The Federal Reserve predicts a sunnier 2021: Here's how the headlines could affect your money

S&P and Nasdaq open at new record highs and the Fed predicts a sunnier 2021. Here's how the headlines could affect your money.

Wednesday, the Nasdaq had a record close and the S&P was just one point shy of its record last week. The Dow dropped slightly.

Stocks rose early Thursday, with S&P and Nasdaq opening at new record highs. The market shook off a jobless report that was worse than expected. First-time filer claims totaled 885,000 last week, the most since early September. 

The Federal Reserve's latest economic outlook, released Wednesday, has a slightly more positive take on 2021 and the end of this year. 

In September, policymakers predicted the 2020 GDP would fall 3.7%, but now they expect a drop of just 2.4%. Its 2021 forecast is more forgiving, too, predicting both higher GDP and a lower unemployment rate. 

The Fed also announced that it would continue buying back bonds until the economy reaches full employment and the inflation rate stays at 2%. 

^{Video by David Fang}

It's likely too late to boost your 401(k) contribution this year. However, there are other ways to maximize your last paycheck of the year. Until April, you can still make a 2020 contribution into your health savings account, a traditional IRA, or Roth IRA.

A health savings account, or HSA, is a tax-advantaged account that can be paired with high-deductible health plans to cover medical expenses. There's a triple tax benefit: Your contributions are pre-tax, plus the money grows tax-free and can be withdrawn tax-free for qualified medical expenses. 

Qualified medical expenses can include insurance premiums if you are receiving unemployment benefits or on Cobra, and certain drugstore purchases like thermometers, allergy medicines, or first aid items. Because of the CARES Act, HSA withdrawals can also be used for telehealth services.

Although the daily news can have an impact on your wallet, remember to take a long-term outlook when it comes to decisions on spending, saving, and investing.

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