Market Commentary for the week of May 28, 2018

The Markets

Trading volume was light going into the holiday weekend. The S&P and the Dow fell Friday amid a steep drop in oil prices, continued trade tensions with China and uncertainty over talks with North Korea. The three main indexes still posted weekly gains. For the week, the Dow rose 0.18 percent to close at 24,753.09. The S&P gained 0.33 percent to finish at 2,721.33, and the NASDAQ climbed 0.70 percent to end the week at 7,433.85.

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

Big Surprise — Seventeen percent of 1,040 retirees surveyed in January 2018 say their health care expenditures in retirement are “much higher than expected” (source: EBRI Retirement Confidence Survey).

Many Years, No Change — The Social Security payroll tax rate paid by employees has been 6.2 percent since 1990 except for a 2 percent reduction in the rate during the two years of 2011-12 (source: Social Security, BTN Research).

Lengthy — The USA’s current economic expansion (in its 107th month) is the nation’s second longest expansion based upon data that has been tracked since 1854, i.e., for 164 years (source: National Bureau of Economic Research, BTN Research).

WEEKLY FOCUS – Today Is National 529 College Savings Plan Day

If you’re concerned about funding your child’s or grandchild’s education, here are some things to know about tax-advantaged 529 College Savings Plans:

Advantages: These low maintenance plans let donors control the account and change investments twice a year. While the initial contribution is made with post-tax dollars, the account’s earnings are federal tax-free with qualified distributions. What’s more, over 30 states currently add a full or partial state tax deduction on contributions. Unlike Coverdell Education Savings Accounts and Roth IRAs, 529s aren’t subject to income, age or yearly contribution limits. However, only contributions up to $15,000 per individual per year will be considered gifts for tax purposes.

New this year: Thanks to last year’s Tax Cut and Jobs Act, qualified withdrawals up to $10,000 for tuition to K-12 schools can now be made for each beneficiary per year. Although every state makes qualified withdrawals for higher education tax-free, not all do for K-12 expenses. Even those that do may later reconsider since shorter holding periods could make it difficult to predict state tax revenues and may increase costs to providers. The tax act also allows account holders to roll the annual gift limit amount from an existing 529 education account to an ABLE (Achieving a Better Life Experience) account for a beneficiary who was disabled after the account was funded.

Other useful facts: Plan assets owned by a dependent student or a parent count on the Free Application for Federal Student Aid (FAFSA), but both are considered parental assets. The first $20,000 of parental assets aren’t counted in the Expected Family Contribution calculation; beyond that, up to 5.64 percent are factored (compared to 20 percent of students’ assets). Eligible expenses for higher education include: tuition, fees, books, supplies, computers and room and board. Transportation costs, health insurance and student loan repayments are excluded.

Donors will not lose account funds if a beneficiary doesn’t need them for educational purposes but will incur tax consequences for non-education distributions – unless the beneficiary: receives a tax-free scholarship, attends a U.S. Military Academy or dies or becomes disabled. Donors can also change an account’s beneficiary to another family member or make themselves a beneficiary to further their own education without tax consequences.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright May 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2133953.1