Tuition Made Simple: How to Save and Withdraw from a Washington 529 Plan
Tuition costs continue to rise yearly, meaning that your gift to your children or grandchildren may not go as far as you hoped in a regular savings account. The good news is that there are savings vehicles you can use to maximize your financial legacy—and it all starts with the basic 529 savings plan.
Of course, the issue with 529 plans is that they vary from state to state. What you can use them for and how much you can contribute may depend on your residency. Here’s what you should know about your 529 plan in Washington.
Types of 529 Plans in Washington
In Washington, you can decide how your money would best be allocated toward educational expenses by choosing which plan you want: the Guaranteed Education Tuition (GET) or the DreamAhead.
We will cover them in broad strokes here, but you may want to seek additional resources about the nuances between plans before deciding on the best path forward. For a quick overview of both, this short video outlines their differences. You can also view all potential savings options at Saving for College.
GET (Guaranteed Education Tuition)
Maybe the sudden spike in college tuition prices has you wondering whether your savings will be sufficient for tuition eighteen years down the road. GET counteracts this fear, allowing you to buy education credits that can be redeemed in the future.
Outside of Washington, some other states also offer pre-paid tuition programs equivalent to the GET program.
How do these plans work? Essentially, you will buy tuition units based on present-day costs, saving you from paying exorbitant rates a decade later. These units also keep you from worrying about investments or stock market fluctuations. In turn, Washington state ensures that 100 GET units will cover one year of resident undergraduate tuition fees at Washington’s highest-priced public university.
Generally speaking, these plans are popular for their predictable costs and stability. However, because the funds aren’t invested, they will likely underperform the college investment plans during periods of strong market performance.
DreamAhead
Instead of buying tuition credits with a GET plan, DreamAhead is more of a standard investment program. Planholders get the final say in how the money gets invested and can tweak the account as their student nears college.
In other words, you get to decide whether you want to take a more conservative stance or if you want to be more aggressive in your savings. For example, you might choose to be more aggressive while your child is young, then shift to a lower-risk strategy as they near college age. Since the funds are invested, they have more potential to grow when the market is doing well.
Choosing Your Washington 529 Plan
While some tips and advice will apply to 529 plans of all kinds, each state has its own rules and 529 plans in place. If you don’t live in Washington, it’s important to research what your state can offer and how it might differ from the Washington 529 plans we’re covering here.
For Washington residents, it’s hard to go wrong with your options. Since Washington doesn’t have an income tax (and so contributions are not state tax-deductible), it might not really matter which state plan you choose.
When choosing a 529, it’s important to evaluate:
State-specific rules. Is there a tax deduction for 529 contributions for residents, and if so, what are the rules? As mentioned previously, Washington doesn't have an income tax, so there’s no extra deduction for plan contributions.
Appetite for risk. This will help you to understand whether a pre-paid tuition or a college investment plan makes more sense.
Costs, ability, and interest in self-management. Those who are more cost-averse may prefer to focus on 529s with lower expense ratios, while those who prefer to delegate management might find an advisor-managed 529 compelling.
Tips for Growing Your 529 Plan in Washington
If you want to give your student the gift of tuition-free education, you don’t want to delay another minute on opening up a 529 plan in Washington. Here are our three top tips for how to grow your savings quickly and easily.
Start Early
Start thinking about a college savings plan as soon as a child is born – whether it's your child, a grandchild, or even a niece or nephew. Since you can’t have multiple beneficiaries on a 529 plan, it’s something you’ll have to revisit with each new addition to the family.
The longer you have to invest in a 529 plan, the more that money can grow (DreamAhead) or the more credits you can purchase (GET). It allows you to contribute smaller amounts over a longer time, offsetting the initial pain of a lump sum contribution.
Due to recent SECURE 2.0 changes, unused funds in a 529 can be transferred to a Roth IRA. You can roll over $35,000 per beneficiary up to the annual IRA contribution limit ($7,000 in 2025), so it could take a few years. Unused funds can also be used for a qualified family member’s education.
As a last resort, non-qualified distributions can be pulled with the earnings being subject to a 10% penalty and taxed as earned income.
In other words, there’s no harm in starting early and ending up with more than you need! Anything left over can help fund another child’s education or get your child’s retirement savings off to a healthy start.
Automate Contributions
How much would you save if you never had to think about making that transfer? For many busy individuals and families, it makes more sense to automate their contributions. You never have to think twice about whether you should contribute this month. Instead, it’s a priority and is already taken care of—one more thing off your plate!
Consider the Annual Gift Exclusion
If you want to contribute substantial sums to a 529 plan, consider the annual gift exclusion and make sure you fall within its limits. This is the maximum amount of money you can give to another person without incurring a tax on that gift. You and a spouse can even leverage gift splitting to contribute even more without a tax penalty.
In 2025, you can contribute up to $19,000 per person. Since each parent could contribute this amount, that would add up to $38,000 in gifts without incurring a gift tax penalty.
It’s also worth noting that you may want to make up for lost time. You can lump five years of gifts into a one-time gift in a 529 plan. This can be helpful if a child is nearing college but you didn’t start saving years ago and need a faster injection of funds.
Tips for Making Qualified Withdrawals from a Washington 529 Plan
With the growth of your 529 plan underway, it’s time to turn your attention to how you can spend the money you invested here. Qualified withdrawals are key to harnessing the tax benefits of this plan.
Understand Qualified Expenses
Qualified expenses can be tricky because the language from the IRS isn’t as clear as you might like. Students can take money out of a 529 plan for education expenses: room and board, tuition, fees, books, and even computers or software used in pursuit of educational endeavors. Supplies and equipment for apprenticeships are also included.
However, you cannot use funds for entertainment (think TVs or gaming systems for dorm rooms).
Save Receipts
Uncle Sam wants proof that you spent that 529 money on qualified educational expenses. You might not need them at the end of the tax year when you file your return, but you should hold onto them in the event you ever get audited. Without receipts, you will be hard-pressed to prove where the money went.
Have the 529 Plan Pay the College Directly
It’s a best practice to arrange for the 529 plan to pay the college directly instead of transferring it to your student who transfers it to the school. Even the most trustworthy college students-to-be could accidentally misplace or damage the check!
Direct transfers also leave a clear “paper” trail for how the money moved, leaving you less to worry about. Be sure to save your withdrawal forms for tax purposes.
Spend 529 Money Right Away
Once you decide that you’re going to withdraw money from a 529 plan for a school expense, it should be spent right away. Never let so much time lapse that you have a withdrawal made in the year prior to the spending. Everything should take place in the same tax year that the money has been withdrawn.
Achieve Your Family’s Financial Goals with Consilio
If you need help deciding what the right savings vehicle is for your family based on your complex compensation structures at major tech companies, Consilio can help. Consilio offers fiduciary and wealth planning services to help you harness all the benefits of a well-paying corporate job.
We specialize in working with tech professionals from Google, Meta, Amazon, and Microsoft to get the most out of their complex compensation structure and achieve financial freedom!
Before you decide that a 529 plan in Washington is the right fit for your family, let us help you lay the foundation for your financial future. Schedule a call today!
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