Choose wisely. There is only one correct answer to each question.
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1.
Section 529 plans are sponsored by _______.
States. States set contribution limits and investment guidelines that the plans must follow.
2.
The IRS gets to decide how you spend the money in your Roth IRA.
False. Though the IRS sets restrictions on Roth IRA use, ultimately you get to decide how to spend the money in it.
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.
Prepaid tuition plans let you lock in the cost of college at _______.
Today's prices. One of the chief attractions of prepaid tuition plans is how they lock in college costs at current prices.
5.
What kinds of investments can you transfer to an UGMA account?
All of the above. You are allowed to transfer any of these to an UGMA account.
6.
What is the current contribution limit to a Coverdell education savings account?
$2,000. This is the current limit.
7.
When it comes to qualifying for financial aid, how much money you earn every year will be more important to a financial aid office than your stock portfolio.
True. Financial aid offices consider income more heavily.
8.
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.
