Time to reconsider Health Savings Accounts. In the October 29, 2007 issue of Newsweek, there was an article outlining the advantages of an HSA.

The Newsweek article suggests finding a good HSA provider that offers an investment account and not just a bank savings account, which is fine if you believe that you can out-guess the market.

• High Deductible Health Plan (HDHP)
• minimum deductible must be at least $1,050 (self-only coverage) - 2006
• annual out-of-pocket (including deductibles and co-pays) for 2005 cannot exceed $5,250 (self-only coverage) - 2006

Save all the receipts to submit later to get the money back. Sounds like an administrative chore. Is it worth the effort for us, given that we are in good health and rarely incur any medical costs, even for over the counter medication. We usually don’t replace eyeglasses or contacts very often, but perhaps we should.

As someone pointed out recently, “no body expects car insurance to cover routine maintenance. Why would you expect your health insurance to cover routine healthcare costs?”

Who can benefit and how?

HSA in California for individuals

Aetna, Inc.
Blue Cross of California - *Individual PPO 3500 (HSA Compatible) Plan
Blue Shield of California
John Alden Insurance
Kaiser Foundation Health Plan
Lumenos, Inc.
Nationwide Health Plans

Learn more…

Newsweek article October 29, 2007

U.S. Treasury - Health Savings Accounts (HSAs)
Health Savings Accounts (HSAs) were created by the Medicare bill signed by President Bush on December 8, 2003 and are designed to help individuals save for …
www.treas.gov/offices/public-affairs/hsa/

U.S. Treasury - HSA Frequently Asked Questions
A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for …
www.ustreas.gov/offices/public-affairs/hsa/faq_basics.shtml

Health savings account - Wikipedia, the free encyclopedia
A Health Savings Account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a High Deductible …
en.wikipedia.org/wiki/Health_savings_account

ehealthinsurance.com

hsainsider.com - Newsweek suggests
HSA Insider - The Nation’s Leading Authority on Health Savings …
The HSA Insider is the Internet’s leading destination for information related to Health Savings Accounts. Inside the Insider:. HSAs for Individuals …
www.hsainsider.com/

Having always liked the 80/20 rule as a good rule of thumb for many experiences in business and in life, I was delighted to find it connected to the dysfunctional financial markets as I see them (I know… What do I know? but this stuff just seems so wrong.)

from Wagging the Fat Tail
By Niels C. Jensen
The Absolute Return Letter
October 2007

theory doesn’t work in practice and it may be time that we ditch modern portfolio theory altogether.

Professor Cuno Pümpin … pointed out that returns in financial markets are much more akin to power law distributions than to normal distributions. Unlike normal distributions which occur mostly in static environments, power law distributions occur when three conditions are prevalent: Variety, inequality and dependency. Graphically, power law distributions look very different from normal distributions

Power law distributions are far more frequent than most people realise. Natural disasters, epidemics, war casualties, book sales, internet traffic, income distribution3 as well as returns in financial markets are all examples of power law distributions (and there are many more). Some people also refer to power law distributions as the 80/20 rule.

SO gets this stuff and has a hard time being patient with the rest of us who struggle to understand the differences. At some level I understand that Greenspan is not the genius that he and others would have your believe. But what is the real story? How can so many people be so wrong about what actual matters in the health and wellbeing of the global economy?

Dr. Woody Brock on GDP
We overestimate the importance of the Fed and monetary policy. And we underestimate the importance of fiscal policy.

Consider the shock to many investors that no recession (defined here as two consecutive quarters of negative growth) accompanied the dual crashes of both capital spending and the stock market during 2000-2002. What saved the day? The answer is that the Bush administration managed to transform a Clinton fiscal surplus of 2.5% of GDP into a fiscal deficit of 3.4% between 2000 and 2003. This is a swing that pushed the level of GDP 6% higher than it otherwise would have been by the end of this period. This number reflected reduced tax revenues from decelerating income growth and policy-determined tax cuts and increased government spending.

“Yet this is rarely if ever cited when observers attempt to explain the events of this momentous period. Instead, economists erroneously attribute stability on Main Street to Greenspan’s dramatic cut in the Fed funds rate to 1%. The reality is that the funds rate only reached 1% in June of 2003. Given the policy transmission lags involved, these lower rates cannot be said to have prevented recession in 2002. Fiscal policy played the key role here.

http://www.frontlinethoughts.com/gateway.asp
http://www.sedinc.com/

The Financial Independence project started as a resource for informal online education promoting financial independence for boomers, and women in particular, publishing short articles and background resource links as a blog. An alarming number of boomers are going to be in serious financial trouble. Learning about money management is an investment and is time well spent.

This is a trail of personal education. The format is info-education - news, commentary and background on personal money matters contribute to a sound introduction to personal financial management over time. There are plenty of issues and related web sites that are really interesting. Many of them are important, too. As a baby boomer, a friend and partner, a parent, a sailor and a concerned citizen with libertarian leanings, I learn something new every day and pass along my two-cents worth.

In the interests of full disclosure, the blog Financial Reality is written by my significant other.

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