Posted July 27, 2016
Saving for College
With summer quickly coming to an end, many of us are gearing up to send our favorite students off to college this fall.
Ready to save? Read on…
What is a 529 Plan?
A 529 Plan, made available in 1996, is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs.
Plans are usually categorized as either Prepaid or Savings plans. Educational institutions can offer a 529 prepaid plan but not a 529 savings plan (the Private College 529 Plan is the only institution-sponsored 529 plan thus far).
These plans work much like a 401K or IRA by investing your contributions in mutual funds or similar investments. The plan offers several investment options and your account’s value will rise or fall on depending upon the performance of your selection.
Pre-pay all or part of the costs of an in-state public college education with a prepaid plan. These plans may also be converted for use at private and out-of-state colleges. The Private College 529 Plan is a separate prepaid plan for private colleges.
Which states offer 529 plans?
Plans can be used to meet costs of qualified colleges nationwide and, in most plans, your choice of school is not affected by the state your savings plan is from. You can be a SC resident, invest in a CT 529 plan and send your student to college in NY.
What are the Tax Benefits?
As long as the plan satisfies a few basic requirements, the federal tax law provides special tax benefits to you, the plan participant. See the top 7 benefits of 529 plans and know that some states offer tax incentives to investors as well — research your state’s tax treatment online.
South Carolina provides an unlimited deduction for contributions made to the SC Future Scholars 529 Plan, so if you live and/or work in South Carolina you could be eligible for an immediate 7% return on your investment. South Carolina also allows the deduction for transfers into the plan from other 529 Plans.
Last Minute? No Worries
You can put the money in the SC Future Scholars 529 plan and take it out in a few weeks and still get the income tax deduction — perfect for parents paying for college that want the deduction but haven’t already contributed to a 529 Plan.
You can invest in a SC Future Scholars 529 plan via a 529 Plan Manager or through a Financial Advisor. Connect with us today to learn more about how we can help guide you through this process!