Thursday, November 5, 2015

Switching the boys college accounts

When we were in Washington, it made sense to have the boys college money parked in the Washington GET program, which is a guaranteed tuition plan. However, that particular plan has had some challenges recently due to a college affordability act. Basically, the Washington plan never accounted for tuition going down. Given that it has, many of the accounts are underwater & customers are requesting refunds.

We are in a slightly unique situation, as we heavily prebought credits when the boys were infants. Tuition credit at that time was around $70, if I remember correctly. We also have bought credits as high as $170, but the majority was purchased at the initial threshhold. Current tuition credit stands at $117 per unit.

Washington is extending the offer for anyone to remove their entire account without fees or penalties for the next few months. I'm investigating the tax implications of this, although we plan to immediately move the money into the Utah 529 plan. All told, I expect to receive around $45K. Our investment was $22.5K. So, we've made money, but may have done better in another plan. Either way, I'm not comfortable with the current challenges in the Washington based plan, and prefer to move to an investment based account.

I do have a call out to the accountant to ensure I understand potential tax liability. All of this has reminded me that we need to put a revised plan in place around college savings. Somehow, the boys are halfway there, & we need to accelerate our investments. Time isn't on our side as it was in the infant days! The estimators I've seen show that we should have $60K/per kid by the time they are ten. We obviously are very short of that.

So, more to come, and a robust plan is needed on our side. How have you saved for your kids colleges, if that's an option you are pursuing? College planning is definitely on our radar for 2016 goals, especially in light of my revised career plans. We also plan to work with the kids to do some savings of their own. :-) 

5 comments:

  1. Hubs got an annual Bonus in his job so since 2000, 9 years before our oldest went to college, we put that whole amount away for college every single year until 2013.

    I don't envy you having to fund for college for younger kids now. I am so glad we are almost done with this phase of our lives. Since 2009(the first year we had a kid in college)the costs at a state school in PA have risen at least (some years it was more). What we put away just hasn't kept up with inflation so we had to add more to it for the last one.

    By the time your boys are ready to attend the face and form of college may be unrecognizable compared to what it presently is. This could be a good thing but best to keep socking away as much as you can until then.

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  2. I meant to say too, that since we weren't able to put $ away when they were babies and younger than 9(though they did have some savings bonds) we only invested part of the money instead of investing it all...kept some semi-liquid. It was a good thing too since the Recession hit right before oldest went to college and the invested portion took a big hit. But we left that in and drew from the non-invested funds until it recovered(in the nick of time!)so we didn't take a bath in the market on the college money.

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    1. I know - the unknown part of how much to save is the real challenge here. I think we'll do something similar to you - invest partially in a 529, and keep the rest in liquid funds, in the event we over save (unlikely), or they don't need as much.

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  3. Wow, who would have anticipated that problem? Lower tuition?

    We are investing in 529 Plans. I stress about college savings on a regular basis. My oldest has 60K in her account, which would cover 4 years of tuition at today's rates (local U tuition is 14K per year). I just hope we can keep up with tuition hikes and have some extra saved for room & board by the time she is ready for college in four years.

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    1. Exactly! I don't exactly blame the WA plan creators for not having predicted that outcome. ;-) We need to get ourselves motivated to start putting more in. Compound interest & all that. :-)

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