Frequently Asked Questions
General
Q: What do I need to get started?
A: In order to establish a State Farm Mutual Funds® account, complete an application with your registered State Farm agent or contact a Securities Products Representative to request a new account packet. You may also download a new account packet from our Forms Library or use our Request Materials feature to have one sent to you. The minimum initial investment for State Farm Mutual Funds is $250 with a $50 minimum for subsequent investments. If you wish to begin an Automatic Investment Plan (AIP), the minimum amount required for both initial and subsequent investments is $50.
For a State Farm College Savings Plan account, the minimum initial investment for each portfolio is $500 and subsequent investments of $50 or more. If you choose to make automatic monthly investments, you need only $50 to open the account, followed by $25 automatic monthly contributions.
Q: What can I do to ease my concerns over the recent price fluctuations of the stock markets?
A: Recently the stock markets have gone through a period of large price swings, perhaps causing some concern among investors. During a volatile market period, it is important to review and remain focused on your long-term investment goals. This is not the first time the markets have gone through a volatile period, and it will not be the last. By working with your registered State Farm agent, you can understand the benefits of investing for the long-term, diversifying your portfolio, and the value of making regular investments over a long period of time. Although such an investment program cannot ensure a profit, it can ease the uncertainty created by changes in the markets.
It is important to note that diversification does not assure a profit or protect against loss in a declining market.
Q: Can I open a State Farm Mutual Fund account without the assistance of an agent?
A: Yes. However, every account opened with State Farm Mutual Funds must have a registered State Farm agent associated with it. If you open your account without the assistance of a registered State Farm agent, an agent in your local area will be assigned to your account.
Q: Why buy a mutual fund?
A: Mutual funds offer you a diversified investment vehicle without requiring a great deal of money. An investment in State Farm Mutual Funds may be started for as little as $250 initially or for $50 in conjunction with an automatic investment plan. Your investment and those of other investors with similar objectives are pooled together to purchase securities.
A professional manager will closely monitor the securities held within a fund portfolio to determine if they are meeting the objective of that fund. Managers will buy and sell securities in an effort to get the best return for investors while maintaining that objective. There is usually a fee charged by fund companies for the manager's services. Those fees are normally a fraction of what it would cost you to make stock or bond purchases independently. See the prospectus for complete information regarding fees
Your investment in a mutual fund is also liquid. In other words, you are able to sell your shares on any business day. The value of your shares is determined by the Net Asset Value of the fund as determined at the close of business on the day you wish to redeem shares. It is important to note that there is market risk involved when investing in mutual funds, including possible loss of principal.
Investment return and principal value will fluctuate and your investment, when redeemed, may be worth more or less than its original cost.
Q: Can I invest periodically throughout the year?
A: Yes. An easy way to do this is through an Automatic Investment Plan. By doing so, you will be taking advantage of an investment strategy known as dollar-cost averaging*. This strategy can help reduce your average cost basis. For example, assume you invest $500 quarterly and you purchase an investment which initially sells for $2.50 per share. You purchase 200 shares. If the price falls to $2.00 per share when you make your next investment, your next $500 purchase would buy 250 shares. If the price returns to $2.50 when you make your next investment, you will buy 200 additional shares. At the end of three quarters you would own 650 shares after investing $1,500. Your average cost per share would be $2.31, less than the fund's most recent market price ($2.50).
*Dollar-cost averaging neither guarantees a profit nor protects against loss in declining markets. Such a plan involves continuous investment in securities regardless of fluctuating price levels of such securities. Investors should consider their financial ability to continue purchases through periods of low price levels.
Q: How do I select a mutual fund that's right for me?
A: First, determine your investment goal. Next, establish the amount of risk you are willing to assume to achieve this objective. A registered State Farm agent can provide you with a Risk Tolerance Tool to help you in determining your tolerance to risk. From there, identify funds whose investment objective is in line with yours and whose investment strategy appears suited to your risk tolerance level. Your registered State Farm agent will work with you to determine the funds that are right for you.
Q: How do I determine the number of funds that I should own?
A: Some individuals would be well-served by investing in two or three mutual funds, while others with more complex needs may find five or six funds appropriate. The number of funds to own is a personal financial decision requiring a careful analysis of your specific needs and long-range investment plans. Your registered State Farm agent can be a valuable resource in helping you explore this objective.
Q: Is there risk in owning too many funds?
A: Yes, there is. While diversification is necessary in helping you protect your assets from undue risk and exposing your portfolio to a large number of investments, over-diversification can water down your investment results. And that can hinder your progress in achieving your goals. As a result, you need to strike a delicate balance between returns and risk with a select number of quality funds most appropriate for your personal financial needs. Again, your registered State Farm agent can provide important guidance and support in helping you explore this objective.
Q: What else should I keep in mind after purchasing my funds?
A: Realize that investing is not a one-time affair. As your needs and goals change over time, you may want to shift assets from one type of fund to another. For example, when you have many years to reach retirement, you may want to invest most of your assets in stock funds because you have time to ride out the market's ups and downs. But when you come within 10 years of your golden years, you might want to invest a higher percentage of your assets in bond funds. An annual meeting with your registered State Farm agent is an excellent opportunity to keep your investments in line with your goals.
Q: What is the difference between Class A and Class B shares?
A: The class of shares you purchase is an important decision based on your own preference. Do you want to pay a sales charge, or 'load,' up front or when your shares are redeemed? With Class A shares, a sales load of up to 5 percent will be added to the initial purchase price. Class B shares are subject to a contingent deferred sales charge, or 'back-end load,' that applies when you redeem your shares.
Some investors prefer to pay the sales charge when the initial purchase takes place and then pay lower 12b-1 fees over time. 12b-1 fees are asset based sales charges used to pay marketing and distribution costs. Others may purchase Class B shares with higher 12b-1 fees in order to have a higher percentage of their investment go to work on day one. We developed our cost structures with the intention of neutralizing as much as possible the difference in the overall costs between Class A and B shares over time. However, because the sales load applied to Class A shares is reduced based on the amount invested, neutralization may not always occur.
The contingent deferred sales charge will be reduced during the period Class B shares are held. Class B shares held for seven years or longer will not be subject to the contingent deferred sales charge and will convert to Class A shares after eight years. No sales charge is applied when this conversion takes place.
No sales load is applied to reinvested dividends or distributions and Class A shares of the State Farm Money Market Fund are not subject to an up-front load. Exchanges from the State Farm Money Market Fund to any of the other State Farm Mutual Funds will be subject to an up-front load.
Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of an investment at $1.00 per share, it is possible to lose money by investing in a money market fund.
Q: What is the difference between Class A, Class B, Legacy Class A and Legacy Class B shares?
A: Grandfathered shareholders may purchase Legacy Class A and Legacy Class B shares whereas shareholders who are not grandfathered may purchase Class A or Class B shares.
You are a grandfathered shareholder if you satisfy one or more the following criteria:
- Your account holding Legacy Class A or Legacy Class B shares was established before May 1, 2006.
- Your account holding Legacy Class A or Legacy Class B shares is established after April 30, 2006, as a result of the death or divorce of one or more individual shareholders who had a grandfathered account.
- Your account holding Legacy Class A or Legacy Class B shares is established after April 30, 2006, as a result of a conversion or re-characterization of a grandfathered IRA account.
- You are a trust that obtained Legacy Class A or Legacy Class B shares from another grandfathered account.
Q: Are there any costs or penalties for withdrawing funds?
A: There are no charges for redeeming Class A shares. If you redeem Class B fund shares, you may be assessed a contingent deferred sales charge based on the length of time you have held the shares. Shares held for seven years or longer will not be subject to the contingent deferred sales charge. Any time shares are redeemed, you may be taxed on any realized gains associated with those shares.
Funds that are held in Traditional or Roth IRAs may be subject to a 10% penalty if you make a withdrawal prior to reaching 59 1/2 years of age. Traditional IRA withdrawals may be made prior to age 59 1/2 without penalty if certain criteria are met. If you have funds in a Roth IRA, you may take certain qualified distributions without a penalty but will be taxed on earnings if the money has not been in the account for five tax years. There is no penalty for withdrawals from a Coverdell Education Savings Account if the money is used for qualified education expenses.
A tax advisor should be consulted for more in depth information concerning the taxation and penalties associated with redeeming mutual fund shares.
Retirement
Q: What is the annual deadline for contributing to my Traditional or Roth IRA?
A: You can make annual contributions to a Traditional or Roth IRA from January 1st through the tax-filing deadline (excluding extensions) for the contribution year, generally April 15. For example, year 2007 contributions can be made from January 1, 2007 through April 15, 2008.
Q: I have not saved much for retirement. Do I still have the opportunity to retire comfortably?
A: If you can be disciplined about investing for retirement, you will have the opportunity to accumulate money over time and be better prepared for your retirement years. Develop a mindset of paying yourself in addition to paying your bills. By doing so, you should have a steady flow of money going to work for you.
Q: How do I change my IRA beneficiary?
A: Choosing an IRA beneficiary is an important part of your estate and investment planning. But sometimes there can be events that result in a need to change that decision. If you have recently had a change in your life that would affect your choice of IRA beneficiary, you can make a change by completing a Designation of Beneficiary (PDF 29 KB) Form.
Without a beneficiary, the assets you have accumulated in your State Farm IRA will generally pass to your estate upon your death. The assets could then be subject to the potential delays and expenses associated with settling an estate.
Choose your beneficiary carefully. Contact your Registered State Farm Agent if you need assistance in selecting a beneficiary or have any questions regarding your investment options.
Rollovers
Q: What's the difference between a transfer & a rollover?
A: A transfer is a movement of funds between like-type plans (IRA to IRA, SEP to SEP, Roth to Roth). A rollover is a movement of funds from a qualified retirement plan/IRA to an IRA or qualified plan.
Q: What is distribution paperwork?
A: Distribution paperwork is the paperwork of a custodian or plan administrator that must be submitted to initiate a rollover to State Farm. The paperwork may be referred to as a distribution election form, direct rollover form, or distribution authorization form. The paperwork may be part of a termination packet received by a participant who is eligible to receive a distribution from a plan.
Q: Why do I need to call the Custodian in the case of a direct rollover?
A: Most custodians require the participant to call to request distribution paperwork. Some custodians may process rollover requests through internet forms or phone calls.
Q: Should I send the paperwork to State Farm or Custodian directly?
A: It would be best to send originals to the custodian and a copy to State Farm. If originals are sent to State Farm, we will forward them to the Custodian.
Q: Can I put both transfer/rollovers on the same form?
A: As a rule, direct rollovers require distribution paperwork from the surrendering custodian or plan administrator. The IRA/TSA Transfer Request form (PDF 352 KB) is used only for transfers (like-to-like plans).
LifePath Funds
Q: What is the number at the end of each LifePath Fund?
A: The number -- as in LifePath 2010 -- represents the approximate year when an investor expects to start withdrawing money. As this year gets closer, the investment managers at Barclays gradually adjust the portfolio's mix to try and maximize the return while taking into account the level of risk appropriate for the remaining time horizon.
Q: How do LifePath Funds change over time?
A: Follow each LifePath Fund -- over time the investment mix will change and eventually merge with the LifePath Income Fund as shown in this graphic.
Q: What happens when I hit my target year (e.g. 2040)?
A: When LifePath reaches its target year, it merges with the LifePath Income Fund. LifePath Income Fund is managed for investors seeking a conservative portfolio with long-term growth of capital.
Q: How much should I invest in LifePath?
A: Because each portfolio is broadly diversified, you can invest your assets in a LifePath Fund and feel confident that you are invested in the three broadest asset classes that can help you to be a successful investor.
LifePath can also be used as an investment core. Investors can put the majority of their contribution in a LifePath Fund and then invest the remaining portion of their contribution in other assets. In this way, they have professionals manage part of their assets while they manage the rest.
Q: Who manages LifePath Funds?
A: State Farm Investment Management Corp. is the investment advisor to the State Farm LifePath Funds. Each State Farm LifePath Fund invests all of its assets in a separate mutual fund called a LifePath Master Portfolio that has a substantially identical investment objective as the corresponding State Farm LifePath Fund. The LifePath Master Portfolios are managed by a team of investment professionals at Barclays Global Fund Advisors. This dedicated team of professionals has the skill, experience and focus to address the daily investment challenges of managing an investment portfolio.
State Farm VP Management Corp. (SFVPMC) is the distributor of the State Farm LifePath Funds. Barclays Global Fund Advisors (BGFA) is the investment advisor to the LifePath Master Portfolios. Neither SFIMC or SFVPMC, or their affiliates, are affiliated with BGFA or its affiliates.
Q: Can I get out of the LifePath Funds at any time?
A: Yes, you can move in and out of the LifePath Funds at any time. The number on each fund represents the approximate target year when you are planning to begin withdrawing your money.
LifePath® is a registered trademark of Barclays Global Investors, N.A.
The State Farm College Savings Plan is available by registered representatives of State Farm VP Management Corp., One State Farm Plaza, Bloomington, IL 61710, 1-800-447-4930. Please read carefully the Enrollment Handbook and Participation Agreement and consider the investment objectives, risks, fees and expenses and other information associated with The State Farm College Savings Plan before investing or sending money. State and local tax laws vary. If you or the designated beneficiary are not Nebraska residents, you should consider before investing whether you or the designated beneficiary's home state offers any state tax or other benefits to its residents for investing in the plan offered by the state.
The State Farm College Savings Plan (the "plan") is sponsored by the State of Nebraska and administered by the Nebraska State Treasurer. The plan is established in cooperation with State Farm VP Management Corp. ("State Farm"), A I M Distributors, Inc. and the State of Nebraska, pursuant to which State Farm offers classes of shares in a series of accounts within the Nebraska Educational Savings Plan Trust (the "Trust" and plan issuer) that are managed and distributed by A I M Capital Management, Inc. ("AIM") and its affiliates. The Trust offers other accounts that are not affiliated with the plan.
The Nebraska State Treasurer serves as trustee of the plan; A I M Capital Management, Inc. serves as the investment manager, with the oversight of the Nebraska Investment Council; A I M Distributors, Inc. serves as the distributor; and AIM Investment Services, Inc. serves as the servicing agent, Union Bank & Trust Company serves as the program manager.
State Farm does not provide investment management services for the plan and the accounts in the plan are not insured or guaranteed by State Farm, AIM, Union Bank and Trust Company, the Trust, the State of Nebraska, the Nebraska State Treasurer, the Nebraska Investment Council, any of their respective affiliates, directors, officers or agents, or any other entity.
State Farm and AIM are not affiliates. A I M Distributors Inc. is the distributor of the plan.
The information presented in this document does not constitute tax advice. State and local tax laws vary. Additionally, your home state may only offer favorable tax treatment for investing in a plan that your state offers. Please consult your tax advisor for specific information about your tax situation, including any state tax consequences of an investment.
Investment return and principal value will fluctuate and your investment, when redeemed, may be worth more or less than its original cost.
 
State Farm VP Management Corp Risk/Important Disclosures. State Farm Mutual Funds Prospectus. The State Farm College Savings Plan Enrollment Handbook
(PDF 417 KB)
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State Farm Agents do not provide tax, legal or investment advice.
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