the account until a
later date, (2) change beneficiaries, or (3) make a non-qualified withdrawal
Federal and State Tax Considerations
Non-qualified withdrawals subject to federal and State taxes
Subject to federal and State income tax on earnings, plus a 10% federal penalty tax on earnings
Any portion attributable to contributions for which a New York State tax deduction was previously claimed will be subject to New York personal income tax
Rollovers to another state’s 529 plan are considered non-qualified withdrawals for State income tax purposes
Withdrawals Due to Death, Disability or Scholarship
Subject to federal income tax on earnings, but not the 10% federal penalty tax
Withdrawals due to death or disability of beneficiary not subject to NY State tax
Withdrawals due to a beneficiary scholarship are subject to NY State tax to the extent they represent earnings and previously deducted contributions
Low Fees, Low Minimums, and High Maximum
One of the Lowest Management Fees of Any 529 Plan
0.58% of your investment annually (no other fees)
Low Minimum Contribution Amounts
$25 minimum for initial and ongoing contributions (EFT or check)
$25 minimum for AIP (bi-monthly, monthly, quarterly)
$15 for contributions made through payroll deduction
High Maximum Contribution Limit
Contribute until the total balance of all Program accounts for the same beneficiary reaches an aggregate maximum, which is currently $235,000 (earnings can continue to accrue after reaching the maximum)
Professional Investment Management by Vanguard
One of the Most Trusted Investment Management Companies
Largest pure no-load mutual fund company in the world
Over $600 Billion in assets under management
Commitment to high-value, low-cost investing and client service
Commitment to “plain talk” with customers
15 Vanguard Investment Options for the Program
3 age-based options and 12 individual portfolios
Choose up to 5 investment options per account
Reallocate among investments once per calendar year or when you change beneficiaries
Vanguard education investment specialists available to help
3 Age-Based Vanguard Investment Options
Conservative, moderate, and aggressive options
Contributions are invested according to your risk tolerance and the age of your beneficiary
As your beneficiary ages, your assets are automatically shifted to more conservative investments to seek to protect your capital
5 Stock Portfolios (100% stock funds)
Aggressive Growth Portfolio
Growth Stock Index Portfolio
Mid-Cap Stock Index Portfolio
3 Balanced Portfolios (mix of stock and bond funds)
Conservative Growth Portfolio
Growth Portfolio
3 Bond Portfolios (100% bond funds)
Bond Market Index Portfolio
Income Portfolio
1 Interest Accumulation Portfolio (100% short-term investments)
12 Vanguard Individual Portfolios
Small-Cap Index Portfolio
Value Stock Index Portfolio
Moderate Growth Portfolio
Inflation-Protected Securities Portfolio
Choose from among these options if you wish to be more aggressive or more conserv-ative than the age-based options allow.
Unlike the age-based options, your allocation among individual portfolios will remain fixed until you instruct the Program to change it.
Today’s Agenda
The goal of college
How New York’s 529 College Savings Program Direct Plan can help
Additional savings through Upromise® Rewards
Important considerations
To learn more…
Additional Savings with Upromise® Rewards
Upromise Rewards is a free, optional service that can add to your savings
Join Upromise for free through www.nysaves.org
Register your credit, debit, grocery and drug store cards
Get money back for college when you buy gas, dine out, shop online, buy groceries, and more
Link your Upromise Rewards account to your New York 529 account and have your Upromise savings transferred automatically on a periodic basis
Hundreds of leading companies will help you save for college
…and many more
Save for College at the Grocery Store
… at your favorite New York grocery store (over 1,000 participating stores).
Get money back for college on over 7,000 products…
Just register your grocery cards with Upromise.
From Everyday Expenses to Big Purchases
Over 9,000 restaurants Over 7,000 Hotels Circuit City The Sharper Image
Bed Bath & Beyond ADT America Online Many more…
Save for college at over 50,000 stores, restaurants, and services
Staples.com KBtoys.com Dell.com Sears.com Gap.com
Barnes & Noble.com Walmart.com JCPenney.com Many more…
Shop online through Upromise® and save at over 200 online retailers
Century 21 Coldwell Banker ERA
Chase Home Finance CitiMortgage Wachovia Mortgage
Save more for college on big purchases
Today’s Agenda
The goal of college
How New York’s 529 College Savings Program Direct Plan can help
Additional savings through Upromise® Rewards
Important considerations
To learn more…
Financial Aid and Other ConsiderationsState and Federal Financial Aid Consideration
Program assets not included in New York State financial aid determination
Considered parental asset (not the student’s assets) for federal financial aid purposes if parent is the account owner – which means that a smaller percentage is considered available for federal financial aid purposes
Hope and Lifetime Learning Credit Eligibility
Qualified withdrawal will not impact eligibility for the Hope Scholarship or Lifetime Learning tax credits, provided that the withdrawal is not used for the same expenses for which the credit was claimed
Special gift, estate, and generation skipping transfer tax considerations
Contributions are considered completed gifts and are generally removed from the account owner’s estate
Can contribute up to $55,000 in a single year ($110,000 for married couples filing jointly) without federal gift, estate, or generation skipping transfer tax consequences, provided no more gifts are made to the beneficiary for 5 years
No Guarantee & Other Important Program DisclosureNew York's 529 College Savings Program Direct Plan is described in the current applicable
Program Brochure and Tuition Savings Agreement. Accounts are opened by completing an Enrollment Form. All of these should be read carefully before opening an account. None of the State of New York, its agencies, the Federal Deposit Insurance Corporation (FDIC), The Vanguard Group, nor Upromise insures accounts or guarantees the principal deposited therein or any investment returns on any account or investment portfolio. The value of your account will vary based on market conditions and the performance of the investment options you select, and may be more or less than the amount you deposit. Tax benefits are subject to certain limitations and certain withdrawals are subject to federal, state and local taxes. If you are a resident or taxpayer of another state, you should consider whether that state offers a 529 Plan with tax or other benefits that are not available through this Program. You should consult your tax advisor. Investments may be made through Upromise Investments, Inc. and Vanguard Marketing Corporation, as distributors. New York's 529 College Savings Program currently includes two separate 529 plans. The Direct Plan is sold directly by the Program. You may also participate in the Advisor Plan, which is sold exclusively through financial advisors and offers investment options that are not available under the Direct Plan. However, the fees and expenses of the Advisor Plan are higher and include financial advisor compensation. Be sure to understand the options available before making an investment decision.
Today’s Agenda
The goal of college
How New York’s 529 College Savings Program Direct Plan can help
Additional savings through Upromise Rewards
Important considerations
To learn more…
We’re Here to Help!!
Visit www.nysaves.org to learn more about the Program, request an information kit, and even enroll online.
Call 1-877-NYSAVES (1-877-697-2837) to speak with a Program representative at Vanguard. Monday through Friday, 8 a.m. to 9 p.m.