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Portfolios 210: How to Invest for College

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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.
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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.
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True. This is its intended use.
4.
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.
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True. Financial aid offices consider income more heavily.
5.
What's the biggest drawback to a Uniform Gift to Minors Act account?
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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.
6.
Who administers a Section 529 plan?
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An investment company. An investment company of the state's choosing administers them.
7.
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.
Choose wisely. There is only one correct answer.
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.
8.
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.