Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
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.
3.
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.
4.
As time draws closer to when your student enters college, your college savings plan for him should probably _______.
Shift into less-volatile assets. Normally, as you reach a goal that you have been financing for a long, long time with high-risk investments, the danger of it recovering from a fall is very high. That's why advisors recommend shifting your holdings to safer investments, such as short-term bond mutual funds. Such funds would weather a downturn rather well.
5.
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.
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.
With a prepaid tuition plan, you can control what the plan invests in.
False. The state controls what the plan invests in.
8.
Who administers a Section 529 plan?
An investment company. An investment company of the state's choosing administers them.
