Help
Course Catalog > Portfolios > 200
Portfolios 210: How to Invest for College

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
When using a traditional IRA to pay for qualified educational expenses, how much is the early withdrawal penalty?
Choose wisely. There is only one correct answer.
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.
2.
With a prepaid tuition plan, you can control what the plan invests in.
Choose wisely. There is only one correct answer.
False. The state controls what the plan invests in.
3.
Money in a Coverdell education savings account is intended for educational use and cannot legally be used for anything else.
Choose wisely. There is only one correct answer.
True. This is its intended use.
4.
What's the biggest drawback to a Uniform Gift to Minors Act account?
Choose wisely. There is only one correct answer.
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.
5.
When choosing a college-savings plan, you want _______.
Choose wisely. There is only one correct answer.
Both of the above. The new crop of college-savings plans provide both a variety of return possibilities and tax savings. Evaluate both when choosing a plan.
6.
If you are using a Roth IRA for college expenses, who will ultimately control who gets to spend the money?
Choose wisely. There is only one correct answer.
You. Unlike a few other college-savings options, you control the money in a Roth IRA.
7.
Section 529 plans are sponsored by _______.
Choose wisely. There is only one correct answer.
States. States set contribution limits and investment guidelines that the plans must follow.
8.
As time draws closer to when your student enters college, your college savings plan for him should probably _______.
Choose wisely. There is only one correct answer.
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.