Bodnar Financial Advisors, IncJohn Bodnar, III, CFP®, CIMA®,248 Columbia Tpk.Suite 104Florham Park, NJ 07932Phone: 973-966-6939Fax: 973-966-0032john@bodnar.netwww.bodnar.net

Winter 2019Take This Quiz: The Social SecurityRetirement Earnings Test

For College Savings, 529 Plans Are Hard toBeat

Should I sign up for an identity theft protectionservice?

Protecting Yourself Against Identity Theft

BODNAR FINANCIAL ADVISORS INCClient Quarterly NewsletterDo Millennials Need Life Insurance?

See disclaimer on final page

Allow me to be the last person to wish youa very Happy New Year!

The Roaring Twenties have already startedoff with a bang. The SECURE Act madesome important changes to IRAs, 401(k)s,and even 529 plans. If you haven't already,please read our summary of the biggestchanges for savers—we printed a copy foryou in this newsletter.

As I write this, the Dow is over 29,325,continuing a bull market that began over 10years ago. (Remember when pundits werepanicking about the 'inverted yield curve?'Let's hope they didn't sell theirinvestments.)

Karen and I made the exciting decision tomove in the Fall. Thankfully, my commutewill be about the same. My daughter Jackieand her husband Sam have a baby boy onthe way, which makes that FOURgrandsons in total for "Paw and Doo Dah."This decade will bring many things, but Ipredict boredom will NOT be one of them.

The financial challengesmillennials face can beoverwhelming. Manyyoung adults have tofigure out how to pay offcollege loans, save tobuy a home or start afamily, and sock awaymoney for retirement.

Given these hurdles, it's no wonder that lifeinsurance as a financial asset gets little to noattention. But it should. There are manyreasons to have life insurance at a relativelyyoung age, but here are some common ones.

Leaving your debts for others to payAs a young adult, you become moreindependent and self-sufficient. While you nolonger depend on others for your financialwell-being, your death might still create afinancial hardship for those you leave behind.

You may have debts such as a mortgage orstudent loans that are jointly held with anotherperson. Or you may be paying your parents forloans they took out (e.g., PLUS loans) to helppay for your education. Your untimely deathwould leave others responsible for some or allof these debts. You might consider purchasingenough life insurance to cover your financialobligations so others don't have to.

Funeral expenses can also be a burden forthose you leave behind. Life insurance couldease the financial burden of paying for youruninsured medical bills (if any) and for costsassociated with your funeral and burial.

It's less expensivePremiums for life insurance are based on manyfactors, including age and health. Certainly, theyounger and presumably healthier you are, theless your coverage will cost. This is especiallytrue if you are at a high risk for developing amedical condition later in life.

Replacing lost incomeSomeone may be relying on your income forfinancial support. For instance, you may beproviding for a family member such as a parent,grandparent, or sibling. In each of theseinstances, how would your income be replaced

if you died? The death benefit from lifeinsurance can help replace your income afteryou're gone.

Providing for your familyAs your family grows, so do your financialresponsibilities. There is likely a hefty mortgageto pay. And there are costs associated withyoung children. If you died without lifeinsurance, how would the mortgage get paid?Could your surviving spouse or partner coverthe costs of day care and housekeeping?

And there are events you should plan for nowthat won't happen until several years in thefuture. Maybe you'll begin saving for your kids'college education while trying to save as muchas you can for your retirement. Over the nextseveral decades, think about how much youcould set aside for these expenses. If you areno longer around to make these contributions,life insurance can help fund these futureaccumulations.

Work coverage may not be enoughYou may have a job with an employer thatsponsors group life insurance. Hopefully, youtake advantage of that program, but is itenough coverage to meet your needs now andin the future? Your insurance needs maychange with time, although your employer'scoverage may not. Also, mostemployer-sponsored life insurance programsare effective only while you remain anemployee. If you change jobs or are unable towork due to illness or disability, you may loseyour employer's coverage. That's why it's agood idea to consider buying your own lifeinsurance.

The cost and availability of life insurancedepend on factors such as age, health, and thetype and amount of insurance purchased. Aswith most financial decisions, there areexpenses associated with the purchase of lifeinsurance. Policies commonly have mortalityand expense charges. In addition, if a policy issurrendered prematurely, there may besurrender charges and income tax implications.

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Take This Quiz: The Social Security Retirement Earnings TestCan you work and receive Social Securityretirement benefits at the same time? Yes, butthe Social Security Administration (SSA) willapply an earnings test. Part or all of yourmonthly benefit may be withheld if you earn toomuch.

To help avoid surprises, take this quiz to findout what you know — and don't know — aboutSocial Security earnings test rules.

Questions1. The retirement earnings test applies onlyif you are receiving Social Security benefitsand are...

a. Under age 62

b. Under full retirement age

c. Full retirement age or older

d. Age 70 or older

2. Which of the following types of incomecount toward the earnings test?

a. Wages earned as an employee and netself-employment income

b. Pension and retirement plan income

c. Interest and dividends

d. Both a and b

e. All of the above

3. Benefits that are withheld are lost forever.

a. True

b. False

4. The earnings test may affect familymembers who are receiving which types ofbenefits?

a. Disability benefits

b. Spousal benefits

c. Dependent benefits

d. Both b and c

5. What special rule applies to earnings forone year, usually the first year you claimSocial Security retirement benefits?

a. A monthly earnings limit applies to anyearnings after you claim retirement benefits.

b. Earnings during the first year after you claimretirement benefits can't be counted if youretired after 40 years of continuousemployment.

c. Earnings during the first year after you claimretirement benefits will not reduce your SocialSecurity benefit if you retired from agovernment job.

Answers1. b. If you have not yet reached full retirementage (66 to 67, depending on your year of birth),your Social Security retirement benefit may bereduced if you earn more than a certain annualamount.

In 2020, $1 in benefits will be deducted forevery $2 you earn above $18,240. In thecalendar year in which you reach your fullretirement age, a higher limit applies. In 2020,$1 in benefits will be deducted for every $3 youearn above $48,600. Once you reach fullretirement age, your earnings will not affectyour Social Security benefit.

The SSA may withhold benefits as soon as itdetermines that your earnings are on track tosurpass the annual limit. The estimated amountwill typically be deducted from your monthlybenefit in full, so you might not receive benefitsfor one or more months before they resume.

2. a. Only earned income, such as wages froman employer and net self-employment income,count toward the earnings limit. Unearnedincome — such as other government benefits,investment earnings, interest, pension andretirement plan distributions, annuities, andcapital gains — doesn't count.

3. b. Benefits that are withheld are not reallylost. Your benefit will be recalculated at fullretirement age to account for the monthsbenefits were withheld. You'll receive the higherbenefit for the rest of your life, so assuming youlive long enough, you'll eventually recoup thetotal amount you previously "lost."

4. d. Benefits paid to family members (such asyour spouse or dependent children) based onyour earnings record may also be reduced ifyou're subject to the earnings test. Theearnings test does not apply to disabilityinsurance benefits.

5. a. Many people retire mid-year and havealready earned more than the earnings limit. Soin the first year you claim retirement benefits, amonthly earnings test may apply, regardless ofyour annual earnings.

For example, let's say that you claim benefits atage 62 on September 30, 2020 and havealready earned more than the 2020 earningslimit of $18,240. Then, you take a part-time jobthat pays you $1,000 per month for the rest ofthe year. You'll still receive a Social Securitybenefit for October, November, and Decemberbecause your earnings are less than $1,520,the monthly limit that applies in 2020.

This quiz covers only somebasic rules. For moreinformation about otherretirement earnings test rules,visit the Social SecurityAdministration website,ssa.gov.

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For College Savings, 529 Plans Are Hard to BeatRaising kids is hard enough, so why not makethings easier for yourself when it comes tosaving for college? Ideally, you want a savingsvehicle that doesn't impose arbitrary incomelimits on eligibility; lets you contribute a little ora lot, depending on what else happens to begoing on financially in your life at the moment;lets you set up automatic, recurringcontributions from your checking account soyou can put your savings effort on autopilot;and offers the potential to stay ahead of collegeinflation, which has been averaging 3% to 4%per year.1 Oh, and some tax benefits would bereally nice, too, so all your available dollars cango to college and not Uncle Sam. Can you findall of these things in one college savingsoption? Yes, you can: in a 529 plan.

Benefits529 college savings plans offer a uniquecombination of features that are hard to beatwhen it comes to saving for college, so it's nosurprise why assets in these plans have grownsteadily since their creation over 20 years ago.

Eligibility. People of all income levels cancontribute to a 529 plan — there are norestrictions based on income (unlike Coverdellaccounts, U.S. savings bonds, and Roth IRAs).

Ease of opening and managing account. It'srelatively easy to open a 529 account, set upautomatic monthly contributions, and manageyour account online. For example, you canincrease or decrease the amount andfrequency of your contributions (e.g., monthly,quarterly), change the beneficiary, change yourinvestment options, and track your investmentreturns and overall progress online with theclick of a mouse.

Contributions. 529 plans have high lifetimecontribution limits, generally $350,000 and up.(529 plans are offered by individual states, andthe exact limit depends on the state.) Also, 529plans offer a unique gifting feature that allowslump-sum gifts up to five times the annual gifttax exclusion — in 2020, this amount is up to$75,000 for individual gifts and up to $150,000for joint gifts — with the potential to avoid gift taxif certain requirements are met. This can be avery useful estate planning tool forgrandparents who want to help pay for theirgrandchildren's college education in atax-efficient manner.

Tax benefits. The main benefit of 529 plans isthe tax treatment of contributions. First, as yousave money in a 529 college savings plan(hopefully every month!), any earnings are taxdeferred, which means you don't pay taxes onthe earnings each year as you would with aregular investment account. Then, at college

time, any funds used to pay the beneficiary'squalified education expenses — including tuition,fees, room, board, books, and a computer — arecompletely tax-free at the federal level. Thismeans every dollar is available for college.States generally follow this tax treatment, andmany states also offer an income tax deductionfor 529 plan contributions.

DrawbacksBut 529 plans have some potential drawbacks.

Tax implications for funds not used forqualified expenses. If you use 529 plans fundsfor any reason other than the beneficiary'squalified education expenses, earnings aresubject to income tax (at your rate) and a 10%federal penalty tax.

Restricted ability to change investmentoptions on existing contributions. When youopen a 529 college savings plan account,you're limited to the investment options offeredby the plan. Most plans offer a range of staticand age-based portfolios (where the underlyinginvestments automatically become moreconservative as the beneficiary gets closer tocollege) with different levels of risk, fees, andmanagement objectives. If you're unhappy withthe market performance of the option(s) you'vechosen, you can generally change theinvestment options for your future contributionsat any time. But under federal law, you canchange the options for your existingcontributions only twice per year. This rule mayrestrict your ability to respond to changingmarket conditions, so you'll need to considerany investment changes carefully.

Getting started529 college savings plans are offered byindividual states (but managed by financialinstitutions selected by the state), and you canjoin any state's plan. To open an account,select a plan and complete an application,where you will name an account owner(typically a parent or grandparent) andbeneficiary (there can be only one); chooseyour investment options; and set up automaticcontributions if you choose. You are then readyto go. It's common to open an account with yourown state's 529 plan, but there may be reasonsto consider another state's plan; for example,the reputation of the financial institutionmanaging the plan, the plan's investmentoptions, historical investment performance,fees, customer service, website usability, andso on. You can research state plans at theCollege Savings Plans Network.1 College Board, Trends in College Pricing,2014-2018

529 plan assets reach $353billion

As of June 2019, assets in 529plans reached $353 billion —$328 billion (93%) in collegesavings plans and $25 billion(7%) in prepaid tuition plans.

Source: Strategic Insight, 529Data Highlights, 2Q 2019

Note: Investors shouldconsider the investmentobjectives, risks, charges, andexpenses associated with 529plans before investing. Moreinformation is available in eachissuer's official statement andapplicable prospectuses, whichcontain this and otherinformation about theinvestment options, underlyinginvestments, and investmentcompany, and should be readcarefully before investing. Alsoconsider whether your stateoffers a 529 plan that providesresidents with favorable statetax benefits and other benefits,such as financial aid,scholarship funds, andprotection from creditors. Aswith other investments, thereare generally fees andexpenses associated withparticipation in a 529 plan.There is also the risk that theinvestments may lose moneyor not perform well enough tocover college costs asanticipated.

Page 3 of 4, see disclaimer on final page

Bodnar FinancialAdvisors, IncJohn Bodnar, III, CFP®, CIMA®,248 Columbia Tpk.Suite 104Florham Park, NJ 07932Phone: 973-966-6939Fax: 973-966-0032john@bodnar.netwww.bodnar.net

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020

John Bodnar, III, RegisteredPrincipal, Securities offeredthrough Cambridge InvestmentResearch, Inc., a Broker/Dealer,Member FINRA/SIPC.

Investment Advisor RepresentativeCambridge Investment ResearchAdvisors, Inc., a RegisteredInvestment Advisor.

Financial Planning Services offeredthrough Bodnar Financial Advisors,Inc., a Registered InvestmentAdvisor.

Cambridge and Bodnar FinancialAdvisors, Inc., are not affliated.

Should I sign up for an identity theft protection service?Unfortunately, data breachesare now normal, everydayoccurrences in our society. Asa result, many companies areoffering services to help you

protect your personal information. If you wantan extra layer of protection, an identity theftprotection service is a good option. However,the term "identity theft protection service" canbe misleading. The reality is that no one servicecan safeguard all of your personal informationfrom identity theft. What most of thesecompanies actually provide are identity theftmonitoring and recovery services.

A monitoring service will watch for signs that anidentity thief may be using your personalinformation. This typically includes tracking yourcredit reports for suspicious activity and alertingyou whenever your personal information (e.g.,Social Security number) is being used. Therecovery portion of the service usually helpsyou deal with the consequences of identitytheft. This often involves working with a casemanager to help resolve identity theft issues(e.g., dealing with creditors or placing a freezeon your credit report). And depending on thelevel of protection you choose, the service may

also provide reimbursement for out-of-pocketexpenses directly associated with identity theft(e.g., postage, notary fees) and any fundsstolen as a result of the identity theft (up to planlimits). Identity theft protection services usuallycharge a monthly fee. Entry-level plans thatprovide basic protection (e.g., Social Securitynumber and credit alerts) can cost as little as$10 a month, while plans that offer moreadvanced features (e.g., investment accountmonitoring) will cost more.

Keep in mind there are steps you can take onyour own to help protect yourself againstidentity theft, such as:

• Check your credit report at least once a yearfor errors

• Periodically review your bank and debit/creditcard accounts for suspicious charges/activity

• Obtain a fraud alert or credit freeze ifnecessary

• Have strong passwords, use two-stepauthentication, minimize information sharing,and be careful when shopping online

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