APEX FINAL EXAM QUESTIONS WITH
ACTUAL DETAILED SOLUTIONS
529 college savings plan - correct answer- A student's family saves
money for college by investing funds in the stock market. It offers
several investment options, and the values go up and down based on
market performance of the option selected.
529 plans - correct answer- Legally known as the qualified tuition
program. It is a tax-advantaged savings plan designed to encourage
saving for future college costs. They are sponsored by states, state
agencies, or educational institutions. Those who invest in a plan are
exempt from paying federal taxes on it and receive certain state tax
benefits.
529 prepaid tuition plan - correct answer- AKA the guaranteed
tuition plan. Allows families to repay all of or part of the cost of an
instate public university education. It also may be converted for use at a
private university.
Advantages and Disadvantages of Coverdell Education Savings account -
correct answer- Advantages
-many of the same advantages as the 529 plan
-can be opened at any financial institution
, -can be invested in stocks, bonds, mutual funds, and certificates of
deposits.
-money left over will go to the beneficiary rather than the person in
control of the account.
-Funds can be used for K-12
-More investment options
Disadvantages
-Yearly maximum contribution limit
-Age limit for disbursement funds.
Advantages and Disadvantages to 529 plans - correct answer-
Advantages
-Money gained from the investment doesn't get taxed.
-when money is withdrawn to pay for school it doesn't get taxed
-most states don't tax withdrawals
-usually, plans have a low minimum monthly contribution requirement
-Options of contributing money in one lump sum up to 65,000
-Account holder maintains control
-The beneficiary can be changed.
Disadvantages
-Money withdrawn that is not used for college will be taxed.
-Does affect need-based financial aid eligibility
-Does not guarantee admission to college.
ACTUAL DETAILED SOLUTIONS
529 college savings plan - correct answer- A student's family saves
money for college by investing funds in the stock market. It offers
several investment options, and the values go up and down based on
market performance of the option selected.
529 plans - correct answer- Legally known as the qualified tuition
program. It is a tax-advantaged savings plan designed to encourage
saving for future college costs. They are sponsored by states, state
agencies, or educational institutions. Those who invest in a plan are
exempt from paying federal taxes on it and receive certain state tax
benefits.
529 prepaid tuition plan - correct answer- AKA the guaranteed
tuition plan. Allows families to repay all of or part of the cost of an
instate public university education. It also may be converted for use at a
private university.
Advantages and Disadvantages of Coverdell Education Savings account -
correct answer- Advantages
-many of the same advantages as the 529 plan
-can be opened at any financial institution
, -can be invested in stocks, bonds, mutual funds, and certificates of
deposits.
-money left over will go to the beneficiary rather than the person in
control of the account.
-Funds can be used for K-12
-More investment options
Disadvantages
-Yearly maximum contribution limit
-Age limit for disbursement funds.
Advantages and Disadvantages to 529 plans - correct answer-
Advantages
-Money gained from the investment doesn't get taxed.
-when money is withdrawn to pay for school it doesn't get taxed
-most states don't tax withdrawals
-usually, plans have a low minimum monthly contribution requirement
-Options of contributing money in one lump sum up to 65,000
-Account holder maintains control
-The beneficiary can be changed.
Disadvantages
-Money withdrawn that is not used for college will be taxed.
-Does affect need-based financial aid eligibility
-Does not guarantee admission to college.
