SIE Exam Practice Question 320
Question: 320
Noreen and her husband Jeff, residents of New York City, have just had their first child Ali. They are interested in opening a 529 Plan for Ali in order to save for her future college education. As a registered representative, it would be most appropriate to tell them
Correct Answer: A
Explanation:
A - Investors make after-tax contributions to 529 Plans. The earnings in the plan grow tax-free and any distributions for qualified educational expenses are tax-free at the federal level. Additionally, registered representatives must disclose that there may be certain tax benefits for opening a plan inside your state of residency, for example, tax deductions off of your state income taxes. Conversely, if an individual invests in a 529 Plan outside of their state, their state of residency might make they pay taxes on the growth of the plan.
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