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What you need to know about Health Savings Accounts
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 Health Savings Accounts are helping many Americans as a supplement to health insurance policies. The following article, from DepositAccounts.com, gives you the information you need to decide if an HSA is right for you.
What can a HSA do for you?
First off, an HSA is a tax-advantaged savings account designed to be used only in conjunction with a High Dollar Deductible Plan (HDHP) based on guidelines set by the IRS. This year, individuals can contribute $3,100 and families $6,250.
What's good about them? They have a triple tax advantage. "You get a pre-tax or tax deductible contribution going into the account, tax-deferred growth of the earnings and income tax free when spent on a qualified Section 213(d) expense (see IRS Pub. 502 for a full list of expenses that are HSA eligible)," says Paul Ashley, an advisor with FirstPerson, an employee benefits consulting firm.
"There is no 'use it or lose it rule' with the money in the account like you see on a Flexible Spending Account," says Renee Guariglia, executive vice president for Falcone Associates, which specializes in employee benefits.
Then too, of no small consequence, a high-deductible health insurance plan paired with a HSA, often costs much less in monthly premiums compared to traditional health insurance. You can use your HSA to pay for co-payments, co-insurance and qualifying medical expenses not covered by your health plan, for example, explains Carrie McLean, consumer specialist with eHealthInsurance.com. Without a tax penalty, you may not use HSA funds to pay for monthly health insurance premiums or anything other than qualifying medical expenses, she adds. Money in a HSA cannot be used for over the counter medications, unless you have a prescription from your provider, says Guariglia.
Know too, that if you withdraw funds from your HSA for non-qualified medical expenses, you need to report that on your tax return and pay taxes on it. If you are younger than age 65, you will also pay a 20 percent penalty, says Bill Ware, vice president of U.S. Bank's Healthcare Payment Solutions.
Is a HSA Right For You?
For all the good stuff about HSAs, they aren't for everybody. "They tend to come with higher-than-average deductibles," says McLean. Average annual deductibles for HSA-eligible plans was $3,567 for individuals and $5,685 for families (non-HSA deductibles for comparison, were $2,810 for individuals and $3,398 for families), according to McLean. "Make sure you can afford the deductible in a pinch if necessary," she adds.
HSAs are best for individuals and families who historically incur medical expenses below the deductible chosen, says Steven Spiro, a chartered life underwriter with The Excelsior Group, an independent insurance agency. "The savings in premium should more than cover their expenses. And if they've gambled incorrectly, at least the family's maximum exposure is capped."
Generally, HSAs work for those who rarely visit the doctor or for those whose employers help fund the account, says McLean.
Know too, that you need to keep all receipts, Explanation of Benefit (EOB) statements from your insurance carrier and bank records in the event of an audit, says Guariglia.
Make the most of your HSA
To maximize the value of an HSA over time, limit utilization of medical care when appropriate and avoid meeting your deductible ever year, if possible, says McLean.
Ask your employer to chip in. Even if your employer doesn't fully fund HSA, they may be willing to contribute toward your HSA as a component of your total compensation package. You never know until you ask.
If you're over 55, you may qualify to make an additional $1,000 contribution toward your HSA for the 2012 tax year. Talk to your tax professional.
Be sure to deduct your contributions up to the federally prescribed limits. If you don't reach those limits during 2012, one of the nice things about HSA contributions is that they can be made in the first part of 2013 (prior to tax day) and applied to qualified medical costs in 2012, points out McLean. |
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What is the worst career mistake you can make?
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Career management has become a serious concern for many in these days of economic uncertainty. Forbes magazine contributor, Kathy Caprino, tells us that complacency and stagnation can be a major career blunder.
It can be summarized by these fateful words:
"I'm staying just where I am; I don't need to make any changes."
The reality today is that you must always be looking up and looking in - open to what's happening around you and within you. If you block out this vital information and refuse to process it and adapt appropriately to it, you'll be blindsided, either by changes in your professional environment, or by shifts inside you that bring with them powerfully unsettling outcomes. Getting blindsided really hurts and is hard to recover from.
What can you do to avoid this huge career blunder?
Take these five steps to ensure you'll see clearly what's happening around you and within you, and use the information you receive to manage and grow your career:
1) Remember, nothing outside yourself is "secure."
So many professionals have the mistaken notion that because they're doing well, their job is secure. Nothing could be farther from the truth. How you're faring in your job is NOT a predictor of the security of your role or position or you in it. A myriad of other important factors come into play, including: the stability of your industry, your employer's financial well-being, the ever-shifting power and labor dynamics at your company, your relationships with your peers, colleagues and managers, and structural or organizational demands/changes that are beyond your control. Nothing is secure - least of all a job - except what you hold and possess inside of you.
2) Grow and stretch your skills and abilities, or you'll fall behind.
Another mistake people make is to hunker down hard and stick with only what they know to do. It's a recipe for disaster to stay overly-focused on your existing skill set, refusing to stretch your chops and embrace new talents, abilities, and focus areas. The key is to continually expand your professional toolbox, not just stay put. The business world is changing at the speed of light, and we need to keep ourselves current, adaptable, and open to these changes to be of continuing value.
3) Identify exactly what your employer wants from you.
Employed individuals today often think about what they want from the job, and about what the employer owes them. They neglect, however, to see that it's a two-way street: the relationship has to be mutually beneficially and positive, or it won't last. You need to identify specifically and concretely what your employer and manager want from you - behaviorally, performance-wise, and in terms of your relationships with others, your leadership potential, and your long-term contribution. If you're not willing to or capable of giving them what they want, there will be changes made, and most likely you won't like them.
4) Keep your professional relationships positive and nurturing.
Here's an important tip - if you don't get along with people, your job and career are in danger, no matter how well you "perform." Your potential success and value as a professional are directly correlated with how well you engage, inspire, and connect with others. If you hate the folks you work with, they'll end up hating you back, and mutual disdain is not a condition that will keep you in good stead at work. If your professional relationships are suffering, move to remedy them today.
5) If you're unhappy, make a change
Finally, if you're unhappy at work, you must make a change now. I'm not suggesting that you jump ship without another job, especially in these times. I mean that you need to get to the bottom of what isn't working - deeply and specifically -and address the situation without delay. Most people are hanging onto their jobs in this economy for fear of not being able to find another. If this describes you, my best advice is to keep your job for the time being, but try to make it the best you can, and make yourself the best you can be in the process.
Address your challenges, fears, insecurities, and problems before you get a new job or launch a new career. Otherwise, the problems will follow you in the next chapter of life and work. Do what you must to stay afloat, while planting seeds for your future career visions. Don't wait. Interview, network, reach out to former colleagues, learn new skills, get great recommendations on LinkedIn - understand your worth in the marketplace, and become an active participant in your career management. Don't just sit and wait for a headhunter to call you. In the end, hanging on to a job you dislike or that you're not good at will end badly for you.
Read the entire article here.
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Student debt: Where you attend college matters
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Student loan debt is constantly increasing in the U.S. This article by Kathleen Kingsbury, originally printed in Yahoo! Finance, points out some important facts that may influence your choice of college or university for your children.
If you thought four years at Princeton would leave you saddled with more debt than the University of Michigan, think again.
Where you attend college can significantly impact how much you owe when you leave school. Thanks to generous financial aid policies and large endowments, students may find that an Ivy League degree, for example, often requires less borrowing than a degree from many much less expensive state schools.
To demonstrate these differences, Reuters gathered research on the average student debt for the class of 2011 - the most recent data available - at 25 private and public universities and liberal arts colleges with top rankings from
These schools, among the most elite and expensive in the country, also have instituted in the last several years some of the most generous financial aid policies. On average, 53% of students at the surveyed schools received financial aid, and at least half of students at most of the institutions graduated debt-free. Yet University of Michigan graduates owed, on average, more than $27,000, compared with an average for Princeton University graduate of only $5,000.
And the much higher debt levels at Michigan come even though costs there for in-state students are less than half the cost of attending Princeton - an estimated $25,204 for incoming freshman at Michigan for tuition, room and board, compared with $54,780 at Princeton.
The average debt at Michigan is calculated to include both in-state and out-of-state graduates; for the latter group, costs for incoming freshman almost rival Princeton, at an estimated $50,352.
Seventy-four schools nationwide, both public and private, have eliminated loans from their financial aid packages for at least some students, according to FinAid.org. The California Institute of Technology, known as Caltech, North Carolina's Davidson College and University of Washington are just a few examples.
Others, such as Harvard, Stanford, and Berkeley, have capped contributions for students from low-and middle-income families. As of next fall, for instance, Harvard students with a family income of less than $65,000 will pay nothing to attend, and those with incomes under $150,000 will pay 10% of the total cost of tuition, room, board and fees - or less.
"Our commitment is not to make education free, but to make it affordable," says Adam Falk, president of Williams College, which whenever possible provides students who qualify for financial aid with grants or scholarships rather than loans.
Students at no-loan colleges still can, and often do, borrow money to help cover the portion of costs that the institutions determine should be borne by their families. At Pomona College, for instance, the average student debt is slightly more than $10,000, and 53% of students graduated with loans. The University of North Carolina, on the other hand, also had one of the lowest debt burdens, $15,472, with 65% of students graduating debt-free.
Eliminating loans isn't an option at most public universities. Substantial state funding cuts are forcing public schools to depend more heavily on tuition payments to cover operating costs.
"We just don't have the fiscal means to eliminate debt," says Susan Fischer, financial aid director at the University of Wisconsin-Madison, where students graduated with an average debt of $24,140 in 2011.
Two-thirds of all students in 2010 borrowed money to pay for college, for an average debt load of $25,000, according to the nonprofit Institute for College Access & Success.
One reason - the average tuition and fees at private four-year colleges rose 28% in the last five years, according to the nonprofit College Board; the increase was 41% for in-state tuition at public schools.
California alone - which educates about 10% of all full-time U.S. college students - increased tuition and fees at state schools by 21% in 2011 at its four-year institutions and by 37% at two-year colleges.
With the weak job market, the prospects for paying back loans are challenging for recent grads. One statistic grabbing headlines is that total outstanding student loan debt in the U.S. now tops $1 trillion, exceeding even credit card debt.
One yardstick for how much debt students can handle: Borrow no more over four years than what you'll earn the first year out of college. That can require rigorous budgeting and tough decisions, yet college administrators believe loans help make students feel more responsibility for their education.
To read the entire article, click here .
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What's happening now
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What are the six factors that can keep you from happiness and achieving your goals? Hint: Number 3 - Nothing destroys a good idea faster than a mandatory consensus.
Yahoo! CEO Scott Thompson told a lie on his r�sum�. What is the high price of including untruths or exaggeration of facts on business r�sum�s? Click here.
Which U.S. cities have the most ultra-high net worth individuals (the 1%)? Pretty much what you may expect, but there are some surprises.
Did you know that asking a banker to check your credit score could cause it to be lowered? This and six other ways you might inadvertently cause your credit score to go down.
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This communication is strictly intended for individuals residing in the States of: AL, AR, AZ, CA, CO, CT, FL, GA, IA, IL, IN, KY, LA, MA, ME, MI, MT, NC, NY, OH, PA, SC, TX, VA WI, WV. No offers may be made or accepted from any resident outside these States due to various state requirements and registration requirements regarding investment products and services. Securities and Advisory Services Offered Through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser. Fixed-insurance products and services offered by Chornyak & Associates, LTD are separate and unrelated to Commonwealth. This informational e-mail is an advertisement. To opt out of receiving future messages, follow the "Unsubscribe" instructions below. Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor's. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000� Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Barclays Capital Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury's daily yield curve. The Barclays Capital Mortgage-Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Barclays Capital Municipal Bond Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. The Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index measures the performance of intermediate (1- to 10-year) U.S. TIPS. |
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June 2012
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HSAs or Health Savings Accounts can provide significant tax deductions as well as help you deal with rising health care costs. However, they are not for everyone. Please read this month's lead article to learn if an HSA makes sense for your family. I found an intriguing article in Forbes magazine that I think you might find interesting. It points out some danger signs that may indicate that you may not be as secure in your job as you think you are. We can no longer be complacent in our career position as we may have been in the past. With people changing jobs on an average of every three years, we have to be circumspect and willing to stretch our comfort zone. Student loan debt has been in the news a lot recently. Did you know that some institutions of higher learning in the U.S. are actually doing away with loans as a means of student financial aid? Choosing carefully the college or university that your children attend can help control the amount of debt they incur and have to pay off upon graduation. Don't miss this significant article from Yahoo! finance.
In our "What's happening now" section we reveal the necessity of truthfully reporting your achievements on a resume and some unexpected mistakes you can make that result in a lower credit score. I enjoy hearing from our clients and newsletter readers. Please feel free to call me at 614-888-2121 (or toll- free 877-389-2121), or send an e-mail to:
Sincerely, Joe
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Market Update
| Sell in May and go away?
May was a difficult month for equities across the board, as investors seemed to heed the "Sell in May" maxim. The S&P 500 Index was down 6.01 percent for the month, while the Nasdaq fell 7.19 percent. From a fundamental perspective, there were no changes that would justify the decline in the market, as corporate earnings remained strong, and valuations, based on trailing earnings, continued to appear reasonable. Technically, though, the market has shown significant weakness, with both the S&P and the Nasdaq moving below their 50-day moving averages and close to their 200-day moving averages. This is a sign that could mean we're in store for continued weakness.
International markets fared worse in May, partially due to the relative weakness of the euro and other foreign currencies versus the dollar. The MSCI EAFE Index was down 11.48 percent, and the MSCI Emerging Markets Index was off 11.67 percent. Like the U.S. markets, trailing fundamentals showed no significant changes, but the deterioration of the European macroeconomic outlook and a slowing Chinese economy implied that future results might well be below initial expectations. Technically, both indices have been below their 50-day moving averages since April, and they each moved decisively below their 200-day moving averages in early May, again potentially foreshadowing continued weakness.
U.S. Treasuries continued to do well, however, with yields on U.S. government securities remaining stable for shorter maturities and continuing to drop to new lows for longer maturities throughout the month. Municipal spreads remained level, while corporate and high-yield spreads widened. The Barclays Capital Aggregate Bond Index returned 0.90 percent, and the Barclays Capital U.S. Corporate High Yield Index lost 1.31 percent for the month.
The common factor among these return patterns is the resumption of the risk-off trade, as investors divested themselves of assets that are perceived as risky. The worsening consensus outlook for multiple large economies across the world contributed to a demand for so-called safety assets, and U.S. assets-Treasuries in particular-led the way.
The pain in Spain
Europe drove the risk-off trade, with debt and economic worries once again dominating the headlines. The eurozone economy as a whole has begun to contract. Although the results varied by country, overall demand slowed dramatically in May. Even in historically strong countries like Germany, economists believe that growth will slow as exports to other countries fall. Beyond the real economy, the financial economy also showed worrying signs. The Spanish banking system continued to show signs of stress, and Spanish interest rates increased over the month.
The political backdrop is uncertain as well, with the German-sponsored consensus of austerity under threat. At the end of May, Ireland apparently approved the European fiscal pact, committing the country to continued government spending cuts and austerity. Greece, however, remains an open question. After a failed attempt to form a government, the country has a new round of elections scheduled for mid-June. The results may or may not support the earlier austerity commitments Greece made to receive bailouts. Initial meetings between new French President Fran�ois Hollande and German Chancellor Angela Merkel were inconclusive, but Hollande remains under domestic pressure to at least weaken the German austerity program. Overall, the consensus of two months ago, which was based on the premise that the European problem was on the way to being solved, showed substantial cracks in May.
Negative signs are coming out of China as well, with projected growth slowing and nearing levels that have created problems in the past. While the problems in China are nothing yet like the problems in Europe, the fact that growth is slowing means that another potential growth engine will not be there to bolster either the global or U.S. economy. Continued weakness in Europe is also a negative factor for China.
U.S. economy continues to plod along
Unlike Europe, the U.S. experienced modest economic growth. Data from April, released in May, suggested that while growth was slowing somewhat heading into the summer, the economy still appeared to be on track. A slowdown in employment growth grabbed our attention; nevertheless, the numbers still indicated growth in this area. Similarly, consumer spending continued, but a decline in personal saving may be cause for concern. Although there were many mixed indicators, two components of support stood out.
The first is the housing market. Housing starts, sales of new homes, and sales of existing homes all continued to increase in April, suggesting a broad bottoming in the market. Many markets are seeing price increases, and on a seasonally adjusted basis, the national indices are showing price increases as well. Housing is a foundational component to recovery, and although risks remain, the breadth of the positive data is a good sign in our view.
The second is automobile sales. Like housing sales, vehicle sales have a large supply chain and a high multiplier effect. Bloomberg reported that U.S. auto sales are on pace to achieve their best rate since 2007 and are in their third year of double-digit increases.
Overall, although the U.S. economy remains subject to substantial risks, the base expectation is that slow growth will continue. Most of the risks are noneconomic, with the largest being the pending "fiscal cliff" at the end of this year, when many tax and spending changes are scheduled to take effect if Congress takes no action to stop them. At the moment, though, the trends offer grounds for cautious optimism.
Time for caution, not panic
Despite the deep problems in Europe, and potentially in China, the U.S. remains in a strong, competitive position and, in many ways, is the least exposed of the major economies to global troubles. A strong and growing base of domestic demand will hopefully support growth, and exposure to global troubles via exports is limited. Even the links we do have, such as the banking system, have reduced their exposure over the past year or so. Market action has supported this viewpoint. With 10-year U.S. Treasuries at multiyear lows, the markets are saying that the U.S. market may be one of the safest on the planet. While the volatility of the past month has been unsettling-and may continue-we believe that the U.S. remains one of the best places to be over the medium to long term.
Authored by Brad McMillan, vice president, chief investment officer, at Commonwealth Financial Network.
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