For the week of August 25, 2008
Wall Street ended a volatile week with sharp gains Friday after Federal Reserve Chairman Ben
Bernanke said inflation pressures should moderate and as oil prices fell. Still all major U.S. markets
ended the week down. The Dow closed the week down 0.20 percent to 11,628.06. The S&P ended
down 0.42 percent to finish the week at 1,292.20, while the NASDAQ closed with the greatest loss of
1.54 percent to end the week at 2,414.71.
Source: Morningstar.com. * Past performance is no guarantee of future results. Indexes are unmanaged and
cannot be invested into directly. Three and five-year returns are annualized. The S&P, excluding “1 Week”
returns, is a reflection of return to an investor, by reinvesting dividends after the deduction of withholding tax.
Fewer Jobless – The number of Americans filing new claims for unemployment benefits dropped by
13,000 in the week ended Aug. 16, exceeding analysts’ expectations by about 6,000 jobs.
Fast Track – The rise in fuel prices has created increasing demand for passenger rail service, Amtrak
reported this week. Approximately 2.75 million people took the train in July, a 14 percent increase from
last year and the highest single-month’s ridership in Amtrak’s 37-year history. Amtrak officials expect
ridership to grow from 25 million today to 50 million in ten years. Amtrak would have to double its fleet to
meet the demand.
Clueless – Of U.S. households unprepared for the financial burden of retirement, 40 percent don’t know
it. According to the Center for Retirement Research at Boston College, 61 percent of workers in the U.S.
may not have enough money to retire.
Blame It On Russia – It was 10 years ago this month (August 1998) that economic problems in Russia
caused a ripple effect all the way to Wall Street. The Russian government imposed delays on the
payment of billions of dollars of debt, the Russian ruble fell by more than 30 percent, and the S&P 500 fell
by 14.4 percent (total return), its worst August performance ever (Source: BTN Research).
Flying Higher – The price to fly one mile in the U.S. jumped 7.5 percent in July compared to July 2007.
The Air Transport Association of America reported last week that the cost to fly one mile on a
commercial carrier was 15.7 cents. That excludes taxes and fees, which can account for almost 14
percent of an average $300 domestic roundtrip fare.
WEEKLY FOCUS – 529 Loopholes Closing
The IRS should never underestimate the ingenuity of
Americans when it comes to avoiding taxes. It
appears that 529 college savings plans may be the next
targets of IRS rule changes intended to prevent abuse
of these plans.
In January, the IRS opened a window for comment on
proposed changes to 529 rules. That window closed in
March, and while final rules have not been published,
tax experts like Forefield, a leading provider of premier
financial planning knowledge, have studied the issue
for the most likely outcomes.
The proposed rules would generally prevent taxpayers
from getting the tax benefits of using 529 plans if they use the plans in a way not intended by the law. In
other words, the IRS wants to prevent taxpayers from using 529 plans as retirement savings vehicles
(avoiding the restrictions and requirements of qualified retirement accounts) or as a way to avoid estate
The IRS also is considering tightening the rules for transferring 529 balances from one family member to
another. This would prevent an individual from establishing multiple 529 accounts for multiple
beneficiaries, then changing the beneficiary on the accounts to a single person, thereby avoiding transfer
529 plans remain a viable solution for individuals saving for college expenses for one or more family
members. They can even be used by an individual to save for his or her own college costs. With the IRS
considering these rule changes, now may be a good time for us to review your college planning
strategies with you and your tax advisor. Call our office for an appointment.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of
the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded
blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter
common stocks traded on the National Association of Securities Dealers Automated Quotation System. The
Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely
recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies
representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all
dividends. Written by Securities America. SAI# 286071
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