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

October 2017

Managing Debt While Saving for Retirement

Examining the Taxpaying Population: Where DoYou Fit In?

Is the Social Security Administration still mailingSocial Security Statements?

What are some tips for reviewing my Medicarecoverage during Medicare Open Enrollment?

Cooper Advisory NewsletterPlanning Your Financial FutureFrom Data Breaches to Ransomware: How to Avoid Becomingthe Victim of a Cybercrime

See disclaimer on final page

Each time youconnect to theInternet, you riskbecoming the victimof a cybercrime. It'sthe price we pay forliving in a digitalworld — whether it'sat home, at work, oron your smartphone.

According to theIdentity Theft Resource Institute, the number ofU.S. data breaches in 2016 increased by 40%.And as recently as May 2017, a widespread"ransomware" attack targeted personalcomputers across the globe. While softwarecompanies are continually developingstrategies to combat the latest cybercrimes,there are some steps you can take to helpprotect yourself online.

The stronger, the betterIt's a scary thought — most of us have a largeamount of financial and personal informationthat's readily accessible through the Internet, inmost cases protected by nothing more than ausername and password.

Create a strong password by using acombination of lower- and upper-case letters,numbers, and symbols or by using a randomphrase. Avoid using a password with yourpersonal information such as your name andaddress. In addition, have a separate andunique password for each account or websitethat you use.

If you have trouble keeping track of all yourpassword information or you want an extra levelof password protection, consider usingpassword management software. Passwordmanager programs generate strong, uniquepasswords that you control through a singlemaster password.

Follow the 3-2-1 ruleBacking up your online data is critical to avoidlosing valuable information due to a cyberattack. If you have digital assets that you don'twant to risk losing forever, you should back

them up regularly. This pertains to data storedon both personal computers and mobiledevices.

When backing up data, a good rule to follow isthe 3-2-1 rule. This rule helps reduce the riskthat any one event — such as a computer hackergaining access to your computer — willcompromise your primary data and backups. Inorder to follow the 3-2-1 rule:

• Have at least three copies of your data (thismeans a minimum of the original plus twobackups)

• Use at least two different formats (e.g., harddrive and cloud-based service)

• Ensure that at least one backup copy isstored in a separate location (e.g.,safe-deposit box)

Stay one step aheadFinally, the best way to avoid becoming thevictim of a cybercrime is to stay one step aheadof the cybercriminals. Here are some extraprecautions you can take before you go online:

Consider using two-step authentication.Two-step authentication, which involves using atext or email code along with your password,provides another layer of protection for yoursensitive data.

Keep an eye on your accounts. Notify yourfinancial institution immediately if you seesuspicious activity. Early notification not onlycan stop the cyber thief but may limit yourfinancial liability.

Think twice before clicking. Beware of emailscontaining links or asking for personalinformation. Never click on a link in an email ortext unless you know the sender and have aclear idea where the link will take you.

Be careful when you shop. When shoppingonline, look for the secure lock symbol in theaddress bar and the letters https: (as opposedto http: ) in the URL. Avoid using public Wi-Finetworks for shopping, as they lack secureconnections.

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Managing Debt While Saving for RetirementIt's a catch-22: You feel that you should focuson paying down debt, but you also want to savefor retirement. It may be comforting to knowyou're not alone.

According to an Employee Benefit ResearchInstitute survey, 18% of today's workersdescribe their debt level as a major problem,while 41% say it's a minor problem. Andworkers who say that debt is a problem are alsomore likely to feel stressed about theirretirement savings prospects.1 Perhaps it's nosurprise, then, that the largest proportion (21%)of those who have taken a loan from theiremployer-sponsored retirement plans havedone so to pay off debt.2 Borrowing from yourplan can have negative consequences on yourretirement preparedness down the road. Loanlimits and other restrictions generally apply aswell.

The key in managing both debt repayment andretirement savings is to understand a few basicfinancial concepts that will help you develop astrategy to tackle both.

Compare potential rate of return withinterest rate on debtProbably the most common way to decidewhether to pay off debt or to make investmentsis to consider whether you could earn a higherrate of return (after accounting for taxes) onyour investments than the interest rate you payon the debt. For example, say you have a creditcard with a $10,000 balance that carries aninterest rate of 18%. By paying off that balance,you're effectively getting an 18% return on yourmoney. That means your investments wouldgenerally need to earn a consistent, after-taxreturn greater than 18% to make saving forretirement preferable to paying off that debt.That's a tall order for even the most savvyprofessional investors.

And bear in mind that all investing involves risk;investment returns are anything butguaranteed. In general, the higher the rate ofreturn, the greater the risk. If you makeinvestments rather than pay off debt and yourinvestments incur losses, you may still havedebts to pay, but you won't have had the benefitof any gains. By contrast, the return that comesfrom eliminating high-interest-rate debt is a surething.

Are you eligible for an employer match?If you have the opportunity to save forretirement via an employer-sponsored plan thatmatches a portion of your contributions, thedebt-versus-savings decision can become evenmore complicated.

Let's say your company matches 50% of yourcontributions up to 6% of your salary. Thismeans you're essentially earning a 50% returnon that portion of your retirement accountcontributions. That's why it may make sense tosave at least enough to get any employermatch before focusing on debt.

And don't forget the potential tax benefits ofretirement plan contributions. If you contributepre-tax dollars to your plan account, you'reimmediately deferring anywhere from 10% to39.6% in taxes, depending on your federal taxrate. If you're making after-tax Rothcontributions, you're creating a source oftax-free retirement income.3

Consider the types of debtYour decision can also be influenced by thetype of debt you have. For example, if youitemize deductions on your federal tax return,the interest you pay on a mortgage is generallydeductible — so even if you could pay off yourmortgage, you may not want to. Let's say you'repaying 6% on your mortgage and 18% on yourcredit card debt, and your employer matches50% of your retirement account contributions.You might consider directing some of youravailable resources to paying off the credit carddebt and some toward your retirement accountin order to get the full company match, whilecontinuing to pay the mortgage to receive thetax deduction for the interest.

Other considerationsThere's another good reason to explore ways toaddress both debt repayment and retirementsavings at once. Time is your best ally whensaving for retirement. If you say to yourself, "I'llwait to start saving until my debts arecompletely paid off," you run the risk that you'llnever get to that point, because your goodintentions about paying off your debt may falter.Postponing saving also reduces the number ofyears you have left to save for retirement.

It might also be easier to address both goals ifyou can cut your interest payments byrefinancing debt. For example, you might beable to consolidate multiple credit cardpayments by rolling them over to a new creditcard or a debt consolidation loan that has alower interest rate.

Bear in mind that even if you decide to focus onretirement savings, you should make sure thatyou're able to make at least the minimummonthly payments on your debt. Failure to doso can result in penalties and increased interestrates, which would defeat the overall purpose ofyour debt repayment/retirement savingsstrategy.

1 Employee BenefitResearch Institute, 2017Retirement ConfidenceSurvey2 Employee BenefitResearch Institute, 2016Retirement ConfidenceSurvey3 Distributions from pre-taxaccounts will be taxed atordinary income tax rates.Early distributions frompre-tax accounts andnonqualified distributions ofearnings from Rothaccounts will be subject toordinary income taxes and a10% penalty tax, unless anexception applies. Employercontributions will always beplaced in a pre-tax account,regardless of whether theymatch pre-tax or Rothemployee contributions.

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Examining the Taxpaying Population: Where Do You Fit In?Every quarter, the Statistics of Income Divisionof the Internal Revenue Service (IRS) publishesfinancial statistics obtained from tax andinformation returns that have been filed with thefederal government. Recently published reportsreflect data gleaned from 2014 individualfederal income tax returns. These reports offera snapshot of how the U.S. population breaksdown as taxpayers.

The big pictureFor tax year 2014, U.S. taxpayers filed roughly139.6 million individual income tax returns.1Total adjusted gross income reported on thesetax returns was $9.71 trillion, resulting in a totalincome tax of $1.37 trillion. That works out toan overall average tax rate of 14.16% for allreturns filed — the highest total average rate inthe 10-year period represented by the statisticalreport.

If your 2014 AGI was $38,173 or more, youwere in the top 50% of all federal income taxfilers based on AGI. This group accounted for88.7% of all AGI reported and paid 97.3% oftotal federal income tax for the year.

A look at the topHow much AGI did it take to make the top 10%of all individual filers? Probably not as much asyou might think. If your AGI was $133,445 orgreater, you would have been one of the almost14 million filers making up the top 10%. Thisgroup reported about $4.58 trillion in AGI (morethan 47% of all AGI reported) and accountedfor about 70.9% of total individual income taxfor the year.

To make the top 5%, you would have needed$188,996 or more in AGI. You would have beenamong approximately 7 million filers whoreported almost $3.5 trillion in total AGI andaccounted for about 60% of total income taxespaid.

It's also worth noting that the top 3% of all 2014individual income tax returns based on AGIaccounted for 52.9% of total income tax paid forthe year.

The very, very topFor the 2014 tax year, 1.4 million returns hadan AGI of $465,626 or more. These taxpayersmake up the top 1% of filers, reporting almost$2 trillion in total AGI and responsible for justunder a 40% share of the total tax haul.

The 1,396 income tax returns that showed$56,981,718 or more in AGI make up the top0.001% (that's the top one-thousandth of 1%) of2014 filers. These filers together reported over$207 billion in AGI and paid over 3.6% of taxes.

Not all high-income returns showed taxOf the 6.2 million income tax returns filed for2014 with an AGI of $200,000 or more, 10,905showed no U.S. income tax liability (the numberdrops to 3,927 if you eliminate returns filed byindividuals who were responsible for incometaxes to foreign governments and had no U.S.income tax because of a credit for such taxespaid).

Why did these high-income returns show noU.S. tax liability? The IRS report noted thatthese returns show no tax for a variety ofreasons, including tax credits and deductions,most notably miscellaneous deductions anddeductions for charitable contributions, medicaland dental expenses, and investment interestexpenses. A significant secondary factor wasthe deduction for taxes paid.

Average tax ratesDividing total tax paid by total AGI yields thefollowing average federal income tax rates forthe 2014 tax year:

Top Filers(byPercentile)

AGIThreshold

Average TaxRate

0.001% $56,981,718 24.01%

0.01% $11,407,987 25.92%

0.1% $2,136,762 27.67%

1% $465,626 27.16%

5% $188,996 23.61%

10% $133,445 21.25%

20% $90,606 18.64%

30% $66,868 17.19%

40% $50,083 16.24%

50% $38,173 15.52%

1 Excludes returns filed by dependents; based onfinal estimates for tax year 2014 reported in Spring2017 Statistics of Income Bulletin

Sources for data: IRSStatistics of IncomeBulletins, Spring 2017 andSummer 2017, Washington,D.C., irs.gov/statistics

What is adjusted grossincome (AGI)?

Adjusted gross income, or AGI,is basically total income lessadjustments for certain items,such as deductiblecontributions made to an IRA,alimony paid, and qualifiedstudent loan interest paid.

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Cooper Financial ServicesMichael 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 2017

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.

What are some tips for reviewing my Medicare coverageduring Medicare Open Enrollment?During the Medicare OpenEnrollment Period that runsfrom October 15 throughDecember 7, you can make

changes to your Medicare coverage that will beeffective on January 1, 2018. If you're satisfiedwith your current coverage, you don't need tomake changes, but it's a good idea to reviewyour options.

During Open Enrollment, you can:

• Change from Original Medicare to a MedicareAdvantage plan, or vice versa

• Switch from one Medicare Advantage plan toanother Medicare Advantage plan

• Join a Medicare prescription drug plan, switchfrom one Medicare prescription drug plan toanother, or drop prescription drug coverage

The official government handbook, Medicare &You, which is available electronically or throughthe mail, contains detailed information aboutMedicare that should help you determinewhether your current coverage is appropriate.Review any other information you receive fromyour current plan, which may include an Annual

Notice of Change letter that lists changes toyour plan for the upcoming year.

As you review your coverage, here are a fewpoints to consider:

• What were your health-care costs during thepast year, and what did you spend the moston?

• What services do you need and whichhealth-care providers and pharmacies do youvisit?

• How does the cost of your current coveragecompare to other options? Considerpremiums, deductibles, and otherout-of-pocket costs such as copayments orcoinsurance; are any of these costschanging?

If you have questions about Medicare, you cancall 1-800-MEDICARE or visit the Medicarewebsite at medicare.gov. You can use the site'sMedicare Plan Finder to see what plans areavailable in your area and check each plan'soverall quality rating.

Is the Social Security Administration still mailing SocialSecurity Statements?Your Social SecurityStatement provides importantinformation about your SocialSecurity record and future

benefits. For several years, the Social SecurityAdministration (SSA) mailed these statementsevery five years to people starting at age 25,but due to budgetary concerns, the SSA hasstopped mailing Social Security Statements toindividuals under age 60.

Workers age 60 and over who aren't receivingSocial Security benefits will still receive paperstatements in the mail, unless they opt to signup for online statements instead. If you're age60 or older, you should receive your statementevery year, about three months before yourbirthday. The SSA will mail statements uponrequest to individuals under age 60.

However, the quickest way to get a copy ofyour Social Security Statement is to sign up fora my Social Security account at the SSAwebsite, ssa.gov. Once you've signed

up, you'll have immediate access to yourstatement, which you can view, download, orprint. Statement information generally includesa projection of your retirement benefits at age62, at full retirement age (66 to 67), and at age70; projections of disability and survivorbenefits; a detailed record of your earnings; andother information about the Social Securityprogram.

The SSA has recently begun using a two-stepidentification method to help protect my SocialSecurity accounts from unauthorized use andpotential identity fraud. If you've neverregistered for an online account or haven'tattempted to log in to yours since this change,you will be prompted to add either your cellphone or email address as a secondidentification method. Every time you enter youraccount username and password, you will thenbe prompted to request a unique security codevia the identification method you've chosen,and you need to enter that code to completethe log-in process.

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