South Carolina sponsors two 529 college savings plans: a direct-sold option and an advisor-sold option. Both allow South Carolina families to contribute up to $500,000 per beneficiary and deduct 100% of their contributions on their state tax returns, making the Palmetto State one of the most generous in the country. Additionally, the direct option has some of the lowest fees we’ve seen. On the negative side, though, both plans offer investment menus that are not as vast as those in other states’ plans. If you decide to go the advisor-sold-plan route, use our free matching tool to find a fiduciary financial advisor in your area.
|Plan Name||Program Type||How to Enroll||Fees|
|Future Scholar: South Carolina 529 College Savings Plan Read Review||College Savings Plan||Direct-Sold||0.06% to 0.20%|
|Future Scholar Advisor Plan Read Review||College Savings Plan||Advisor-Sold||0.61% to 1.26%|
Future Scholar: South Carolina 529 College Savings Plan
South Carolina's 529 college savings plan is called Future Scholar. Any U.S. citizen or legal resident can open an account and over the lifetime of the account contribute up to $500,000 per beneficiary—a high level compared to plans sponsored by other states. South Carolina families can also deduct up to $500,000 from their state taxable income, which is substantial compared to other states. The plan offers a variety of investment options, but you don’t have to be an experienced investor to open one. Your options include age-based portfolios, which automatically change their asset allocation, or the mix of stocks, bonds and other securities invested, in order to become less risky as your child gets closer to college age.
How Do I Enroll in South Carolina’s 529 Plan?
You can open an account with the Future Scholar 529 Direct Plan online or you can request that an enrollment kit be mailed to you. You’ll need the following information for yourself and your beneficiary: name, address, Social Security number, date of birth and bank account and routing number if making an initial payment electronically.
And unlike several 529 plans sponsored by other states, you don’t need a minimum contribution to open an account. You decide how much you want to start with.
How Much Does South Carolina’s 529 Plan Cost?
With the exception of the FDIC-insured Bank Deposit account, each investment portfolio charges a total annual asset-based fee that is factored out of your balance. The total fee currently ranges from 0.06% to 0.20%, which makes Future Scholar Direct among the most fee-friendly we’ve seen across the country.
Tax Benefits of 529 College Savings Plans
South Carolina taxpayers can deduct 100% of their contributions on their state tax returns. Since contributions can add up to $500,000 per beneficiary, that's a high threshold. Only three other states allow for 100% of contributions to be claimed: New Mexico, Virginia and West Virginia. Most states cap the deduction.
At the federal level, there is no tax deduction, but savings grow tax exempt. This means Uncle Sam won’t touch the money you earn in the market as long as it’s invested, and you can take advantage of compound interest. You’re also free from taxation when you take the money out if you use the funds to pay for 529 plan qualified expenses such as tuition.
Since Trump's tax cuts of 2017, you can also withdraw up to $10,000 tax free each year to pay for K-12 tuition at private, public and religious schools. Additionally, the recently passed SECURE Act expanded the definition of qualified educational expenses. It now includes expenses for apprenticeship programs. You can also take out up to $10,000 tax free to pay for student loans (this is a lifetime total amount).
However, you may face some tax-related pitfalls when you don’t use your 529 plan as intended. When you take money out of the plan to fund anything that’s not a qualified higher education expense, you’ve made a nonqualified withdrawal. It may be subject to federal income tax at your rate and a 10% penalty. You may also have to pay back previously claimed state income tax deductions.
In a few situations, you can get the penalty waived. Speak to a financial advisor or tax professional to learn how a nonqualified withdrawal may impact you based on your unique situation.
What Are My Investment Options?
The Future Scholar 529 Direct Plan offers a variety of investment portfolios with underlying mutual funds that leading investment firms manage. Those who are new to investing and want a hands-off approach to the college savings process may be interested in opening an account with an age-based portfolio. These options change their asset allocation over time. The general objective is for the portfolio to become more conservative automatically as your child gets closer to college age by investing less in traditionally riskier options like stock funds and more in generally safer investments like bond and money market funds.
These age-based portfolios run on three risk-level tracks: conservative, moderate and aggressive. So if you have a high risk tolerance, you may choose the aggressive option. This portfolio would invest a significant portion of your contributions in stocks and shift to safer funds less than other tracks as your child approaches college age.
If you’re not sure what your risk tolerance is, you can use our asset allocation calculator to get a sense of what mix of investments would be in your comfort zone. You can then use that information to explore the plan’s target portfolios. Each invests in a variety of securities based on a specific risk level that ranges from conservative to aggressive. In addition, you can also invest in one or more individual portfolios. Each of these options invests in a single underlying fund.
If your risk tolerance is low or you’ve been saving for a while and want to protect what you’ve earned, you may be interested in the FDIC-insured Branch Banking and Trust (BB&T) interest bearing account.
Additionally, unlike plans that other states sponsor, the South Carolina Direct Plan offers a portfolio that invests entirely in one exchange-traded fund (ETF). ETFs typically have lower fees than mutual funds.
How Do I Withdraw Money from the Future Scholar 529 Plan?
You can request a 529 plan withdrawal by logging on to your account. There, you'll have the option to make payments to yourself, your beneficiary or directly to the student's eligible educational institution. Payments can be via check, wire transfer or ACH direct deposit. Fees may apply to wire transfers.
Future Scholar Advisor Plan
The advisor-sold version of South Carolina’s 529 college savings plan offers slightly more investment options but with higher overall fees. However, this option provides professional guidance from a qualified financial advisor. This individual can work with you to tailor an investment portfolio and a college savings road map designed for your unique financial circumstances and goals.
How Do I Enroll in the Future Scholar 529 College Savings Plan Advisor Program?
You can enroll in the program through a financial advisor, who would navigate you through the enrollment and investment selection process. The individual would then help build a long-term, personalized college savings strategy.
How Much Does the South Carolina Advisor 529 Plan Cost?
Each portfolio in the plan with the exception of the FDIC-insured option, carries a total annual asset-based fee which factors in fees for program management, state administration and marketing. This total fee currently ranges from 0.61% to 1.26%, depending on the portfolio and share class or pricing alternative as it’s called in this plan. You can choose from the available share classes for any portfolio. For example, you can invest in an aggressive growth static portfolio for share Class A. Or you can pick the same for share Class C. The fees will vary for each, even though you’re investing in the same exact portfolio.
As an advisor-sold 529 plan, the Future Scholar advisor program may charge additional fees not usually found in direct-sold plans. These fees are to compensate the advisor and other intermediaries involved with managing the plan. They may include initial sales charges and contingent deferred sales charges, which can vary based on your choice of portfolio and share class.
Sales charges typically go to the advisor. An initial sales charge is taken from each contribution, and a deferred sales charge typically kicks in when you withdraw money from the plan within a certain time period after making a contribution. The amount of these sales charges and when you’d be charged depends on the share class you chose for your portfolio.
Below are some details about how fees break down based on different share classes.
- Maximum Initial Sales Charge (Pricing Alternative A, AG, AX): 3.75%
- Maximum Deferred Sales Charge: (Pricing Alternative C): 1.00%
- Pricing Alternative E and I: No Sales Charges
If you're not sure which investment option and corresponding share class to choose, the best thing to do is to speak with your financial advisor. You should also discuss all fees involved— especially advisor fees. Some of these can be reduced or waived based in certain circumstances. For example, initial sales charges —which are taken from contributions—decrease as your balance increases.
Tax Benefits of South Carolina’s Advisor 529 Plan
When you invest in the Future Scholar Advisor Plan, you get the same tax benefits you do under the direct-sold option. This means your contributions will grow tax-exempt as long as they’re invested. Also, your withdrawals will be tax-free as long as you use them on qualified higher education expenses.
A professional advisor would be able to help you make the most out the many tax perks that all 529 College Savings plans have to offer such as estate-tax benefits. In addition, 529 plans offer several ways to give money to students and avoid gift tax.
Your advisor can also help you weigh the pros and cons of any nonqualified withdrawal, should the need for one arise. Though it’s always best to avoid one, of course.
What Are My Investment Options?
The Future Scholar Advisor Plan offers the same types of portfolio options as its direct-sold counterpart. You can invest in an age-based portfolio that adheres to your risk level. You can also invest in risk-based target portfolios and individual portfolios including one FDIC-insured option.
Additionally, the advisor-sold plan offers a few more portfolio options that are slightly more diversified. For the most part, however, both plans share similar types of portfolios with similar asset-allocations and goals. Underlying funds could vary across portfolios. You should examine all investment options carefully with your advisor to determine which portfolio option or options are best for you based on your unique circumstances.
How Do I Withdraw Money from the South Carolina Advisor 529 Plan ?
You can request a withdrawal by logging on to your account or by calling the plan directly. You can direct payments to yourself or the educational institution where your beneficiary is enrolled. However, you have to download and mail in a withdrawal request form and mail it in if you want the withdrawal sent to your beneficiary. You can also contact your financial advisor.
If you’re not sure where even to begin looking for an advisor, use our SmartAsset Advisor matching tool. After you some questions, we'll direct you to up to three financial advisors knowledgable about 529 plans.
Check Out Other 529 Plans
You do not have to live in South Carolina to invest in its 529 plan. Take a look at these other states' 529 plans.
|New York 529 Plans||Pennsylvania 529 Plans||Ohio 529 Plans||Iowa 529 Plans|
|California 529 Plans||North Carolina 529 Plans||Colorado 529 Plans||Nevada 529 Plans|