CFSMichael Butler, CFA® InstitutePresident/Financial Advisor3190 Whitney AvenueBuilding 6, Suite 2Hamden, CT 06518203-248-1972cfs@cooperfinservices.comwww.cooperfinservices.com

March 2018Weathering the Storm: Are You Prepared?

College Saving: How Does a 529 PlanCompare to a Roth IRA?

How does working affect Social Securityretirement benefits?

Will a government pension reduce my SocialSecurity benefits?

CFS Advisory NewsletterPlanning Your Financial Future

Due Date Approaches for 2017 Federal Income Tax Returns

See disclaimer on final page

Tax filing season ishere again. If youhaven't done soalready, you'll wantto start pulling thingstogether — thatincludes getting yourhands on a copy ofyour 2016 tax returnand gathering W-2s,1099s, and

deduction records. You'll need these recordswhether you're preparing your own return orpaying someone else to prepare your tax returnfor you.

Don't procrastinateThe filing deadline for most individuals isTuesday, April 17, 2018. That's because April15 falls on a Sunday, and Emancipation Day, alegal holiday in Washington, D.C., is celebratedon Monday, April 16. Unlike in some years,there's no extra time for residents ofMassachusetts or Maine to file becausePatriots' Day (a holiday in those two states) fallson April 16 — the same day that EmancipationDay is being celebrated.

Filing for an extensionIf you don't think you're going to be able to fileyour federal income tax return by the due date,you can file for and obtain an extension usingIRS Form 4868, Application for AutomaticExtension of Time to File U.S. IndividualIncome Tax Return. Filing this extension givesyou an additional six months (to October 15,2018) to file your federal income tax return. Youcan also file for an extension electronically —instructions on how to do so can be found in theForm 4868 instructions.

Filing for an automatic extension does notprovide any additional time to pay your tax.When you file for an extension, you have toestimate the amount of tax you will owe andpay this amount by the April filing due date. Ifyou don't pay the amount you've estimated, youmay owe interest and penalties. In fact, if the

IRS believes that your estimate was notreasonable, it may void your extension.

Note: Special rules apply if you're living outsidethe country or serving in the military and onduty outside the United States. In thesecircumstances you are generally allowed anautomatic two-month extension (to June 15,2018) without filing Form 4868, though interestwill be owed on any taxes due that are paidafter April 17. If you served in a combat zone orqualified hazardous duty area, you may beeligible for a longer extension of time to file.

What if you owe?One of the biggest mistakes you can make isnot filing your return because you owe money.If your return shows a balance due, file and paythe amount due in full by the due date ifpossible. If there's no way that you can paywhat you owe, file the return and pay as muchas you can afford. You'll owe interest andpossibly penalties on the unpaid tax, but you'lllimit the penalties assessed by filing your returnon time, and you may be able to work with theIRS to pay the remaining balance (options caninclude paying the unpaid balance ininstallments).

Expecting a refund?The IRS is stepping up efforts to combatidentity theft and tax refund fraud. New, moreaggressive filters that are intended to curtailfraudulent refunds may inadvertently delaysome legitimate refund requests. In fact, sincelast year's tax filing season, the IRS has beenrequired to hold refunds on all tax returnsclaiming the earned income tax credit or therefundable portion of the child tax credit until atleast February 15.1

Most filers, though, can expect a refund checkto be issued within 21 days of the IRS receivinga return.1 IRS.gov (IR-2017-181, IRS Encourages Taxpayersto Check Their Withholding; Checking Now HelpsAvoid Surprises at Tax Time, October 30, 2017)

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Weathering the Storm: Are You Prepared?Severe weather can test even the mostseasoned homeowners. And while stormhazards such as power outages, downed trees,and flooding can result in costly damage to yourhome, they can also put your family's safety atrisk. The key to making it through a stormsafely is to be prepared.

Protect your homeBefore a storm arrives, you'll want to takeproactive steps to prevent damage to yourhome, such as:

• Cleaning your gutters and downspouts sothat water can flow freely away from yourhome

• Inspecting and repairing roof shingles andflashing to prevent water damage

• Trimming overhanging tree limbs• Securing loose objects (e.g., grills and patio

furniture)• Parking your car and storing any heavy

equipment (e.g., lawnmower) inside a garage• Investing in storm windows, doors, and

shutters

Have an emergency plan/stock up onsuppliesA severe storm can cause power outages thatlast for days. It can also result in downed powerlines, fallen trees, and flooding that make roadsimpassable. You'll want to have an emergencyplan that identifies a place nearby where youcan safely stay if you lose power for anextended period of time.

In addition, you should gather the necessarysupplies you'll need to stay safe both duringand after a storm. The following are some itemsto put together in an emergency supply kit.

Food/supplies. Stock up on enoughnonperishable food to sustain you and yourfamily for several days. You'll also want to storeother items that are specific to your family'sneeds, such as infant formula, diapers, petfood, clothing, and blankets.

First aid/medicine. Be prepared for anypossible medical needs by having a first aid kit.Also talk to your doctor about obtaining an extraprescription for important medications you takesuch as heart and blood pressure medications,insulin, and asthma inhalers.

Communication/safety items. Make sure yourcell phones and other methods of electroniccommunication are fully charged before thestorm arrives. Also gather additional safetyitems, such as matches, flashlights, batteries,and an AM/FM radio.

Important documents/valuables. Placeimportant documents, such as personal records(e.g., birth and marriage certificates), propertyrecords (e.g., insurance policies), medicalrecords, financial information (e.g., bank orcredit card information), and any valuables in asecure location that is easily accessible in caseof an emergency.

Review your insurance coverageReview all of your insurance policies (e.g.,homeowners, renters, and auto) to make surethat you have appropriate coverage for yourproperty and belongings. Your home and itscontents should be insured to their fullreplacement cost, including any new additions,remodels, and furniture. To assist withpost-storm insurance claims, be sure to takepictures/videos and make an inventory of yourhome and valuables in case they are damagedor destroyed.

Keep in mind that certain types of stormdamage (e.g., flood and hurricane) may not becovered by a standard policy or may requireyou to pay a separate deductible. If you live in ahigh-risk storm area, you may need to purchaseinsurance specifically designed for floods andhurricanes. Contact your insurance agent todetermine if you need to purchase additionalinsurance above and beyond traditionalcoverage.

After the stormIf your home suffers severe storm damage froma natural disaster, you may be eligible forimmediate disaster relief funds and specialprograms through the Federal EmergencyManagement Agency (FEMA) and variousstate/local government agencies.

You'll also need to file a claim for stormdamage with your insurance company. Tomake the claims process easier, take picturesto document the damage — both inside andoutside of your home — as soon as possible.While your claim is being processed, take stepsto prevent further damage (e.g., putting a tarpon a damaged roof), since the insurancecompany may not cover any additional damagethat occurs after the storm passes.

Keep in mind that the process for filing aninsurance claim can take time, especially if yourhome is in an area that has been impacted by alarge-scale storm. As a result, you shouldcontact your insurer with any questions youmay have regarding the claims process.

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College Saving: How Does a 529 Plan Compare to a Roth IRA?529 plans were created 22 years ago, in 1996,to give people a tax-advantaged way to savefor college. Roth IRAs were created a yearlater, in 1997, to give people a tax-advantagedway to save for retirement. But a funny thinghappened along the way — some parentsadapted the Roth IRA as a college savings tool.

Tax benefits and use of fundsRoth IRAs and 529 plans have a similar taxmodus operandi. Both are funded with after-taxdollars, contributions accumulate tax deferred,and qualified distributions are tax-free. But inorder for a 529 plan distribution to be tax-free,the funds must be used for college or K-12education expenses. By contrast, a qualifiedRoth distribution can be used for anything —retirement, college, travel, home remodeling,and so on.

In order for a distribution from a Roth IRA to betax-free (i.e., a qualified distribution), a five-yearholding period must be met and one of thefollowing must be satisfied: The distributionmust be made (1) after age 59½, (2) due to aqualifying disability, (3) to pay certain first-timehomebuyer expenses, or (4) by your beneficiaryafter your death.

For purposes of this discussion, it's the firstcondition that matters: whether you will be 59½or older when your child is in college. If theanswer is yes (and you've met the five-yearholding requirement), then your distribution willbe qualified and you can use your Roth dollarsto pay for college with no tax implications orpenalties. If your child ends up getting a grantor scholarship, or if overall college costs areless than you expected, you can put those Rothdollars toward something else.

But what if you'll be younger than 59½ whenyour child is in college? Can you still use Rothdollars? You can, but your distribution will notbe qualified. This means that the earningsportion of your distribution (but not thecontributions portion) will be subject to incometax. (Note: Just because the earnings portion issubject to income tax, however, doesn't meanyou'll necessarily have to pay it. Nonqualifieddistributions from a Roth IRA draw outcontributions first and then earnings, so youcould theoretically withdraw up to the amount ofyour contributions and not owe income tax.)

Also, if you use Roth dollars to pay for college,the 10% early withdrawal penalty that normallyapplies to distributions before age 59½ iswaived. So the bottom line is, if you'll beyounger than 59½ when your child is in collegeand you use Roth dollars to pay collegeexpenses, you might owe income tax (on theearnings portion of the distribution), but you

won't owe a penalty.

If 529 plan funds are used for any otherpurpose besides the beneficiary's qualifiededucation expenses, the earnings portion of thedistribution is subject to income tax and a 10%federal tax penalty.

Financial aid treatmentAt college time, retirement assets aren'tcounted by the federal or college financial aidformulas. So Roth IRA balances will not affectfinancial aid in any way. (Note: Though the aidformulas don't ask for retirement plan balances,they typically do ask how much you contributedto your retirement accounts in the past year,and colleges may expect you to apply some ofthose funds to college.)

By contrast, 529 plans do count as an assetunder both federal and college aid formulas.(Note: Only parent-owned 529 accounts countas an asset. Grandparent-owned 529 accountsdo not, but withdrawals from these accountsare counted as student income.)

Investment choicesWith a Roth IRA, your investment choices arevirtually unlimited — you can hold mutual funds,individual stocks and bonds, exchange-tradedfunds, and REITs, to name a few.

With a 529 plan, you are limited to theinvestment options offered by the plan, whichare typically a range of static and age-basedmutual fund portfolios that vary in their level ofrisk. If you're unhappy with the marketperformance of the options you've chosen,under federal law you can change theinvestment options for your existingcontributions only twice per calendar year(though you can generally change theinvestment options on your future contributionsat any time).

Eligibility and contribution amountsUnfortunately, not everyone is eligible tocontribute to a Roth IRA. For example, yourincome must be below a certain threshold tomake the maximum annual contribution of$5,500 (or $6,500 for individuals age 50 andolder).

By contrast, anyone can contribute to a 529plan; there are no restrictions based on income.Another significant advantage is that lifetimecontribution limits are high, typically $300,000and up. And 529 plan rules allow for largelump-sum, tax-free gifts if certain conditions aremet — $75,000 for single filers and $150,000 formarried joint filers in 2018, which is equal tofive years' worth of the $15,000 annual gift taxexclusion.

529 plan assets surpass$300 billion mark

As of September 2017, assetsin 529 plans totaled $306billion.

Source: Strategic Insight, 529College Savings & ABLE, 3Q2017 529 Data Highlights

Note

Investors should carefullyconsider the investmentobjectives, risks, charges, andexpenses associated with 529plans before investing. Specificinformation is available in eachplan's official statement. Keepin mind that there is the riskthat 529 plan investments maynot perform well enough tocover costs as anticipated.Also consider whether yourstate offers any 529 plan statetax benefits and whether theyare contingent on joining yourown state's 529 plan. Otherstate benefits may includefinancial aid, scholarship funds,and protection from creditors.

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CFSMichael Butler, CFA® InstitutePresident/Financial Advisor3190 Whitney AvenueBuilding 6, Suite 2Hamden, CT 06518203-248-1972cfs@cooperfinservices.comwww.cooperfinservices.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018

IMPORTANT DISCLOSURES

Cooper Financial Services, Inc. doesnot provide investment, tax, or legaladvice. The information presentedhere is not specific to any individual'spersonal circumstances. Securitiesoffered through our affiliateBroker/Dealer, CFS Securities, Inc.,Member FINRA & SIPC.

To the extent that this materialconcerns tax matters, it is notintended or written to be used, andcannot be used, by a taxpayer for thepurpose of avoiding penalties thatmay be imposed by law. Eachtaxpayer should seek independentadvice from a tax professional basedon his or her individualcircumstances.

These materials are provided forgeneral information and educationalpurposes based upon publiclyavailable information from sourcesbelieved to be reliable—we cannotassure the accuracy or completenessof these materials. The information inthese materials may change at anytime and without notice.

Will a government pension reduce my Social Securitybenefits?If you earned a governmentpension from a job not subjectto Social Security taxwithholding ("noncovered

employment") and are also eligible for SocialSecurity benefits through a job where SocialSecurity taxes were withheld, two provisionsmight reduce your benefits: the windfallelimination provision (WEP) and thegovernment pension offset (GPO).

The WEP affects how a worker's SocialSecurity benefit is calculated. If you're subjectto the WEP, your benefit is calculated using amodified formula, possibly resulting in a benefitreduction. The amount of the reductiondepends on the year you turn 62 and thenumber of years in which you had substantialearnings and paid into Social Security (noreduction applies to those with 30 years ormore of substantial earnings). The reductioncannot be more than one-half of your pensionfrom noncovered employment. Spousal anddependent benefits may also be reduced, butnot survivor benefits.

The GPO may affect spousal or survivorbenefits if the spouse or survivor earned a

government pension from noncoveredemployment. In this case, the GPO may reduceSocial Security benefits by up to two-thirds ofthe amount of the pension.

For example, if you receive a $900 monthlygovernment pension and are eligible for a$1,000 monthly Social Security spousal benefit,you would receive only $400 per month fromSocial Security [$1,000 minus $600 (2/3 times$900) equals $400]. You would still receiveyour $900 pension, so your combined benefitwould be $1,300.

Not all government employees are subject tothese provisions. For example, federalemployees under the Federal EmployeesRetirement System are exempt because theypay Social Security taxes on earnings.However, public-sector employees in somestates do not pay Social Security taxes, andthus could be subject to the WEP. The GPOaffects pensions from noncovered federal,state, or local government employment.

Rules and calculations for the WEP and theGPO are complex. Visit the Social Securitywebsite, ssa.gov, for more information.

How does working affect Social Security retirementbenefits?If you're thinking aboutworking as long as possible toincrease your retirementsavings, you may be

wondering whether you can receive SocialSecurity retirement benefits while you're stillemployed. The answer is yes. But dependingon your age, earnings from work may affect theamount of your Social Security benefit.

If you're younger than full retirement age andmake more than the annual earnings limit($17,040 in 2018), part of your benefits will bewithheld, reducing the amount you receive fromSocial Security. If you're under full retirementage for the entire year, $1 is deducted fromyour benefit for every $2 you earn above theannual limit.

In the year you reach full retirement age, $1 isdeducted from your benefit for every $3 youearn above a different limit ($45,360 in 2018).

Starting with the month you reach fullretirement age, your benefit won't be reduced,no matter how much you earn.

Earnings that count toward these limits arewages from a job or net earnings from

self-employment. Pensions, annuities,investment income, interest, and veterans orother government benefits do not count.Employee contributions to a pension or aretirement plan do count if the amount isincluded in your gross wages.

The Social Security Administration (SSA) maybegin to withhold the required amount, up toyour whole monthly benefit, as soon as itdetermines you are on track to surpass theannual limit. However, even if your benefits arereduced, you'll receive a higher monthly benefitat full retirement age, because the SSA willrecalculate your benefit and give you credit forany earnings withheld earlier. So the effect thatworking has on your benefits is only temporary,and your earnings may actually increase yourbenefit later.

These are just the basics, and other rules mayapply. The Retirement Earnings TestCalculator, available at the Social Securitywebsite, ssa.gov, can help you estimate howearnings before full retirement age might affectyour benefit.

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