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Health Savings Account (HSA)
Categories: Finance,
A health savings account is designed to accumulate tax-free assets to pay current and future healthcare expenses. To open an HSA, you must have a qualifying High Deductible Health Plan (HDHP) either through your employer or as an individual.If you have an employer's plan, your contributions to the HSA are made with pretax income, and your employer may contribute as well. If you have an individual plan, you may deduct your contributions in calculating your adjusted gross income (AGI).Congress sets an annual limit on the amount you can contribute to an HSA, which you set up with a financial institution such as a bank, brokerage firm, insurance company, or mutual fund company that offers these accounts.No tax is due on money you withdraw from the HSA to pay qualified medical expenses such as doctor's visits, hospital care, eyeglasses, dental care, and medications for yourself, your spouse, and your dependants.Any money that's left over in your HSA at the end of the year is rolled over and continues to accumulate tax-free earnings, which you can use for future healthcare costs.Once you're 65, you can use the money in the HSA for non-medical expenses without paying a penalty, but you'll owe income taxes on those withdrawals. If you are younger than 65, you can also spend from your HSA on non-medical expenses, but you'll owe income taxes plus a 10% tax penalty on the amount you take out.
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Standard & Poor's Depositary Receipt (SPDR)
Categories: Finance,
When you buy SPDRs - pronounced spiders - you're buying shares in a unit investment trust (UIT) that owns a portfolio of stocks included in Standard & Poor's 500-stock index (s&p 500). a share is priced at about 1/10 the value of the s&p 500.Like an index mutual fund that tracks the s&p 500, SPDRs provide a way to diversify your investment portfolio without having to own shares in all the s&p 500 companies yourself. However, while the net asset value (NAV) of an index fund is set only once a day, at the end of trading, the price of SPDRs, which are listed on the american stock exchange (AMEX), changes throughout the day, reflecting the constant changes in the index. SPDRs, which are part of a category of investments known as exchange traded funds, can be sold short or bought on margin as stocks can.Each quarter you receive a distribution based on the dividends paid on the stocks in the underlying portfolio, after trust expenses are deducted. If you choose, you can reinvest those distributions to buy additional shares.
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