Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
What is the current contribution limit to a Coverdell education savings account?
$2,000. This is the current limit.
3.
Withdrawals from an UGMA account are taxed at whose rate?
The recipient's. Withdrawals from an UGMA account are taxed at the recipient's rate.
4.
When using a traditional IRA to pay for qualified educational expenses, how much is the early withdrawal penalty?
There is none. As long as the withdrawal is for qualified educational expenses, there will not be an early withdrawal penalty. However, you may still have to pay taxes on them.
5.
With a prepaid tuition plan, you can control what the plan invests in.
False. The state controls what the plan invests in.
6.
Section 529 plans are sponsored by _______.
States. States set contribution limits and investment guidelines that the plans must follow.
7.
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.
8.
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.
