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The Challenge

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What is a 529 plan? A tax-advantaged way for families to save for college. Available to investors nationwide. Proceeds can be used for any accredited college – PowerPoint PPT presentation

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Title: The Challenge


1
Not FDIC Insured May Lose Value No Bank Guarantee
2
The Challenge
3
College costs are rising
Four years of tuition and fees
2016
Public college (in state) 40,861
Private college 140,711
Source The College Board, 2015
4
College debt is also rising
  • Total education debt including federal and
    private education loans is expected to tally
    nearly 68 billion this year for graduates with
    a bachelors degree and their parents, a more
    than 10-fold increase since 1994
  • Almost 71 of bachelors degree recipients will
    graduate with a student loan
  • The average class of 2015 graduate with
    student-loan debt will have to pay back a little
    more than 35,000

Source Edvisors, May 2015.
5
College still offers life-long benefits
  • Linked to long-term social and physical wellness
  • Higher income over lifetime, depending upon major
    selected
  • Decreased likelihood of unemployment

Source U.S. Department of Labor, 2015.
6
Help meet the challenge with a529 plan
7
What is a 529 plan?
  • A tax-advantaged way for families to save for
    college
  • Available to investors nationwide
  • Proceeds can be used for any accredited college

8
Benefits of a 529 plan
  • Anyone regardless of income can contribute
    to the account
  • You can change beneficiaries at any time
  • Control of the account will not shift to the
    child as with traditional savings accounts
  • Favorable financial aid treatment

9
Benefits of a 529 plan
  • Rollovers allowed once every 12 months or upon
    change of a beneficiary
  • Investment changes allowed twice per calendar
    year
  • You have other options if the child does not
    attend college

10
The tax-smart way to save
  • You pay no federal income taxes
  • On your earnings while the account is invested
  • When you withdraw money to pay for college
    expenses
  • Contributions are made with after-tax dollars

Withdrawals of earnings not used to pay for
qualified higher education expenses are subject
to tax and a 10 penalty. State taxes may apply.
Withdrawals for qualified higher education
expenses subject to tax if the American
Opportunity Credit Scholarship or Lifetime
Learning Credit is claimed for same expenses. If
withdrawing funds for qualified higher education
expenses from both a 529 account and a Coverdell
Education Savings Account, a portion of the
earnings distribution may be subject to tax and
penalty on amounts that exceed qualified higher
education expenses. Read the offering statement
for details.
11
The tax-smart way to save
  • Gift tax benefits Make five years worth of
    gifts without triggering the federal gift tax
  • Maximum for individuals 70,000 for 2016
  • Maximum for married couples 140,000


12
The tax-smart way to save
  • A 529 account can help decrease your taxable
    estate while you maintain control over assets

Married couples filing jointly may contribute up
to 140,000 per beneficiary. Individuals may
contribute up to 70,000. Contributions are
generally treated as gifts to the beneficiary for
federal gift tax purposes and are subject to
annual federal gift tax exclusion amount (14,000
for 2016). Contributor may elect to treat
contribution in excess of that amount (up to
70,000 for 2016) as pro-rated over 5 years.
Election is made by filing a federal gift tax
return. While contributions are generally
excludable from contributors gross estate, if
electing contributor dies during 5-year period,
amounts allocable to years after death are
includible in contributors gross estate. Consult
your tax advisor for more information.
13
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14
A wide range of investment choices
  • Age-based portfolios
  • Goal-based portfolios
  • Individual fund options from Putnam and other
    firms
  • Putnam Absolute Return Funds

15
Age-based portfolios
Actively managed and adjusted over time, becoming
more conservative as your child approaches
college age
Newborn 4 8 12 18
Stocks Bonds Cash
15
14
26
85
60
Asset allocations shown are target allocations.
Actual allocations may vary. The age-based and
goal-based options invest across four broad asset
categories short-term investments, fixed-income
investments, U.S. equity investments, and
non-U.S. equity investments. Within these
categories, investments are spread over a range
of asset allocation portfolios that concentrate
on different asset classes or reflect different
styles. Each age-based portfolio has a different
target date, which is based on the year in which
the beneficiary of an account was born. The
principal value of the funds is not guaranteed at
any time, including age-based portfolios closest
to college age.
16
Goal-based portfolios
Actively managed and keep the same allocation
mix, regardless of the childs age
Balanced
Growth
Aggressive growth
15
34
Stocks Bonds Cash
100
85
60
6
Balanced Option Growth Option Aggressive Growth Option
Putnam 529 GAA Growth Portfolio Putnam 529 Balanced Portfolio Putnam 529 Money Market Portfolio Invests in the Putnam 529 GAA Growth Portfolio and Putnam 529 All Equity Portfolio Invests in the Putnam 529 GAA All Equity Portfolio
Allocations shown are target allocations actual
allocations may vary. See the offering statement
for details.
17
Individual investment options
Build your own portfolio with a range of choices
Stocks Bonds Cash
Putnam Equity Income Fund Option Putnam Growth Opportunities Fund Option Putnam Small Cap Value Fund Option MFS Institutional International Equity Fund Option Principal MidCap Fund Option SSgA SP 500 Index Fund Option Putnam High Yield Trust Option Putnam Income Fund Option Federated U.S. Government Securities Fund 25 years Option Capital preservation money market Putnam Government Money Market Fund Option
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 a
money market fund. Money market funds are not
insured or guaranteed by the Federal Deposit
Insurance Corporation (FDIC) or any other
governmental agency. The plan involves
investment risk, including the loss of principal.
18
Absolute Return Funds
  • Putnam 529 for America is the only 529 account to
    offer a suite of absolute return funds as an
    investment option
  • The funds target positive 3-year returns of 1,
    3, 5,or 7 above the return on T-bills over a
    full market cycle and with lower relative
    volatility

7
5
Absolute return investing can be an ally in
helping to navigate todays market volatility
3
1




Chart does not represent the performance of
Putnam Absolute Return Funds. Actual performance
can be found on putnam.com. The funds strategies
are designed to be largely independent of market
direction, and the funds are not intended to
outperform stocks and bonds during strong market
rallies. There is no guarantee that the funds
will meet their objectives.
19
Putnam Absolute Return Funds
Putnam Absolute Return 100 Fund option Putnam Absolute Return 300 Fund option Putnam Absolute Return 500 Fund option Putnam Absolute Return 700 Fund option
For investors considering short-term securities. Invests in bonds and cash instruments. For investors considering a bond fund. Invests in bonds and cash instruments. For investors considering a balanced fund. Can invest in bonds, stocks, or alternative asset classes. For investors considering a stock fund. Can invest in bonds, stocks, or alternative asset classes.
Consider these risks before investing Our
allocation of assets among permitted asset
categories may hurt performance. The prices of
stocks and bonds in the funds portfolio may fall
or fail to rise over extended periods of time for
a variety of reasons, including both general
financial market conditions and factors related
to a specific issuer or industry. Our active
trading strategy may lose money or not earn a
return sufficient to cover associated trading and
other costs. Our use of leverage obtained through
derivatives increases these risks by increasing
investment exposure. Bond investments are subject
to interest-rate risk (the risk of bond prices
falling if interest rates rise) and credit risk
(the risk of an issuer defaulting on interest or
principal payments). Interest-rate risk is
greater for longer-term bonds, and credit risk is
greater for below-investment-grade bonds. Unlike
bonds, funds that invest in bonds have ongoing
fees and expenses. Lower-rated bonds may offer
higher yields in return for more risk. Funds that
invest in government securities are not
guaranteed. Mortgage-backed securities are
subject to prepayment risk. International
investing involves certain risks, such as
currency fluctuations, economic instability, and
political developments. Additional risks may be
associated with emerging-market securities,
including illiquidity and volatility. Our use of
derivatives may increase these risks by
increasing investment exposure (which may be
considered leverage) or, in the case of many
over-the-counter instruments, because of the
potential inability to terminate or sell
derivatives positions and the potential failure
of the other party to the instrument to meet its
obligations. The funds may not achieve their
goal, and they are not intended to be a complete
investment program. The funds effort to produce
lower-volatility returns may not be successful
and may make it more difficult at times for the
fund to achieve their targeted return. In
addition, under certain market conditions, the
funds may accept greater volatility than would
typically be the case, in order to seek their
targeted return. For the 500 Fund and 700 Fund,
these risks also apply REITs involve the risks
of real estate investing, including declining
property values. Commodities involve the risks of
changes in market, political, regulatory, and
natural conditions. Additional risks are listed
in the funds prospectus. You can lose money by
investing in the funds.
20
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21
500 monthly contributions at a hypothetical 6
annual growth rate
193,677
Hypothetical529 account value
Your savings accumulate faster because account
is not taxed
163,477
81,940
Hypothetical taxable account value
75,007
34,885
33,446
5 years
10 years
18 years
This example assumes contributions of 500 per
month, a hypothetical 6 nominal rate of return
compounded monthly with an effective return of
6.17, and a 28 tax bracket for the taxable
account. Performance shown is for illustrative
purposes and is not related to an actual
investment. Regular investing does not ensure a
profit or protect against loss in a declining
market. Capital gains, exemptions, deductions,
and local taxes are not reflected. Certain
returns in a taxable account are subject to
capital gains tax, which is generally a lower
rate than ordinary income tax rates and would
make the investment return for the taxable
investment more favorable than reflected on the
chart. Investors should consider their personal
investment horizon and income tax brackets, both
current and anticipated, when making an
investment decision. These may further impact the
results of the comparison.
22
Start early, contribute often
This chart is for illustrative purposes only and
is not intended to be representative of past or
future performance.The Jones family saves 340
monthly for 18 years. The Smith family saves
1,219 monthly for 8 years. Assumes a
hypothetical 8 annual return compounded monthly.
23
Let the whole family contribute
This chart is for illustrative purposes only and
is not intended to be representative of past or
future performance.The Jones grandfather makes a
lump-sum contribution of 14,000 today. The Jones
parents contribute 226 each month. Assumes a
hypothetical 8 annual return compounded monthly.
24
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25
How much can you contribute?
  • No minimum investment
  • Contributions can occur until the account value
    reaches 370,000
  • Contribute five years worth of gifts in a single
    year
  •   A gift of 70,000 in 2016 would constitute five
    years worth of gifts. Additional gifts made for
    the same beneficiary in the same five-year period
    would be subject to federal gift taxes. Election
    is made by filing a federal gift tax return. If
    the electing contributor dies during the 5-year
    period, amounts allocable to year after death are
    inducible in the contributors gross estate.
  • Contribution limit as of 1/1/16. Subject to
    periodic review.

26
Many ways to contribute
  • Invest a lump sum
  • Establish a dollar cost averaging program
  • Establish a systematic investment program from
    your bank
  • Encourage contributions with gift certificates

Systematic investing and dollar cost averaging do
not assure a profit or protect against loss in a
declining market. You should consider your
ability to continue investing during periods of
low prices.
27
Withdrawals are easy
  • You tell us how tomake out the check
  • Mail the completed formto Putnam Investments

Withdrawals of earnings not used to pay for
qualified higher education expenses are subject
to tax and a 10 penalty. State taxes may apply.
28
  • Contact insert broker name
  • Call 1-877-PUTNAM529
  • Visit putnam.com/529

29
Putnam 529 for America is sponsored by the State
of Nevada, acting through the Trustees of the
College Savings Plans of Nevada and the Nevada
College Savings Trust Fund. Anyone may invest in
the plan and use the proceeds to attend school in
any state. Before investing, consider whether
your state's plan or that of your beneficiary
offers state tax and other benefits not available
through Putnam 529 for America. If you withdraw
money for something other than qualified higher
education expenses, you will owe federal income
tax and may face a 10 federal tax penalty on
earnings. Consult your tax advisor. You should
carefully consider the investment objectives,
risks, charges, and expenses of the plan before
investing. Ask your financial representative or
call Putnam at 1-877-PUTNAM529 for an offering
statement and/or fund prospectus containing this
and other information for Putnam 529 for America,
and read it carefully before investing. Putnam
Retail Management, principal underwriter and
distributor Putnam Investment Management,
investment manager
30
Delete They are the faces of the future
Not FDIC Insured May Lose Value No Bank Guarantee
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