CUSO Financial Services, L.P.at Advantage FinancialPreston IveyFinancial Advisor110 Cybernetics WayYorktown, VA 23693757-886-3344757 814 5751 (Cell)pivey@1stadvantage.orghttps://1stadvantage.cusonet.com/

June 2018

A Parent-Child Conversation About College Costs

Marriage and Money: Taking a Team Approach toRetirement

What is the employment situation report, and why isit important to investors?

What is gross domestic product, and why is itimportant to investors?

Mid-Year Planning: Tax Changes to Factor In

See disclaimer on final page

The Tax Cuts and Jobs Act,passed in December of lastyear, fundamentallychanges the federal taxlandscape for bothindividuals and businesses.Many of the provisions in thelegislation are permanent,others (including most of the

tax cuts that apply to individuals) expire at theend of 2025. Here are some of the significantchanges you should factor in to any mid-yeartax planning. You should also considerreviewing your situation with a tax professional.

New lower marginal income tax ratesIn 2018, there remain seven marginal incometax brackets, but most of the rates havedropped from last year. The new rates are 10%,12%, 22%, 24%, 32%, 35%, and 37%. Most,but not all, will benefit to some degree from thelower rates. For example, all other things beingequal, those filing as single with taxableincomes between approximately $157,000 and$400,000 may actually end up paying tax at ahigher top marginal rate than they would havelast year. Consider how the new rates will affectyou based on your filing status and estimatedtaxable income.

Higher standard deduction amountsStandard deduction amounts are nearly doublewhat they were last year, but personalexemptions (the amount, $4,050 in 2017, thatyou could deduct for yourself, and potentiallyyour spouse and your dependents) are nolonger available. Additional standard deductionamounts allowed for the elderly and the blindremain available for those who qualify. If you'resingle or married without children, the increasein the standard deduction more than makes upfor the loss of personal exemption deductions.If you're a family of four or more, though, themath doesn't work out in your favor.

Itemized deductions — good and badThe overall limit on itemized deductions thatapplied to higher-income taxpayers is repealed,the income threshold for deducting medicalexpenses is reduced for 2018, and the income

limitations on charitable deductions are eased.That's the good news. The bad news is that thededuction for personal casualty and theft lossesis eliminated, except for casualty lossessuffered in a federal disaster area, andmiscellaneous itemized deductions that wouldbe subject to the 2% AGI threshold, includingtax-preparation expenses and unreimbursedemployee business expenses, are no longerdeductible. Other deductions affected include:

• State and local taxes — Individuals are onlyable to claim an itemized deduction of up to$10,000 ($5,000 if married filing a separatereturn) for state and local property taxes andstate and local income taxes (or sales taxesin lieu of income).

• Home mortgage interest deduction —Individuals can deduct mortgage interest onno more than $750,000 ($375,000 for marriedindividuals filing separately) of qualifyingmortgage debt. For mortgage debt incurredprior to December 16, 2017, the prior $1million limit will continue to apply. Nodeduction is allowed for interest on homeequity loans or lines of credit unless the debtis used to buy, build or substantially improvea principal residence or a second home.

Other important changes• Child tax credit — The credit has been

doubled to $2,000 per qualifying child,refundability has been expanded, and thecredit will now be available to many whodidn't qualify in the past based on income;there's also a new nonrefundable $500 creditfor dependents who aren't qualified childrenfor purposes of the credit.

• Alternative minimum tax (AMT) — The TaxCuts and Jobs Act significantly narrowed thereach of the AMT by increasing AMTexemption amounts and dramaticallyincreasing the income threshold at which theexemptions begin to phase out.

• Roth conversion recharacterizations — In apermanent change that starts this year, Rothconversions can't be "undone" byrecharacterizing the conversion as atraditional IRA contribution by the return duedate.

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A Parent-Child Conversation About College CostsIf you're the parent of a high school studentwho's looking ahead to college, it's important tohave a grown-up conversation with your childabout college costs. A frank discussion canhelp both of you get on the same page,optimize the college search process, and avoidgetting blindsided by large college bills.

An initial conversation: a, b, and cAs a parent, you need to take the lead in thisconversation because most 16-, 17-, and18-year-olds are not financially experiencedenough to drive a $100,000 or $200,000decision. One approach is to start off sayingsomething like: "We will have saved 'a' when it'stime for you to start college, and after that weshould be able to contribute 'b' each year, andwe expect you to contribute 'c' each year." Thatwill give you a baseline of affordability whenyou start targeting colleges.

A more in-depth conversation: borrowx, pay back yOnce you start looking at colleges, you'll seethat prices vary, sometimes significantly. If acollege costs more than a + b + c above, you'llhave to fill the gap. The best way to try and dothis is with college grants or scholarships (moreon that in a minute). Absent grant aid, you'llneed to consider loans. And here is where youshould have a more detailed conversation withyour child in which you say: "If you borrow 'x'you will need to pay back 'y' each month aftergraduation." Otherwise, random loan figuresprobably won't mean much to a teenager.

You can use an online calculator to show yourchild exactly what different loan amounts willcost each month over a standard 10-yearrepayment term. For example, if College 1 willrequire your child to borrow a total of $16,000at 5%, that will cost $170 each month for 10years. If College 2 requires $24,000 in loans,that will cost $255 each month. A loan amountof $36,000 for College 3 will cost $382 permonth, and $50,000 for College 4 will cost $530a month, and so on. The idea is to take anabstract loan amount and translate it into amonth-to-month reality.

But don't stop there. Put that monthly loanpayment into a larger context by reminding yourchild about other financial obligations he or shewill have after college, such as a cell phone bill,food, rent, utilities, car insurance. For example,you might say: "If you attend College 3 andhave a student loan payment of $382 everymonth, you'll also need to budget $40 a monthfor your phone, $75 for car insurance, $400 forfood..." and so on. The goal is to help your childunderstand the cost of real-world expenses and

the long-term financial impact of choosing amore expensive college that will require moreloans.

Even with a detailed discussion, though, manyteenagers may not be able to grasp how theirfuture lives will be impacted by student loans.Ultimately, it's up to you — as a parent — to helpyour child avoid going into too much debt. Howmuch is too much? The answer is different forevery family. One frequently stated guideline isfor students to borrow no more than what theyexpect to earn in their first year out of college.But this amount may be too high if assumptionsabout future earnings don't pan out.

To build in room for the unexpected, a saferapproach might be to borrow no more than thefederal government's Direct Loan limit, which iscurrently a total of $27,000 for four years ofcollege ($5,500 freshman year, $6,500sophomore year, and $7,500 junior and senioryears). Federal loans are generally preferableto private loans because they come with anincome-based repayment option down the roadthat links a borrower's monthly payment toearned income if certain requirements are met.Whatever loan amount you settle on as beingwithin your range, before committing to acollege, your child should understand the totalamount of borrowing required and the resultingmonthly payment after graduation. In this way,you and your child can make an informedfinancial decision.

If there's any silver lining here, it's that parentsbelieve their children may get more out ofcollege when they are at least partlyresponsible for its costs, as opposed to havinga blank check mentality. Being on the hookfinancially, even for just a small amount, mayencourage your child to choose coursescarefully, hit the books sufficiently, and livemore frugally. Later, if you have the resources,you can always help your child repay his or herstudent loans.

Target the right collegesTo reduce the need to borrow, spend timeresearching colleges that offer grants tostudents whose academic profile your childmatches. Colleges differ in their aid generosity.You can use a net price calculator — availableon every college website — to get an estimate ofhow much grant aid your child can expect atdifferent colleges. For example, one collegemay have a sticker price of $62,000 but mightroutinely offer $30,000 in grant aid, resulting inan out-of-pocket cost of $32,000. Anothercollege might cost $40,000 but offer only$5,000 in grant aid, resulting in a higher$35,000 out-of-pocket cost.

A weighty decision

Most teens are not financiallyexperienced enough to drive a$100,000 or $200,000decision, especially one thathas the potential to impactthem for most or all of their 20sor longer. So parent guidanceis critical.

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Marriage and Money: Taking a Team Approach to RetirementNow that it's fairly common for families to havetwo wage earners, many husbands and wivesare accumulating assets in separateemployer-sponsored retirement accounts. In2018, the maximum employee contribution to a401(k) or 403(b) plan is $18,500 ($24,500 forthose age 50 and older), and employers oftenmatch contributions up to a set percentage ofsalary.

But even when most of a married couple'sretirement assets reside in different accounts,it's still possible to craft a unified retirementstrategy. To make it work, open communicationand teamwork are especially important when itcomes to saving and investing for retirement.

Retirement for twoTax-deferred retirement accounts such as401(k)s, 403(b)s, and IRAs can only be held inone person's name, although a spouse istypically listed as the beneficiary who wouldautomatically inherit the account upon theoriginal owner's death. Taxable investmentaccounts, on the other hand, may be heldjointly.

Owning and managing separate portfoliosallows each spouse to choose investmentsbased on his or her individual risk tolerance.Some couples may prefer to maintain a highlevel of independence for this reason,especially if one spouse is more comfortablewith market volatility than the other.

However, sharing plan information andcoordinating investments might help somefamilies build more wealth over time. Forexample, one spouse's workplace plan mayoffer a broader selection of investment options,or the offerings in one plan might be somewhatlimited. With a joint strategy, both spousesagree on an appropriate asset allocation fortheir combined savings, and their contributionsare invested in a way that takes advantage ofeach plan's strengths while avoiding anyweaknesses.

Asset allocation is a method to help manageinvestment risk; it does not guarantee a profit orprotect against loss.

Spousal IRA opportunityIt can be difficult for a stay-at-home parent whois taking time out of the workforce, or anyone

who isn't an active participant in anemployer-sponsored plan, to keep his or herretirement savings on track. Fortunately, aworking spouse can contribute up to $5,500 tohis or her own IRA and up to $5,500 more to aspouse's IRA (in 2018), as long as the couple'scombined income exceeds both contributionsand they file a joint tax return. An additional$1,000 catch-up contribution can be made foreach spouse who is age 50 or older. All otherIRA eligibility rules must be met.

Contributing to the IRA of a nonworking spouseoffers married couples a chance to double upon retirement savings and might also provide alarger tax deduction than contributing to asingle IRA. For married couples filing jointly, theability to deduct contributions to the IRA of anactive participant in an employer-sponsoredplan is phased out if their modified adjustedgross income (MAGI) is between $101,000 and$121,000 (in 2018). There are higher phaseoutlimits when the contribution is being made tothe IRA of a nonparticipating spouse: MAGIbetween $189,000 and $199,000 (in 2018).

Thus, some participants in workplace planswho earn too much to deduct an IRAcontribution for themselves may be able tomake a deductible IRA contribution to theaccount of a nonparticipating spouse. You canmake IRA contributions for the 2018 tax year upuntil April 15, 2019.

Withdrawals from tax-deferred retirement plansare taxed as ordinary income and may besubject to a 10% federal income tax penalty ifwithdrawn prior to age 59½, with certainexceptions as outlined by the IRS.

Open communication andteamwork are especiallyimportant when it comes tosaving and investing forretirement.

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CUSO Financial Services,L.P.at Advantage FinancialPreston IveyFinancial Advisor110 Cybernetics WayYorktown, VA 23693757-886-3344757 814 5751 (Cell)pivey@1stadvantage.orghttps://1stadvantage.cusonet.com/

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019

Non-deposit investment productsand services are offered throughCUSO Financial Services, L.P.("CFS"), a registered broker-dealerMember FINRA/SIPC and SECRegistered Investment Advisor.Products offered through CFS: arenot NCUA/NCUSIF or otherwisefederally insured, are notguarantees or obligations of thecredit union, and may involveinvestment risk includingpossible loss of principal.Investment Representatives areregistered through CFS. The CreditUnion has contracted with CFS tomake non-deposit investmentproducts and services available tocredit union members.

What is gross domestic product, and why is it importantto investors?GDP, or gross domesticproduct, measures the valueof goods and servicesproduced by a nation's

economy less the value of goods and servicesused in production. In essence, GDP is a broadmeasure of the nation's overall economicactivity and serves as a gauge of the country'seconomic health. Countries with the largestGDP are the United States, China, Japan,Germany, and the United Kingdom.

GDP generally provides economic informationon a quarterly basis and is calculated for mostof the world's countries, allowing forcomparisons among various economies.Important information that can be gleaned fromGDP includes:

• A measure of the prices paid for goods andservices purchased by, or on behalf of,consumers (personal consumptionexpenditures), including durable goods (suchas cars and appliances), nondurable goods(food and clothing), and services(transportation, education, and banking)

• Personal (pre-tax) and disposable (after-tax)income and personal savings

• Residential (purchases of private housing)and nonresidential investment (purchases ofboth nonresidential structures and businessequipment and software, as well as changesin inventories)

• Net exports (the sum of exports less imports)• Government spending on goods and services

GDP can offer valuable information toinvestors, including whether the economy isexpanding or contracting, trends in consumerspending, the status of residential and businessinvesting, and whether prices for goods andservices are rising or falling. A strong economyis usually good for corporations and theirprofits, which may boost stock prices.Increasing prices for goods and services mayindicate advancing inflation, which can impactbond prices and yields. In short, GDP providesa snapshot of the strength of the economy overa specific period and can play a role whenmaking financial decisions. All investinginvolves risk, including the possible loss ofprincipal, and there is no guarantee that anyinvestment strategy will be successful.

What is the employment situation report, and why is itimportant to investors?Each month, the Bureau ofLabor Statistics publishes theEmployment SituationSummary report based on

information from the prior month. The data forthe report is derived primarily from two sources:a survey of approximately 60,000 households,or about 110,000 individuals (householdsurvey), and an establishment survey of over651,000 worksites.

Results from each survey provide informationabout the labor sector, including the:

• Total number of employed and unemployedpeople

• Unemployment rate (the percentage of thelabor force that is unemployed)

• Number of people working full- or part-time inU.S. businesses or for the government

• Average number of hours worked per weekby nonfarm workers

• Average hourly and weekly earnings for allnonfarm employees

According to the Bureau of Labor Statistics,when workers are unemployed, they, their

families, and the country as a whole can benegatively impacted. Workers and their familieslose wages, and the country loses the goods orservices that could have been produced. Inaddition, the purchasing power of theseworkers is lost, which can lead tounemployment for yet other workers.

Investors pay particular attention to theinformation provided in this report. For instance,a decreasing unemployment rate may indicatean expanding economy and potentially risinginterest rates. In this scenario, stock valuesmay rise with expanding corporate profits, whilebond prices may fall for fear of rising interestrates. Advancing wages may also be a sign ofhigher inflation and interest rates, as well asgreater economic productivity.

Generally, the Employment Situation Summaryreport provides statistics and data on thedirection of wage and employment trends —information that can be invaluable to investors.

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