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.
What's the biggest drawback to a Uniform Gift to Minors Act account?
You eventually surrender control of the account to the recipient. You can contribute much more than $500 each year, and withdrawals are taxed at the recipient's rate. However, the recipient gains control of the account. If she doesn't want to spend the proceeds on college, she doesn't have to.
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.
Who administers a Section 529 plan?
An investment company. An investment company of the state's choosing administers them.
6.
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.
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.
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.
