529 Plan Series: South Carolina Future Scholar
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.
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Yes! I’m glad your doing this series. Do PA, do PA!
I am in SC too. We do have college funds for both our boys but the older has just received a full scholarship. Hoping the younger one will follow in his footsteps in a few years.
Joe, I love reading your blog. I have learned so much. We actualy have a Coverdell savings plan which is supposed to be similar. We were told it is transferable between family members and can be used for anything related to education, ex. school supplies, and even a car. Does this sound right? Can we expect this same with this plan? Which is better?
What about Georgia 529 college savings plan?
ditto on the PA 529.
Could you report on Virginia 529’s?
Thanks, Glenn Dixon
Joe,
I’m wondering if you chose the SC 529 over an ESA (as Dave Ramsey recommends) for any specific reasons (like tax break, etc.)? Looking at the 10 year performance of the portfolios, I didn’t see stellar performance out of any of them. However, I haven’t looked into the advantages of 539’s versus ESAs – thought you might have some insight.
Thanks!