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1.
Money in a Coverdell education savings account is intended for educational use and cannot legally be used for anything else.
True. This is its intended use.
2.
When it comes to using a traditional IRA to pay for college expenses, acceptable uses include _______.
All of the above. For room and board, however, students must be enrolled at least part-time.
3.
Prepaid tuition plans usually invest in _______.
Bonds. Prepaid tuition plans usually invest in state-backed bonds, because they aim only to keep up with rising in-state university costs.
4.
Section 529 plans are sponsored by _______.
States. States set contribution limits and investment guidelines that the plans must follow.
5.
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.
6.
When choosing a college-savings plan, you want _______.
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.
7.
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.
8.
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.
