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AKAMAI MONEY By
Greg Wiles
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Q. I'm interested in setting up a 529 college savings plan but don't know where to go. Is there a state-sponsored plan in Hawai'i and are contributions tax deductible?
— H. Kau, Honolulu
A. Yes, there is a state sponsored 529 plan known as TuitionEdge.
It started in 2002 and is marketed locally by First Hawaiian Bank. You can visit the plan's Web site at www.tuitionedge.com or call 643-4529 to find out more.
Local financial planner Alan Matsuda recommends 529 plans because they have advantages over some other college savings programs. Named for Section 529 of the Internal Revenue Service Code, the plans have grown in popularity in recent years because of the flexibility and tax advantages. Unfortunately contributions aren't tax deductible when it comes to Hawai'i state taxes, though this could change if legislators decide on an exemption. At least 20 other states have a deduction for the plans.
The plans are also attractive because investments grow with taxes being deferred. Money can be withdrawn free from Hawai'i and federal income taxes if the funds are used for higher education expenses.
"It all grows tax-free and when you pull the money out it's all tax-free," said Matsuda.
Other advantages of the plans include:
Ed Char, a First Hawaiian vice president, said 529s have been growing in popularity as college savings vehicles. He said the Hawai'i program, available through any First Hawaiian branch, has the advantage of having people locally who can answer questions about it.
There are five investment options for people to choose from in setting up the TuitionEdge plan. These include a savings account option sponsored by First Hawaiian Bank and investments overseen by Delaware Investments, a large money manager for institutional investors and individuals.
Do you have a question about personal finance, taxes or other money matters? Reach Akamai Money columnist Greg Wiles at 525-8088 or gwiles@honoluluadvertiser.com
