PA 529 Guaranteed Plan (GSP) for K12 Education

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WaffleCone
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Joined: Fri Oct 23, 2015 11:48 pm

PA 529 Guaranteed Plan (GSP) for K12 Education

Post by WaffleCone » Thu Mar 15, 2018 11:49 pm

We pay $12K private school tuition for 4 kids. First child is the most expensive and gradually decreases until the 4th is free. What a deal, eh? I'm trying to determine if it makes sense to use my PA 529 GSP for making payments. The GSP is the type where you buy credits at today's cost for use in the future. We're tracking to have about 1 year of tuition for each child by the time they reach college.

A few questions:

1. Can I make a contribution and withdrawal almost immediately to get the state income tax benefit? At 3.07%, that's $444. PA is allowing these as qualified withdrawls for income tax purposes.

2. The plan has a first in/first out policy for withdrawals. I think I should the keep the oldest dollars in long term as they have the highest gains for college. That's just a gut feel but I have no idea if it's the right strategy. I'll have to find out how they handle the invoice not being broken down by student. I may have to do transfers so I can keep the oldest contributions for college and the new money for K12.

3. Assuming I wait the maturity period (9-12 months) for the contribution to reflect the new credit rate, can I simply pick the college type with he highest 1-year return and cash out? That could be an addition 2-5% tax free on top the state tax savings.

I don't mind jumping through a few hoops just want to make sure I understand it correctly. I vaguely remember a PA FAQ somewhere but couldn't find it. The plan seems like it gets good returns but it's a complex investment and difficult to compare against other options. I don't know if I'd pick it again but I don't want to transfer everything out.

If you reply, please focus on the questions at hand not whether I should be using private school, whether a 529 tax benefit for K12 is bad policy, etc.

Thank you.

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