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.
If you are using a Roth IRA for college expenses, who will ultimately control who gets to spend the money?
You. Unlike a few other college-savings options, you control the money in a Roth IRA.
3.
Who administers a Section 529 plan?
An investment company. An investment company of the state's choosing administers them.
4.
With a prepaid tuition plan, you can control what the plan invests in.
False. The state controls what the plan invests in.
5.
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.
6.
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.
7.
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.
8.
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.
