Investors around the world breathed a sigh of
relief last week.
It wafted many markets higher. The NASDAQ
jumped by more than 4 percent. The Standard & Poor’s 500 Index gained 2.4 percent.
France’s national benchmark index rose 4.5 percent, Germany’s was up 3.2
percent, Italy’s increased by 3.6 percent, and China’s Shanghai Composite was
up 2.1 percent. So, what happened?
Global markets stabilized.
First, the Chinese stock market staunched its wounds and recovered
some value, which eased investors’ worries. According to Barron’s, by the end of the week, the Shanghai Composite Index was
up 13 percent from its early July low. The market’s recovery owed much to
Chinese government intervention. BloombergBusiness
explained:
“Chinese policy makers have gone to
unprecedented lengths to put a floor under the market as they seek to bolster
consumer confidence and prevent soured loans backed by equities from infecting
the financial system. Over the past few weeks, they’ve banned large
shareholders from selling stakes, ordered state-run institutions to buy shares,
and let more than half of the companies on mainland exchanges halt trading.”
Investors also were appreciative when Greece reached an agreement
with its creditors. It accepted austerity measures, which voters had soundly
rejected with a ‘no’ vote on July 5 to forge a bailout agreement with European
Union (EU) leaders.
That doesn’t mean the Greek debt debacle is over. Late last week,
the International Monetary Fund issued a memo indicating it would not support a
bailout for Greece unless significant debt relief was involved. Neither the EU
nor the European Central Bank is interested in forgiving Greek debt. In fact, that
was one of the main reasons negotiations with creditors failed the first time
around.
Are you missing out on a
possible triple tax advantage? If you have a high deductible health insurance plan and you’re not contributing
the maximum to a health savings account (HSA), then you may be missing out. A
study cited by The Washington Post
found just one in 20 people with HSAs take full advantage of the opportunity.
In general, HSAs offer three tax benefits:
1.
Contributions
are federally tax-deductible up to certain limits ($3,350 for a single person
and $6,650 for a family in 2015; add $1,000 to those limits if you’re age 55 or
older).
2.
Any interest
earned on money in an HSA grows tax-deferred.
3.
Withdrawals
used to pay qualified medical expenses are income tax free.
Tax advantages aren’t the only reason to open an HSA. Money set
aside in these accounts can be used to pay health insurance deductibles as well
as qualified medical expenses. Although, according to The New York Times, determining which products can be purchased with
HSA savings can be confusing:
“Under a change enacted with the Affordable
Care Act, most over-the-counter drugs, like common allergy medications or pain
relievers, are HSA-eligible only if you get a prescription for them from your
doctor. On the other hand, items like sunscreen and contact lens solution are
eligible for purchase – without a prescription – with your HSA funds.”
HSA assets also can be used to pay health insurance premiums (if
workers are receiving unemployment benefits) and long-term care premiums.
It’s important to make sure HSA funds are used for qualified
expenses because any money withdrawn for non-qualified expenses is taxed as
ordinary income, plus a 20 percent penalty tax is assessed if the account holder
is younger than age 65.
That brings us to another advantage provided by HSAs. Kiplinger.com explained money not spent
during the contribution year remains in the account. Any earnings grow
tax-deferred and the savings that accumulate may be used for qualified medical
expenses in the future or, once the account holder reaches age 65, for living
expenses. In the latter case, withdrawals may be taxed as ordinary income.
Weekly Focus – Think About It
“In theory there is no difference between
theory and practice. In practice there is.”
--Yogi Berra,
American baseball player
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