Author Topic: GET 529 Washington State - Opinions/Experiences?  (Read 2262 times)

JustTrying

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GET 529 Washington State - Opinions/Experiences?
« on: January 18, 2016, 11:08:22 PM »
I live in WA State, and have a baby due this year. I decided to look into 529 plans tonight. It was my first time learning about the GET (Guaranteed Education Tuition) program. I have to admit, I was thrown for a loop. I think I imagined 529 programs would be similar to 401Ks - I thought I'd get to invest money, choose how to make it grow, and then give it to my kid for tuition when they're ready for college. I was not expecting the program to work the way it does (in which you are guaranteed to have enough money for a year of tuition if you pay the current cost for tuition at this time). The program is frozen right now as they anticipate that costs will fall secondary to the College Affordability Program. But the fact is that with the College Affordability Program, it seems that GET may not be a particularly effective way to save for college.

I'm wondering if any other WA parents have an opinion (pro or con) on the GET program?
If you've chosen not to do the GET 529 program to save for your child's college (but have chosen to save for their college) how are you saving instead?

Thanks!

Sonos

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Re: GET 529 Washington State - Opinions/Experiences?
« Reply #1 on: January 19, 2016, 12:33:44 AM »
Posting to follow.

Also, I've heard some people just put money in a brokerage account to save for kids' college (that way, if/how  you spend the money is much more flexible). Anyone out there choose that route?

Doubleh

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Re: GET 529 Washington State - Opinions/Experiences?
« Reply #2 on: January 19, 2016, 12:51:59 AM »
My wife is originally from WA but we now live in the uk. Investing for our daughter gets in the uk is hard since she is a US citizen so subject to fatca (at 2 years old!) so we decided to go for a 529. We didn't look at GET since there is a good chance she wouldn't go to college in WA but a 529 can be spent on tuition at most universities in the uk or many other countries.

Since WA has no state income tax you can use any state's plan you like, when we researched most recommendations pointed to Utah as a simple low cost option with a good range of vanguard funds so this is what we went with

sol

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Re: GET 529 Washington State - Opinions/Experiences?
« Reply #3 on: January 19, 2016, 09:22:00 AM »
We didn't look at GET since there is a good chance she wouldn't go to college in WA but a 529 can be spent on tuition at most universities

The GET program credits can be used at any accredited university, not just the ones in Washington.  They pay out a cash value based on the highest tuition prices in the state of Washington, but whether you use that value in Washington or elsewhere doesn't matter at all.

But the price to buy credits for the last few years has been too high.  Each credit is worth 1% of a year's tuition, and last year each credit was worth $117 but you had to pay $172 for it, on the assumption that college tuition would be higher in the future than it is today.  Then tuition went down instead and everyone had a freak out. 

I'm wondering if any other WA parents have an opinion (pro or con) on the GET program?
If you've chosen not to do the GET 529 program to save for your child's college (but have chosen to save for their college) how are you saving instead?

Historical UW tuition rates were growing at 8.6% per year, making the GET program look like a better investment than the stock market and suggesting that you had to wait at least five years between buying the credits and using the credits in order to break even (on the $172-$117 differential).  But as Seattlecyclone has pointed out elsewhere on this forum, investing those funds in the stock market instead would have given you the full $172 value on day one, subject to future market fluctuations, instead of the $117 with a "guaranteed" growth rate pinned to tuition increases.  Buying one GET credit means locking in $55 of losses today and then hoping for future growth to make up the difference.

Now that tuition has declined, this program makes even less sense.  So they're offering tax free and penalty free refunds to anyone who owns credits, which pay out at either the current value of $117 or whatever you paid for them, whichever is higher.  That means any old credits you purchased for less than $117 have their past gains locked in up to current payout value, and any recent credits you purchased for more than $117 get straight up refunded, for zero growth since you bought them.

We are keeping all of our old (<$117) GET credits invested, mostly as a hedge against rising future college costs.   We are withdrawing all of our recently purchased (>$117) GET credits and putting them into another state's 529 plan.  In our case, Nevada's 529 plan administered by Vanguard.  If you live in a state with no income tax to benefit from a 529 plan anyway (like Washington), the 529 looks a lot like an educational Roth IRA; you put in after tax dollars which then grow tax free and come out tax free iff used for a qualified educational expense.  I have no idea, OP, if you get a foreign income tax break.

By the time our youngest kid starts college, we'll also have access to our 401k and other age-restricted retirement funds, so part of her college savings could come from there if we weren't already maxing out those accounts.  The 529 is just an additional tax shelter, though, so we use it.

catccc

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Re: GET 529 Washington State - Opinions/Experiences?
« Reply #4 on: January 19, 2016, 11:00:27 AM »
Nevada and NY have the lowest cost 529s.  I went with NY and can't remember why anymore.  I am lucky that my state allows a deduction for 529 contributions to any state's 529.  (I am unlucky that my state disallows deductions for contributions to 401Ks and other retirement plans.)

JustTrying

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Re: GET 529 Washington State - Opinions/Experiences?
« Reply #5 on: January 19, 2016, 06:37:52 PM »
Thanks for all your thoughts, particularly Sol!

I didn't realize that I could purchase 529 plans from other states! I will definitely look into that.