1 The MFS 529 Savings Plan (also referred to as the âMFS Planâ) is a qualified tuition program ... vocational schools across the country. ... As of the 2016â2017 school year, the average cost of tuition for four years at a private college was.
MFS® 529 Savings Plan Simply smart for college investing
LIFE LESSONS
Pursue one of life’s important goals with a smart plan
You know how important a college education can be to opening minds and doors. You also know how expensive it can be. Saving for college early and regularly can help you be financially prepared. Let the following lessons serve as a guide to helping you make college a reality.
bA
NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
Lesson one
CONSIDER A SMART WAY TO SAVE
The MFS® 529 Savings Plan.1 It’s an easy choice for college planning for many reasons: • Earnings are tax deferred. • Withdrawals are free from federal tax if used for qualified higher education expenses.2 • You get a wide range of investment options, including MFS® Asset Allocation Funds.3 • You control the assets and have the right to change the b eneficiary.4 • You can contribute up to $14,000 per year ($28,000 per married couple) per beneficiary without any federal gift tax consequences. Or you can take advantage of the unique accelerated gifting feature of a 529 plan by making a combined five-year gift of up to $70,000 ($140,000 per married couple) to each beneficiary in a single year. You will not have any federal gift tax consequences as long as no additional gifts are made to the beneficiary for the four years after the year during which you make the gift.5 There is a $25 annual account fee associated with the MFS 529 Savings Plan. This annual fee is waived for Oregon residents and for those accounts with assets of $25,000 or more. Investments in 529 plans involve investment risks. You should consider your financial needs, goals and risk tolerance prior to investing. Other waivers may apply, check with your financial advisor. See footnote on bottom of page 5 for reference. The MFS 529 Savings Plan (also referred to as the “MFS Plan”) is a qualified tuition program offered by MFS Fund Distributors, Inc. in conjunction with the Oregon 529 Savings Board (the “Board”) and is part of the Oregon 529 Savings Network. The MFS® Plan was established by the Board, and MFS Fund Distributors, Inc. is the Program Manager. MFS Plan accounts are considered municipal fund securities. 2 You will be subject to federal income tax, and a 10% federal tax penalty may apply on earnings if a mounts are withdrawn for something other than qualified higher education expenses. 3 Each investment option invests in an MFS® mutual fund. 4 The new beneficiary must be a member of the prior beneficiary’s family. Gift taxes could apply if the new beneficiary is of a younger generation than that of the prior beneficiary. 5 Report the gift on a federal tax form. Amounts in an account that were considered completed gifts by the account owner will not be included in the account owner’s gross estate for federal estate tax purposes. However, if the account owner elected to treat the gifts as having been made over a five-year period and dies before the end of the five-year period, the portion of the contribution allocable to the remaining years in the five-year period would be includable in computing the account owner’s gross estate for federal estate tax purposes. Gift limits current as of 1/1/17; tax rules are subject to change. MFS does not provide legal, tax, or accounting advice. Clients of MFS should obtain their own independent tax and legal advice based on their particular circumstances. 1
1
Lesson two
SEEK TO HAVE THE REWARD OUTWEIGH THE COST
Plan for the future. The MFS 529 Savings Plan can help keep college in reach. 529 plans can be used to pay for qualified expenses such as tuition, fees, room, board, books and required supplies at accredited colleges, universities and vocational schools across the country.
The cost of private and public college1 As of the 2016–2017 school year, the average cost of tuition for four years at a private college was $143,176. The average cost of tuition for four years at an in-state public college was $42,539.1 Participation in the plan does not guarantee that contributions and the investment return on contributions, if any, will be adequate to cover future tuition and other higher education expenses.
$314,726
The rewards2 2016 median annual earning by educational level
Not a high school grad . . . . High school grad . . . . . . . . . Bachelor’s degree. . . . . . . . . Ph.D/Professional . . . . . . . . . .
$27,200 $36,800 $61,400 $110,900
$276,008 $242,054 $212,276
$186,162 PRIVATE COLLEGE
$149,580
$163,260 $132,501 $109,643 $90,728
PUBLIC COLLEGE
CHILD’S AGE
2
$45,311
17 yrs.
$51,407
15 yrs.
$62,125
12 yrs.
$75,076
9 yrs.
6 yrs.
3 yrs.
Newborn
1
Source: MFS calculations based on data from College Board’s Trends in College Pricing 2016, using average tuition and fees for only a four-year period. Calculations assume private college costs will increase 4.5% per year and public college costs will increase 6.5% per year on average. Estimates for future college costs assume a fixed rate of increase based on an average of the last 15 years. Year-over-year percentage increases used in both categories. For illustrative purposes only.
2
Sources: College Board’s Education Pays 2016. US Census Bureau, Income, Poverty, and Health Insurance in the United States: 2015, Table PINC-03; Internal Revenue Service, 2014; Davis et al., 2015; calculations by the authors.
Lesson three
MAKE IT A FAMILY AFFAIR
Parent, grandparent, aunt, uncle or family friend. No matter who you are, you can establish a 529 plan to help a student with future c ollege expenses. You can even set one up for yourself if you are p lanning to go back to school. There are no age, income or state of residency restrictions with an MFS 529 Savings Plan. Some states may offer favorable tax treatments only to residents who invest in the 529 plan of that state. You should consult with your tax advisor. For as little as $250, you can open an MFS 529 Savings Plan account. With no minimum for additional contributions, our systematic investment program makes it easy and affordable for individuals to save for college. By making monthly contributions to a 529 plan, you will be taking a disciplined, tax-deferred investing route to funding college needs. Greater growth potential An investment growing tax deferred has the potential to accumulate much more money over a long period of time.
Tax deferred 28% tax bracket
$29,368
A little goes a long way Investing a set amount of money each month can really add up over time.
$300 $100 $50
$116,787
$21,861
$38,929
$10,000
$19,464
Growth of $10,000 over 18 years at a 6% annual return compounded monthly
Growth over 18 years at a 6% annual return compounded monthly
These examples are for illustrative purposes only and are not intended to predict the returns of any investment choices. Rates of return will vary over time, particularly for long-term investments. There is no guarantee the selected rate of return can be achieved. Any underlying investments of a 529 plan may have fees and expenses that are not taken into account in these illustrations. The performance of the investments will fluctuate with market conditions. Regular investing does not ensure a profit or protect against loss in declining markets. Investors should consider their ability to continue purchasing shares during periods of low price levels. 3
Lesson four
SHARE THE WEALTH 1 1. CHARLIE
Mr. and Mrs. Mr. Mrs.Anderson Anderson gift a 529 makemake a giftato a to 529 account for their grandson foraccount their grandson CHARLIE on 1 on his Charlie eighth birthday. his eighth birthday.1
7 7. ANDREW When Lily marries and
Ten years later, CHARLIE Ten years later, Charlie graduates from high school graduates from high schoolpublic and and attends a four-year attends aduring four-year public college, which hecollege, uses a during which he uses a portion of portion of his 529 account to his 529 account to pay for pay for qualified expenses.2 qualified expenses.2
When Lily marries and has a child, there could be a has a child,balance there could be a significant in her 529 significant balance in used her 529 account that could be to account may be used give thethat gift of education to to give the education to the gift next of generation. the next generation.
6 6. At attends Atage age18, 18,LILY Lily attends a a four-year public college, four-year public college, paying for herfor education with a paying her education portion of the funds in her 529 with a portion of the funds in her account.2 529 account.2
22.
A plan to pass it on. Consider this example of how the 529 gifting feature can be used to help multiple family members and generations attend college.
5 5. Charlie and his wife Charlie and his wife open open newaccount 529 account a newa 529 for Lily forbyLILY by transferring the transferring the remaining remaining balance on balance on Charlie’s account.1 Charlie’s account.1
3. 3 After CHARLIE graduates, After Charlie graduates, the transfer theAndersons Andersons transfer ownership of the account ownership of the account to to him simple letter Charlie with with aasimple letter of of instruction. instruction.
44. LILY Charlie high Charliemarries marrieshishis and and highschool schoolsweetheart sweetheart their daughterLILY Lily isisborn. their daughter born.
These examples are for illustrative purposes only and are not intended to predict the returns of any investment choices. The illustration assumes Charlie’s college costs are not funded entirely from a 529. Any underlying investments of a 529 plan may have fees and expenses that are not taken into account in these illustrations. The performance of the investments will fluctuate with market conditions. Regular investing does not ensure a profit or protect against loss in declining markets. Investors should consider their ability to continue purchasing shares during periods of low price levels. 1 A single person can contribute up to $70,000 in one year per beneficiary; a married couple can contribute up to $140,000 in one year per beneficiary with no gift-tax consequences. Such a contribution will be considered a five-year accelerated annual-exclusion gift, so no additional gifts can be made for that beneficiary for the next four years without incurring gift-tax implications unless the annual gift exclusion increases. The gift amount and subsequent appreciation, however, are removed from your taxable estate. (A portion of the contribution amount may be included in the donor’s taxable-estate calculation if the donor should die within the five-year period.) 2 Earnings are tax deferred and, if used for qualified higher education expenses (such as tuition, room and board, required computers, books and supplies), are not subject to federal income tax. Withdrawals not used for qualified higher education expenses are subject to both income taxes and a 10% federal tax penalty on earnings. State taxes may also apply. There are no guarantees that 529 plans will be in existence 40 years from now. The rules governing 529 accounts are subject to change. Report gifts on your federal tax return. The illustration does not consider any state taxes that may apply. 4
Lesson five
ASK AN EXPERT
Make educated decisions. College investing programs come in many shapes and sizes today. That’s why the insight and guidance of a financial advisor is so valuable. He or she will help you choose the right college plan and then help you select the investment options that best fit your needs and tolerance for risk. Consult your tax professional for tax advice applicable to your p articular circumstances.
Income tax treatment
Contribution limits
MFS 529 SAVINGS PLAN
UGMA/UTMA
Withdrawals are federal tax free if used for qualified higher education expenses.
Earnings are taxed at the beneficiary’s rate.
Up to $310,000 account balance per beneficiary
None
No limits
No limits
Account owner
Custodian until child reaches majority; then the child
You can move assets among funds twice each calendar year or when you change beneficiaries.
You can move assets as often as you want, but each transfer usually is a taxable event.
Assets are transferred out of the owner’s estate. The owner retains control.
Assets are transferred out of the estate.
Can be used for almost any accredited post-secondary school
No restrictions
Can be transferred to another member of the same family without penalty
Not permitted
Ordinary income taxes and a 10% IRS penalty on earnings
None
$2,330 per individual ($4,660 for married couples filing jointly) — Oregon taxpayers only*
No
$25 annual fee, waived for accounts v alued over $25,000 and for residents of Oregon†
Differs, depending upon funding vehicle
Income limits
Control of assets
Investment flexibility Estate planning features Uses Ability to change beneficiaries Penalties on nonqualified withdrawals State tax deduction
Annual fee
* Oregon taxpayers may be eligible for a state tax deduction from Oregon taxable income for contributions to the MFS 529 Savings Plan. For 2016, the limit is $2,330 if single or married and filing separately, or $4,660 if married and filing jointly. These deduction limits will be adjusted for inflation by the Oregon Department of Revenue. Learn more at www.oregon529network.com. † Other waivers may apply, check with your financial advisor.
55
YOU HAVE MANY CHOICES Your financial advisor can help you choose the right investment options for you when you’re ready to open an MFS 529 Savings Plan. MFS makes it easy for you to follow the disciplined diversification® strategy of ADR — allocate, diversify and rebalance. This proven strategy has helped thousands of investors pursue their long-term goals at a risk level they find comfortable. Our age-based investment option and built-in allocation portfolios offer automatic ADR. You can also build a well-diversified portfolio with the customized approach.
1. Age-based investment option When you select the age-based investment approach, you do not have to worry about switching to a more conservative portfolio as the child approaches college age. Your assets are automatically transferred to a more conservative asset allocation fund as your beneficiary approaches college age. This option transfers your assets among five MFS asset allocation funds that are designed to take into account the approximate number of years before your beneficiary starts college. Then, during the child’s college years, the assets are placed in a conservative bond fund. Automatic exchanges take place on the quarterly exchange date on or following the beneficiary’s fifth, tenth, fourteenth, sixteenth and eighteenth birthdays. The funds’ objectives and investment strategies change from one age-based model to another.
Level of risk
Age 0–4 MFS® Aggressive Growth Allocation Fund
6
Age 5–9 MFS® Growth Allocation Fund
Age 10–13 MFS® Moderate Allocation Fund
Age 14–15 MFS® Conservative Allocation Fund
Age 16–17 MFS® Lifetime® Income Fund
Age 18+ MFS® Limited Maturity Fund
2. Built-in allocation approach The built-in allocation approach simplifies the decision process by o ffering asset allocation funds that are preassembled for you. Asset a llocation investment options offer targeted asset mixes to match the varying o bjectives and risk tolerance of investors. They are rebalanced periodically. stocks • US International stocks • Bonds • Specialty/Cash* •
4% 8%
10%
MFS® Aggressive Growth Allocation Fund
20%
4%
28%
40%
13%
3. Customized approach Create your own diversified portfolio from a menu of MFS mutual funds. We offer a full spectrum of investment choices, from more aggressive stock funds to balanced funds to c onservative bond funds. Your financial advisor can help you select the right mix of MFS funds.
5%
60%
71%
MFS® Conservative Allocation Fund
MFS® Lifetime® Income Fund
20%
MFS® Growth Allocation Fund
20%
8%
52% 60%
30%
* Specialty includes investments in commodities, REITs, derivatives or MFS funds that concentrate in such investments.
6%
41%
MFS® Moderate Allocation Fund
KEEP IN MIND that all investments, including mutual funds, carry a certain amount of risk, including the possible loss of the principal amount invested. The principal value of the fund options are not guaranteed at any time. Each 529 investment option invests in a single MFS mutual fund. Performance of the MFS Asset Allocation Funds depends on their underlying MFS funds. These funds may be subject to the volatility of global financial markets (domestic and international) and additional risks associated with investing in high-yield, small-cap, and foreign securities, as well as different fees and expense levels associated with investing in these funds. Asset allocation, diversification, and rebalancing do not guarantee a profit or protect against loss. 7
MFS 529 SAVINGS PLAN ADVANTAGES Tax-advantaged investing, asset control, a wide range of investment options and experienced management help make the MFS 529 Savings Plan the right choice for many families.
Flexibility
Control
• T here is a high contribution limit until the account balance reaches $310,000 and a low initial minimum contribution of $250. There is no minimum for additional contributions. The low minimums make it an affordable way to invest.
• T he account owner retains control over the assets, unlike some other types of accounts typically established for children.
•Y ou may reallocate your contributions and earnings among investment options that invest in MFS mutual funds twice per calendar year or upon a change to the designated beneficiary of the account.
• T he account owner may roll over existing accounts such as UGMA/UTMA accounts into an MFS 529 Savings Plan.
• T he MFS Automatic Exchange Plan enables you to dollar cost average from any MFS fund into any of the MFS 529 Savings Plan investment options.
A wide-reaching global research platform:
Choice Refer to the application for fund selection. • Age-based investment option • Built-in allocation approach •C ustomized approach, including a menu of investment options that invest in MFS mutual funds
88
• T he account owner may choose to change the beneficiary.
Global asset management •M ore than 200 investment management professionals monitoring securities worldwide •R esearch offices in Boston, Hong Kong, London, Mexico City, São Paulo, Singapore, Sydney, Tokyo and Toronto • In-depth analysis of thousands of companies across eight global sectors
SIMPLE TO START Discuss these three steps with your financial advisor: 1. Determine which MFS investment options fit your needs. 2. Review the Participation Agreement and Disclosure Statement and the Expense Supplement. 3. Complete the MFS 529 Savings Plan Account Application.
9
WE BELIEVE IN THE POWER OF ACTIVE MANAGEMENTSM MFS® is a global investment manager committed to skilled active management as the most powerful way to meet investors’ need for strong returns over the long term. We bring you the value of our insights and expertise through: Integrated Research Taking advantage of the depth and reach of our research teams around the world and across equity, fixed income and quantitative disciplines, we uncover investment opportunities and thoroughly analyze our best ideas to develop a full perspective on the securities we select for our portfolios. Global Collaboration We believe good decision making, driven by our ability to work together, share information and actively debate different viewpoints, leads to better investment outcomes for our clients. Active Risk Management To help protect capital and generate alpha, we seek segments where risk is appropriately rewarded, focus on selecting investments with the potential to hold their value through challenging markets and apply systematic risk reviews on multiple levels. Long-Term Conviction Developing our insights, differentiating meaningfully from the benchmark and staying true to our convictions over the long term allows the market time to potentially reward our investment ideas.
The MFS® 529 Savings Plan is a flexible college investing plan sponsored by the state of Oregon, acting by and through the Oregon 529 Savings Board, and is part of the Oregon 529 Savings Network. MFS Fund Distributors, Inc. is the Program Manager. MFS 529 Savings Plan accounts are considered municipal fund securities. Depending on your state of residence and the state of residence of the beneficiary, an investment in the MFS 529 Savings Plan may not afford you or your beneficiary state tax benefits or other benefits only available for investments in such state’s qualified tuition program. See your tax advisor to be sure you understand the tax issues related to a 529 plan. Withdrawals of earnings not used to pay for qualified higher education expenses are subject to an additional 10% federal tax penalty. State taxes may also apply. There is a $25 annual account fee associated with the MFS 529 Savings Plan. This annual fee is waived for Oregon residents and for those accounts with assets of $25,000 or more. Other waivers may apply, check with your financial advisor. Investments in 529 plans involve investment risks. You should consider your financial needs, goals, and risk tolerance prior to investing. Before investing in the MFS 529 Savings Plan, consider the investment objectives, risks, charges, and expenses. For a prospectus or summary prospectus containing this and other information, as well as a Participant Agreement and Disclosure Statement and Expense Supplement, contact your investment professional or view online at mfs.com. Read it carefully. MFS does not provide legal, tax, or accounting advice. Individuals should not use or rely upon the information provided herein without first consulting with their tax or legal professional about their particular circumstances. Any statement contained in this communication (including any attachments) concerning U.S. tax matters was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. This communication was written to support the promotion or marketing of the transaction(5) or matter(s) addressed. MFS Fund Distributors, Inc., Boston, MA529-MFSP-BRO-6/17 16258.16
