Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
Section 529 plans are sponsored by _______.
States. States set contribution limits and investment guidelines that the plans must follow.
3.
If you'll be sending your child to college in five years, her college portfolio should _______.
Resemble an intermediate-term portfolio. A college portfolio should become tamer as the student gets closer to matriculating. The idea is to protect the gains instead of angling for more.
4.
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.
5.
With a prepaid tuition plan, you can control what the plan invests in.
False. The state controls what the plan invests in.
6.
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.
7.
Assuming they are used for qualified educational purposes, withdrawals from a Coverdell education savings account are _______.
Tax-free. Contributions are taxable, but qualified withdrawals are tax-free.
8.
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.
