College is Expensive. Make Sure You Have a Plan in Place.

College student studying.

SouthState Investment Services Logo

Are you aware of the different options available to you when saving for your children’s (or grandchildren’s) college costs? Here is a glimpse at each option.

The hallmarks of an ideal college savings plan would include limitless contributions, important tax benefits, minimal impact on financial aid, and flexibility in choosing a college. No one savings plan is perfect, but some come closer than others.

A 529 plan provides many potential benefits.

Couples can contribute up to $30,000 a year without triggering the gift tax. You can contribute more if you use some of your lifetime gift tax exemption. Your money has tax deferred growth potential, and withdrawals for qualified higher education expenses are both tax-free and not reported on the Free Application for Federal Student Aid (FAFSA®). Other withdrawals are subject to taxes and penalties, and investment strategies may be limited. You can choose a 529 plan that you can use to pay for colleges in all 50 states. There are no income limits for 529 contributions*.

A Roth IRA is a flexible alternative.

Contributions grow tax-free, and you can withdraw them tax-free at any time. Earnings grow tax deferred, and withdrawals are tax-free if you follow the rules. You avoid penalties on early earnings withdrawals when used for qualified education expenses. You can set up a Roth IRA (Individual Retirement Account) for maximum investment variety, and the account’s value isn’t included on the FAFSA (although withdrawals count as base-year income). However, annual contributions are limited to $6,000 ($7,000 if the account owner is 50 or older), and contributions by high-income earners are limited.

Consider UGMA and UTMA accounts.

There are no income limits for contributions to Uniform Gifts to Minors Act and Uniform Transfers to Minors Act accounts. These accounts let you put aside up to $15,000 ($30,000 for couples) in a child’s name, free of the gift tax. However, you can put aside more by using some of your lifetime gift tax exemption. A child’s interest, dividend, and capital gain (IDCG) income exceeding $2,100 may be subject to tax. If a dependent child’s only income is IDCG and it’s less than $10,500, you can choose to report the income on your tax return.

Qualified U.S. Savings Bonds are safe.

You can invest up to $10,000 a year, per owner per bond type in these government-backed bonds. You can redeem them free of federal taxes when used for qualified higher-education expenses. The bonds earn a modest amount of interest, but the interest exclusion phases out for higher-income bond owners. The FAFSA counts savings bonds as assets of the bond owner.

There are even more options.

For example, you can set up trust accounts and/or invest in mutual funds/exchange-traded funds. These have their pros and cons as well.

For advice and guidance on retirement, income, investments and more, reach out to your local Financial Consultant or call (800) 382-0564.

  • 529 Plans
  • Build Your Wealth
  • College Savings
  • Goal-Based Planning
  • Start Investing

  • Broker
    *Please consult your tax-advisor for tax related issues.
    **Products and services offered through LPL Financial.

    Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC.). Insurance products are offered through LPL or its licensed affiliates. South State Bank, N.A. and South State Investment Services are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using South State Investment Services and may also be employees of South State Bank, N.A. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, South State Bank, N.A. or South State Investment Services. Securities and insurance offered through LPL or its affiliates are:

    Not Insured by FDIC or Any Other Government Agency Not Bank Guaranteed Not Bank Deposits or Obligations May Lose Value

    The services offered within this investment site are available exclusively through our U.S. registered representatives and are available for U.S. residents only. LPL Financial U.S. registered representatives may only conduct business with residents of the states for which they are properly registered. Please note that not all of the investments and services mentioned are available in every state.

Secure Log In

Close mobile menu
Login Error

Your username is valid but has a problem. Please call customer support

Our website uses cookies to ensure your online experience is as informative and relevant as possible. Please review our Privacy Policy to learn more about the information we collect.