Carrie Eritano, EA, RFC®Presidentceritano@moneyconcepts.comwww.moneyconcepts.com/ceritano

June 2018Marriage and Money: Taking a TeamApproach to Retirement

A Parent-Child Conversation AboutCollege Costs

Can I convert my traditional IRA to aRoth IRA in 2018?

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Itemized deductions — good and badThe overall limit on itemized deductions thatapplied to higher-income taxpayers is repealed,the income threshold for deducting medicalexpenses is reduced for 2018, and the income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

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018

All Securities Through MoneyConcepts Capital Corp., MemberFINRA / SIPC11440 North Jog Road, PalmBeach Gardens, FL 33418 Phone:561.472.2000Copyright 2010 Money ConceptsInternational Inc.

Investments are not FDIC or NCUAInsuredMay Lose Value - No Bank orCredit Union Guarantee

Can I convert my traditional IRA to a Roth IRA in 2018?If you've been thinking aboutconverting your traditional IRAto a Roth IRA, this year maybe an appropriate time to doso. Because federal income

tax rates were reduced by the Tax Cuts andJobs Act passed in December 2017, convertingyour IRA may now be "cheaper" than in pastyears.

Anyone can convert a traditional IRA to a RothIRA in 2018. There are no income limits orrestrictions based on tax filing status. Yougenerally have to include the amount youconvert in your gross income for the year ofconversion, but any nondeductible contributionsyou've made to your traditional IRA won't betaxed when you convert. (You can also convertSEP IRAs, and SIMPLE IRAs that are at leasttwo years old, to Roth IRAs.)

Converting is easy. You simply notify yourexisting IRA provider that you want to convertall or part of your traditional IRA to a Roth IRA,and they'll provide you with the necessarypaperwork to complete. You can also transferor roll your traditional IRA assets over to a newIRA provider and complete the conversionthere.

If you prefer, you can instead contact thetrustee/custodian of your traditional IRA, havethe funds in your traditional IRA distributed toyou, and then roll those funds over to your newRoth IRA within 60 days of the distribution. Theincome tax consequences are the sameregardless of the method you choose.1

The conversion rules can also be used tocontribute to a Roth IRA in 2018 if you wouldn'totherwise be able to make a regular annualcontribution because of the income limits. (In2018, you can't contribute to a Roth IRA if youearn $199,000 or more and are married filingjointly, or if you're single and earn $135,000 ormore.) You can simply make a nondeductiblecontribution to a traditional IRA and thenconvert that traditional IRA to a Roth IRA.(Keep in mind, however, that you'll need toaggregate the value of all your traditional IRAswhen you calculate the tax on the conversion.)You can contribute up to $5,500 to all IRAscombined in 2018, or $6,500 if you're 50 orolder.1 If you choose to receive the funds first and don'ttransfer the entire amount, a 10% early withdrawalpenalty may apply to amounts not converted.

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