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Portfolios 210: How to Invest for College

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1.
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.
2.
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.
Choose wisely. There is only one correct answer.
False. The intention does not matter. Only the actual use matters. Therefore, she will be charged a penalty.
3.
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.
4.
What kinds of investments can you transfer to an UGMA account?
Choose wisely. There is only one correct answer.
All of the above. You are allowed to transfer any of these to an UGMA account.
5.
The IRS gets to decide how you spend the money in your Roth IRA.
Choose wisely. There is only one correct answer.
False. Though the IRS sets restrictions on Roth IRA use, ultimately you get to decide how to spend the money in it.
6.
If you'll be sending your child to college in five years, her college portfolio should _______.
Choose wisely. There is only one correct answer.
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.
7.
Which of the following will a financial aid office consider most important?
Choose wisely. There is only one correct answer.
Your income. Financial aid offices consider this the most important of all these options.
8.
What is the current contribution limit to a Coverdell education savings account?
Choose wisely. There is only one correct answer.
$2,000. This is the current limit.