Welcome to another series on JoeSangl.com – 529 Plans.
In this series, I will be reviewing 529 college saving plans offered by different states.
It might be helpful to first review what a 529 plan is. A 529 plan is a tax-advantaged college savings plan that is named for the section of tax code that outlines how they may operate – Section 529.
Today's 529 Plan is South Carolina's plan – Future Scholar.
The South Carolina Future Scholar 529 College Savings Plan is managed by Columbia Management (a division of Bank of America).
What I Like About The Future Scholar Plan
- Columbia Management. I like some of the funds that are offered by Columbia Management.
- Tax Deduction. Although there are some restrictions, most South Carolina residents can deduct their Future Scholar contributions from their SC state tax return!
- Self-Directed Option. Through the "Direct Program" SC residents can manage their own investments, and if one chooses to do so the "load" (sales charge) is $0! If one chooses to invest in the Future Scholar plan with the help of an advisor, there will be a sales charge of around 5%. The sales charge should not deter someone from investing for college however! If you are really intimidated by investing and mutual funds, it would be worth the sales charge to ensure you are getting good advice!
- Learning Center. The Future Scholar plan offers a great site to help one understand and plan for education costs. It is located HERE.
- Investment Options. The Future Scholar plan offers three investment options.
- Automatic Allocation Choice – This option allows one to "set it and forget it" in regard to adjusting the portfolio. It is really aggressive when the beneficiary is very young and moves steadily to become more stable as the child approaches college time.
- Asset Allocation Choice – This option allows one to make a more specific decision on how one's investments are allocated. This requires a more hands-on approach if one wants to adjust the portfolio.
- Single Fund Portfolio – This option allows one to invest in specific mutual funds offered via Columbia Funds.
What I Would Like To See Improved
- Expense Ratios. I would love to see the expense ratio of the funds reduced. The average expense ratio is around 1.40% to 1.50%. This is an every year fee and erodes the growth of the investment.
My daughter's college savings is in the SC 529 Future Scholar plan. The tax benefit was the final straw for me to move the investment from another state's plan to the SC plan.