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Portfolios 210: How to Invest for College

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1.
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.
2.
If you are using a Roth IRA for college expenses, who will ultimately control who gets to spend the money?
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You. Unlike a few other college-savings options, you control the money in a Roth IRA.
3.
When choosing a college-savings plan, you want _______.
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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.
4.
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.
5.
Who administers a Section 529 plan?
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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.
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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.
When it comes to using a traditional IRA to pay for college expenses, acceptable uses include _______.
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All of the above. For room and board, however, students must be enrolled at least part-time.
8.
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.