THE FIDELITY ADVISOR 529 PLAN* The 529 Plan Saving for college just got easier Not FDIC Insured May Lose Value No Bank Guarantee Fidelity tax and estate planning information is general in nature and should not be considered legal or tax advice. Fidelity does not provide legal or tax advice. Consult with an attorney or tax professional regarding any specific legal or tax situation. *The Fidelity Advisor 529 Plan is sponsored by the State of New Hampshire and managed by Fidelity Investments.
Will you have enough to pay for college? By 2021, the cost of four years at a private college may exceed $281,000. public private TODAY $45,036 $111,456 2021 $113,805 $281,643 Source: The College Board, Trends in College Pricing 2002
The reality of financial aid Unless the parents income is below $25,000, financial aid will likely be in the form of loans.* Income, not savings, is the largest factor in determining whether someone receives federal financial aid. Federal financial aid formulas consider only about 5% of parents assets or savings and 35% of a child s assets. Many potential college investors are deterred by the myth that financial aid will be their primary source of funding the reality may often be more debt. In 2001 2002, $89.6 billion in financial aid was awarded 58.1% Loans 41.9% Grants/Scholarships Source: The College Board, Trends in Student Aid, 2002. Chart excludes tax credits and work aid * Based on net assets of $25,000, family size of three, $25,000 income in the year 2000 before taxes. Parents' contribution calculated under Institutional Methodology (IM) with both parents employed (equal wages). Income is only from employment, taking standard deductions on U.S. income tax and filing a joint 1040 tax return. The contribution levels calculated are for one undergraduate child enrolled in college.
What is a 529 Plan? A tax-deferred (and potentially income tax-free*) college investment vehicle No income requirements or limitations Generous contribution limits Participant maintains control of assets for withdrawal purposes Favorable federal gift tax treatment Limited impact on financial aid qualification *Qualified withdrawals made after December 31, 2001 are federal income tax free. The provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 will expire on December 31, 2010. Unless the law is extended by Congress and the President, the federal tax treatment of 529 Plans will revert to its status prior to January 1, 2002.
Important 529 Plan language Participant: the individual contributing funds to a 529 Plan account Beneficiary: the individual whom the money is to benefit Successor Participant: the individual who becomes the new Participant upon the death of the original Participant Qualified/Nonqualified Withdrawal: based on whether the withdrawal is used to pay for qualified higher education expenses
Investing in a 529 Plan CASH contribution Participant makes a systematic or lump-sum contribution of cash; no securities or in-kind transfers. INDIVIDUAL FUND PORTFOLIOS AGE-BASED PORTFOLIOS STATIC ALLOCATION PORTFOLIOS Money is invested in Static Allocation, Age-Based, and/or Individual Fund Portfolios. Exchanges among Portfolios within a share class are allowed once per calendar year for a given Beneficiary or upon change in the Beneficiary. Federal income tax-free* withdrawals allowed for qualified higher education expenses. Assets left over can be redirected. *This tax-free feature was enacted by EGTRRA and will expire on December 31, 2010, absent new legislation.
How does the funding work? Funds can be used at virtually any U.S.-accredited college or university or at any eligible foreign institution Contribution limits are generous they vary by state Funds can be applied toward qualified higher education expenses, including: tuition and fees, room and board, required books, supplies, and equipment Funds invested in 529 Plans may qualify for more favorable federal financial aid treatment than UGMA/UTMA accounts The plan not only offers tax-deferred growth but also, as of January 1, 2002, provides for federal income tax-free qualified withdrawals* *Qualified withdrawals after December 31, 2001, are federal income tax free. The provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) will expire on December 31, 2010. Unless extended by an Act of Congress, the federal tax treatment of 529 Plans will revert to its status prior to January 1, 2002.
Systematic investing can pay off Hypothetical growth of $500 vs. $1,000 monthly investments $250,000 $200,000 $150,000 $100,000 $50,000 $1,000 / month grows to $182,946 $500 / month grows to $91,473 $0 6/2002 6/2005 6/2007 6/2009 6/2011 5/2012 Assumptions: Based on 8% annual return. Examples include $500 and $1,000 monthly investments starting 6/2001 and continuing through 5/2011. This hypothetical example is for illustrative purposes only and does not represent the performance of any specific investment. This hypothetical assumes that distributions are used to cover qualified education expenses, such that distributions are exempt from federal income tax. State and local taxes, if any, are not taken into account. Systematic investing does not guarantee a profit and does not protect against a loss in declining markets. You should consider your financial ability to invest in both market ups and downs. The tax-free feature was enacted by tax legislation that will expire on December 31, 2010. Unless extended by Congress, the federal tax treatment of 529 Plans will revert to its status prior to January 1, 2002. Withdrawals may or may not be state income tax free depending on the Participant s state of residence.
Taking the 529 Plan beyond college investing College savings strategy Use for discretionary income Tax management strategy Estate planning component
Hypothetical case study: Employee awarded workplace bonus SITUATION John is awarded a cash bonus from his employer. STRATEGY He plans to use the bonus to fund a 529 Plan for his newborn child.
Put discretionary income to work in a 529 Plan Consider investing these income sources Required minimum distributions (RMDs) Mortgage refinancing savings Annual bonus Exercising stock options Expired/matured U.S. savings bonds Legal or insurance settlements Be tax-smart with your discretionary income Federal tax law requires that all investments in 529 Plans be made in cash. You cannot put stocks, bonds, or property in your account. Checks are considered cash for this purpose and will be accepted. You may be subject to taxes and capital gains upon liquidation of assets. Consult a financial advisor in regard to your specific situation.
The Fidelity Advisor 529 Plan Administered by Fidelity Sponsored by State of New Hampshire any U.S. resident can invest Tax-deferred growth and federal tax-free withdrawals* Credit card option to help accelerate savings * This tax-free feature was enacted by tax legislation that will expire on December 31, 2010. Unless extended by Congress, the federal tax treatment of 529 Plans will revert to its status prior to January 1, 2002.
A broader, more flexible investment choice Age-Based Portfolios Newborn Child 3-Year-Old 6-Year-Old 9-Year-Old 88% Equity 12% Bond 87% Equity 13% Bond 86% Equity 14% Bond 78% Equity 22% Bond 12-Year Year-Old 66% Equity 32% Bond 2% Short- Term/MM 56% Equity 15-Year Year-Old 5% Short- Term/MM 40% Bond 38% Equity 17-Year Year-Old 11% Short- Term/MM 51% Bond 20% Equity College Student 24% Short- Term/MM 56% Bond Static Allocation Portfolios 100% Equity 100% Equity 70% Equity 70% Equity 30% Bond The Fidelity Advisor 529 Plan Advantage: Choose among Age-Based Portfolios, regardless of Beneficiary s age Source: Strategic Advisers, Inc. The allocation percentages may not add to 100% due to rounding.
A unique investment approach 100 90 80 70 529 College Saving Plan asset allocation roll-down for the Age-Based Portfolios Percent 60 50 40 30 20 10 0 Age 1 2 3 4 5 6 7 8 9 10 1112131415161718192021 22232425 Source: Strategic Advisers, Inc. High Yield Bond Money Market U.S. Inv. Grade Fixed-Income International Equity Domestic Equity
Individual Fund Portfolios* International Equity Portfolio FA 529 Diversified International Portfolio Domestic Equity Portfolios FA 529 Small Cap Portfolio FA 529 Equity Income Portfolio FA 529 Mid Cap Portfolio FA 529 Value Strategies Portfolio FA 529 Equity Growth Portfolio FA 529 Dividend Growth Portfolio Fixed-Income Portfolios FA 529 High Income Portfolio FA 529 Intermediate Bond Portfolio FA 529 Inflation-Protected Bond Portfolio Money Market Portfolio FA 529 Money Market Portfolio The Fidelity Advisor 529 Plan Advantage: You can customize your FA 529 Portfolio to meet your individual needs whether that means investing in a single Portfolio or choosing from a combination of Portfolios. * The assets of each Individual Fund Portfolio are totally invested in the underlying Fidelity Advisor fund or Fidelity s Cash Reserves fund.
New Fidelity Investments 529 College Rewards SM MasterCard credit card 2% of eligible retail purchases goes toward your 529 Plan* No limits on the points you can earn No annual fee No restrictive vendor network Multiple cardholders can be linked to one Fidelity Advisor 529 Plan account perfect for parents and grandparents! * Earn rate may be subject to change. Other restrictions apply. Full details are provided in the Program Guidelines documents. For rate, fee, and other cost information, and to learn more about the benefits of the Fidelity Investments 529 College Rewards program, please refer to the online credit card application at www.advisorxpress.com or call 866-438-6262. This credit card program is issued and administered by MBNA America Bank, N.A., which is not an affiliate of Fidelity Investments.
Employee participation is easy Employees: Open accounts by completing an application Select deduction amounts, investments, and Beneficiaries * Indicate contribution of after-tax dollars using their Workplace 529 Savings Program option Receive quarterly statements summarizing all their account activity * Section 529 requires that the Account Owner does not have direct control over the investments.
A winning combination 529 Plan Benefits Flexible education funding tool Possible gifting and estate tax benefits Tax-deferred growth and federal tax-free withdrawals* The Fidelity Advantage More flexibility Proven investment approach Trusted brand name * Qualified withdrawals made after December 31, 2001 are federal income tax free. The provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 will expire on December 31, 2010. Unless the law is extended by Congress, the federal tax treatment of 529 Plans will revert to its status prior to January 1, 2002.
For more complete information, including charges and expenses, please call or write for a free prospectus. Read it carefully before you invest or send money. Fidelity estate planning information is general in nature and should not be considered legal or tax advice. Fidelity does not provide legal or tax advice. Consult with an attorney or tax professional regarding any specific legal or tax situation. Qualified withdrawals after December 31, 2001, are federal income tax free. This tax-free feature was enacted by tax legislation that will expire on December 31, 2010. Unless extended by Congress, the federal tax treatment of 529 Plans will revert to its status prior to January 1, 2002. The Fidelity Advisor 529 Plan is sponsored by the State of New Hampshire and managed by Fidelity Investments. If you are not a New Hampshire resident, you may want to investigate whether your state offers its residents a plan with alternative tax advantages. Past performance is no guarantee of future results. Share price and return will vary, and you may have a gain or a loss when you sell shares. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee. Fidelity Investments & Pyramid Design and Fidelity Advisor Funds are registered service marks of FMR Corp. Fidelity Investments Institutional Services Company, Inc., 82 Devonshire Street, Boston, MA 02109 340557 1.773123.102 0303
Questions Frequently asked Do you have to use your states plan? You are not required to use your states plan, but tax issues should be considered. Currently 24 states offer a Tax deduction. (California does not allow a tax deduction) How do I access my account? 1-800-522-7297 advisorxpress.fidelity.com/login/
Enrollment Forms Complete the following forms Payroll Deduction New Account Form Payroll Deduction Employee Form Submit Forms to EORM Corporate office Celeste Scott