Choose wisely. There is only one correct answer to each question.
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1.
Which of the following will a financial aid office consider most important?
Your income. Financial aid offices consider this the most important of all these options.
2.
After you have saved for many years to send your young one to college by investing in high-risk assets such as stocks, you would be wise to shift them to bonds as college gets closer.
True. Given that you don't want to risk your growth in a downturn, shifting your gains to bonds or bond mutual funds might be a good idea.
3.
Emily withdrew $10,000 from her traditional IRA with the intention of using it to pay for her college expenses. But after the withdrawal, she decided to put the money toward a car. Because she originally intended to use the money for college, she won't be charged a penalty.
False. The intention does not matter. Only the actual use matters. Therefore, she will be charged a penalty.
4.
What's the biggest drawback to a Uniform Gift to Minors Act account?
You eventually surrender control of the account to the recipient. You can contribute much more than $500 each year, and withdrawals are taxed at the recipient's rate. However, the recipient gains control of the account. If she doesn't want to spend the proceeds on college, she doesn't have to.
5.
Who administers a Section 529 plan?
An investment company. An investment company of the state's choosing administers them.
6.
If you withdraw money from your Roth IRA for college expenses, you might still have to pay taxes on them.
True. Any earnings that have built up in your account will be taxed. The original contributions in the account will not be taxed, as they were already taxed in the year you put them in.
7.
With a prepaid tuition plan, you can control what the plan invests in.
False. The state controls what the plan invests in.
8.
What is the current contribution limit to a Coverdell education savings account?
