A Health savings Account (HSA) is a tax-advantaged savings account for individuals and families enrolled in a high-deductible health plan. Contributions to an HSA are tax deductible and can be made via payroll deductions, as well as from outside contributions. Withdrawals used to cover qualified medical expenses are not subject to federal taxes. These plans are designed to provide a tax break for the out-of-pocket medical costs associated with a higher deductible health plan, however they also can be used as a great vehicle to save for retirement.
The 10 bear markets since 1929 combine for an average market drop of 45% over an average duration of 25 months. The bull markets that have preceded/followed those 10 bears have generated an average return of 154% over an average duration of 54 months. The current bull market, which began on March 2009, is well above those averages. The bulls just celebrated the 8th anniversary, and have cheered market gains of 231% through the end of 2016. With the market continuing to post impressive gains to start 2017, many investors are increasingly worried that a “pullback” is on the horizon. This increasing pessimism has many investors asking; “Is it possible to time the market?”
Global stock and bond prices broadly advanced during the first half of the year during a period absent of volatility. Investors attribute the rally’s breadth to strengthening corporate earnings, improving economies and continued support from Japanese and European central banks. Markets shrugged off repeated global terrorist incidents, while a seemingly stalled presidency and gridlocked Congress wrangled with the question of the government’s appropriate role in the US health care system. After soaring to a 14 year high right after the Trump election, the US dollar has now weakened, declining by 5.6% over the last six months against other major currencies.
Capital Markets marked time and fluctuated largely sideways after posting sharp gains in the first month (July) of the 3rd Quarter.
The 10-year US Treasury yield crept up to 1.6% after falling to 1.36% earlier in the quarter. The longer end of the curve remained less steep with the 30 Year note yielding just 2.32%. It began the quarter yielding 2.29%, so it hardly budged. Municipal bond prices moderately declined during the quarter but traded down less than -0.31%. Inflation Protected Treasuries advanced 1.42% and is now up 6.58% year to date. The US Aggregate bond advanced by .46% and ended the quarter with a 5.80% year to date gain. Comments from the Federal Open Markets Committee suggest a rate hike is in play by the end of year. Read more
Because it is always a timely topic, we thought we would discuss household fiscal responsibility and try to provide readers with some tips for getting their fiscal house in order. As financial planners and CPA’s, we interact with people from all across the financial spectrum. Our experience has taught us that whether a household is in good financial condition or not has less to do with household income and more to do with household spending (Sound familiar, can you say federal government?). We see families who make more than $500,000 annually who can’t borrow a nickel because they are so maxed out with debt. We also see families who make $60,000 annually who have a house, two cars and no debt other than a mortgage. What it comes down to is simple math. You can’t spend more than you make indefinitely. You can do so in the short-term by borrowing to fund the difference, but at some point that option runs out. So, why do so many families find themselves in a financial mess? We believe there are three main reasons:
Retirement Planning is by far one of the most important areas of financial planning and one that we allocate a good portion of our time and resources to address. We break retirement planning up into two distinct phases:
- Accumulation Phase
- Distribution Phase
The accumulation phase is simply the phase in which you are still working and gathering assets to fund the second phase, which is the distribution phase. Clients in the distribution phase are typically either retired or semi-retired and are supplementing their pre-retirement income with distributions from their portfolios. In the last newsletter we addressed the accumulation phase. This article is part two of our two-part series on retirement planning and will address the distribution phase.
Market Overview – Markets move past Brexit!
World Capital Markets quickly reversed after a knee-jerk sharp two day sell off from Friday, June 24th to Monday, June 27th in the aftermath of the UK vote to exit the European Union. However, the DJIA average recouped the two-day 871-point route ending the quarter plus 790 points in the final four trading days. Including July 1st, the US markets had their best week of the year. However, the story of the 2nd quarter and that of 2016 thus far is the action in the bond markets. The 10-year US Treasury note briefly fell below its lowest level ever at 1.385% on the first day of trading in the third quarter. The market is now firmly of the belief that Brexit collateral damage uncertainty will exert pressure on world central banks to pump even more stimulus to world economies. Brexit has put a downward trajectory on the British Pound sterling, and sparked additional demand for US Treasuries and the US dollar. Gold has caught a bid. Recent events suggest that The Federal Reserve may remain in a holding pattern as well.