Q2 2023 Plan Performance
By Constantine Mulligan, Director of Investments Partner, Cerity Partners LLC
Vista 401(k) Plan Fund Performance
The first half of 2023 is now in the books, and total returns across the board continued their trend upwards, chipping away at the drastic negative returns of 2022. Broad benchmark performance shows positive returns across most equities in the quarter and year-to-date. The growth style of investing retained considerable outperformance relative to the value style, US equity markets regained their advantage over international counterparts, and large caps were still stronger than their small cap counterparts. Broadly, fixed income was either slightly negative or flat on the quarter, as total returns are still clawing back the negative numbers of 2022. Finally, many of the asset classes that are either directly or indirectly tied to inflation experienced total returns that were positive on the quarter.
The investments in the Plan remain competitive overall over the long-term on both an absolute and risk-adjusted basis when compared to respective peers and benchmarks. They continue to do so at exceptionally low costs when compared to general peer averages, as almost every fund can be found within the lowest-cost quartile of its peer group.
A significant amount of plan assets is invested in the well-diversified target date offering (the American Funds Target Date Retire funds). They have routinely been one of the most competitive target date options when compared to the target date investment universe. These fund-of-fund strategies consist of all actively managed funds underneath the hood but are still considered low cost all things considered. There has been some shorter-term underperformance for some of the vintages, though all in all, 2023 has been a good start for the product in general.
The transition from the T. Rowe Price Blue Chip Growth fund to the JPMorgan Large Cap Growth fund was completed smoothly this past quarter (May 24th).
For our clients who wish to take a deeper dive, we have provided the following economic and market commentary. This will provide an explanation of the overall macro and micro economic factors influencing the markets and, in turn, your Vista 401(k) account. If you have any questions or wish to discuss these matters in greater detail, please contact us at (866) 325-1278 or e-mail us at 401k@Vista401k.com.
2nd Quarter 2023 Economic and Market Recap
The U.S. economy showed resilient growth, posting a GDP increase of 2.0% in two consecutive quarters, largely driven by robust consumer spending and defying predictions of a recession due to Federal Reserve tightening measures. Surprising many analysts and economists, the U.S. economy has yet to fall into the recession that many had expected following 500 basis points of Federal Reserve (Fed) tightening over the last 15 months. Headline inflation continued its seemingly inexorable decline as the effectively complete unclogging of supply chains has been met with lower goods demand. The decline in energy prices also helped cool goods price inflation. Input prices at the producer level are beginning to show actual deflation in certain goods sectors.
Internationally, European economies have not fallen into recession, but growth in the first half of the year was rather anemic as Germany, the largest economy on the continent, suffered from higher energy prices and a slower-than-expected rebound in China, which hurt some of Germany’s manufacturing industries. China relaxed its severe COVID-19 restrictions at the beginning of the year, but the anticipated surge in spending and production failed to materialize. The economy did see an uptick in GDP growth, but it was limited by relatively restrained consumers and a hesitancy of businesses to significantly add to their employee payrolls.
Comfortably positive GDP growth, ebbing inflation indicators, and stable interest rates culminating in a Fed pause proved to be a powerful combination leading to another strong quarter in the U.S. equity markets. The biggest criticism of this market advance, which has been fodder for the bears and probably a bit disappointing to the bulls, is the very narrow breadth of the advance. Year to date, the five largest positions in the S&P 500 equity index accounted for 25% of the weighting and roughly 70% of the performance. International equities also advanced in the quarter, but they notably trailed the performance seen in the U.S. large cap asset class. Higher and apparently more stubborn inflation in Europe will likely keep the central banks firmly in tightening mode, which was somewhat of a relative headwind to foreign equities in the quarter.
The strength and resiliency of the U.S. economy in the first half of the year has meaningfully pushed back concerns for a recession into 2024. Inflation in the United States is down to roughly 4.0% year over year through May, and when the June number is announced, it could be as low as 3.0% as the large June 2022 inflation will roll off the year- over-year calculation.
Although the banking turmoil subsided and nothing has yet “broken” in the economy due to the sharp increase in the federal funds rate over the past year, the Fed was still compelled to pause the rate increase cycle during the June FOMC meeting. Odds of a resumption of hikes in the July meeting are high going into the third quarter and Fed speakers, including Chair Powell, will stress the need for continued vigilance in bringing down inflation. However, notable recent improvement, which is expected to continue, will likely mean that July will be the last rate increase. The outlook for continued economic growth with no recession through year-end should continue to exert upward pressure on interest rates throughout the yield curve.
For our clients who wish to take a deeper dive, we have provided the following economic and market commentary. This will provide an explanation of the overall macro and micro economic factors influencing the markets and, in turn, your Vista 401(k) account. If you have any questions or wish to discuss these matters in greater detail, please contact us at (866) 325-1278 or e-mail us at 401k@Vista401k.com.
June 2023 Fund Performance Chart
Maximize Your Future: Making the Most of Your Vista 401(k) Plan
Join the Vista 401(k) Plan Any Time, Any Day
Did you know you do not have to wait until open enrollment to enroll in the Vista 401(k) Plan? You can enroll in this plan any time during the year. Some 401(k) plans make you wait up to a year before you are eligible to contribute to their plan. Not the Vista 401(k) Plan. This plan allows you to contribute via payroll deduction beginning with your first paycheck. But remember: Enrollment is not automatic. You must actively enroll. Please see the article in the newsletter entitled “Nuts and Bolts: How to open a Vista 401(k) account” for details.
Know Your Risk, Be Wise with Your Investments
When opening a Vista 401(k) account, it is important that you determine your risk tolerance and invest accordingly. It is wise to review your risk tolerance on a yearly basis to make certain your tolerance is aligned with your investments. As a Vista 401(k) participant, you can use the My Forecast tool on the Vista 401(k) website to take a risk questionnaire, helping you gauge the level of risk suitable for your portfolio. Additionally, Cerity Partners, an independent investment advisory firm, is available to provide financial education and advice to all participants.
Simplify Your Investments, Consolidate Your Account
Throughout your career, you may accumulate multiple retirement plan accounts. To simplify tracking and align your investment strategy, consider consolidating old accounts into your Vista 401(k) account. Current rules allow rolling various qualified plans into your Vista 401(k) account, such as 401(a), 401(k), 403(b), 457, IRAs, and DROP funds. To do this, visit your vista401k account website, select “Shortcuts”, and “Access Forms”. Download the “Vista 401(k) Rollover Request form” and follow the instructions.
Keep Personal Details Current
Ensure that we have your correct home and email addresses on file so you won't miss out on any important information or communications. And don't forget to keep your beneficiary designations current, especially after significant life events such as marriage, birth of a child, divorce or remarriage.
The Importance of Retirement Savings
Retirement savings don’t just spontaneously happen. It takes planning, commitment and, yes, money. If you are not saving for retirement, it’s time to get started. The sooner you start saving the more time your money will have to grow. Here are a few things you may or may not know about your school board sponsored 401(k) plan.
Investment Help
Remember, you're responsible for deciding how to allocate your contribution among the available investment options. But don't worry, if you're unsure, your contributions will default to the American Funds Target Date Fund closest to your 62nd birthday. And if you want some help with your investment decisions, Cerity Partners is here to provide 1-on-1 counseling. They'll analyze your portfolio and recommend investments based on your circumstances at no additional cost.
Happy Retirement
Now is the time to start, restart, or increase your Vista 401(k) contributions. That way, you'll be able to enjoy your retirement and do everything you didn't have time for while working.
“Nuts and Bolts”: How to Open Vista 401(k) Account
Update Your Home and E-Mail Address
The Vista 401(k) Plan is a supplemental retirement plan option offered by your employer. There are 2 easy ways to enroll today!
- Open an Account Online at Vista401k.com
- Complete an Enrollment Form
Open an Account Online
This method is only available to employees of Miami Dade, Charlotte, and Monroe County. To enroll online:
- Visit Vista401k.com.
- Click “Account Login/Enroll” at the top of the webpage.
- You will be directed to the account login screen.
- To register for the first time, enter your social security number with no dashes as your username and your date of birth as your password. (Example: 01011900).
- After creating and logging in to your online account, follow prompts to set up your 401(k) account, select your investments, and start saving.
Complete an Enrollment Form
Employees from Okeechobee and Madison must use these methods to enroll in the Vista 401(k) Plan.
Obtain a copy of the Enrollment Form by either:
- Downloading an enrollment form from the Vista 401(k) website; or
- Calling the FBMC Retirement Services Department at (850) 325-1278.
Complete and return the Enrollment Form to FBMC by either:
- Faxing to (866) 425-8345; or
- Mailing to FBMC Benefits Management, Inc, P.O. Box 1878, Tallahassee, Florida 32302-1878.
Employees from Madison and Okeechobee may also enroll in the following manner:
- Visit the Vista401k.com website
- Select “401(k) Plan” across the top of the homepage
- Select “Forms” from the drop down
- Choose either an enrollment form for Madison or Okeechobee
- Complete and save this fillable enrollment form
- Email it to us using the confidential email address provided on the enrollment form
If you have any questions or wish to discuss the Vista 401(k) Plan, please contact the Retirement Services Department at (866) 325-1278.
Vista 401(k) – An Essential Supplement to Your Retirement Plan
For over thirty years, the Vista 401(k) Plan has been available as a valuable supplement to retirement savings for school district employees. Unlike the Florida Retirement System (FRS) Pension Plan or FRS Investment Plan, enrollment in the Vista 401(k) Plan is not automatic and requires an active sign-up.
Many employees may not immediately recognize the significance of a supplemental retirement plan. Our data reveals a less than 5% participation rate among those aged 18-39. It's typically not until employees reach their 40s that the importance of a supplemental retirement plan becomes more evident. We want to help you understand from your first day of work in the school district how important the Vista 401(k) Plan can be for your retirement plan.
The Florida Retirement System Pension Plan or FRS Investment Plan
The Florida Retirement System Pension Plan or FRS Investment Plan serves as a solid foundation for your retirement portfolio, but alone, it may fall short of fulfilling your financial needs in retirement. That's where the Vista 401(k) Plan comes into play. By complementing the FRS plan, it puts you on a firmer footing for your retirement years.
The following formula explains the FRS calculation as it pertains to most employees and will help you determine if the FRS plan alone will be sufficient in retirement.
Here's a typical formula used for the FRS pension plan calculation for most employees:
Years of Service x Percentage Value (based on service classification) x Average Final Compensation / 12 (number of months in a year).
For instance, an employee with 30 Years of Service, 1.6 Percentage Value (regular class), and $50,000 in Average Final Compensation would receive $2,000 per month ($24,000 per year) before taxes. While the FRS Plan is a vital part of your retirement, it may be insufficient. That's why the Vista 401(k) Supplemental Retirement Plan is so valuable.
The Vista 401(k) plan – Your School-Sponsored Supplemental Plan
The Vista 401(k) Plan has been serving school district employees effectively for many years. The plan sponsor and the Vista 401(k) Advisory Council continuously strive to enhance the participant experience. In the last year, the Plan transitioned to a new recordkeeper providing a user-friendly, technologically advanced website with features including customizable statement downloads in English or Spanish, and helpful tools like "My Forecast and Financial Wellness."
In the past year, fund lineup changes were implemented resulting in an over 50% reduction in investment expenses. The Plan also utilizes Cerity Partners to provide one-on-one 401(k) advice from certified financial planners at no extra cost, available even for small account balances. Cerity also offers ongoing monitoring of the investment menu and individual fund performance. To access this service, please contact the Retirement Services Department at (866) 325-1278.
Opening a Vista 401(k) Account is easy at Vista401k.com. If you have any questions, please contact the Retirement Services Department via phone, (866) 325-1278, or email, 401k@Vista401k.com.
Making Your Vista 401(k) Loan Payments on Time
As a participant in the Vista 401(k) plan, you have the option to borrow from your account. You can choose how long you take to repay your loan. But, be careful! If you don't repay within your chosen time frame, your loan may be defaulted. In the case of a default, any unpaid balance becomes taxable income, and you won't be able to take out another loan until the defaulted one is paid off.
Might miss a payment? This can often happen if you work for 10 months a year or are on unpaid leave, because loan payments typically come directly out of your paycheck. If you don't receive a paycheck, there's no loan payment and you could fall behind.
But don't worry! We've got a solution to make sure you can keep up with your payments. Starting now, you may make personal payments on your loan during the summer or while on leave, so you never miss a beat. For those who are in the process of repaying your loan, you received paperwork in June of 2023 that explains this solution.
If you are considering a loan and wish to take advantage of this offering, please contact the Retirement Services Department to discuss this matter in greater detail. We can be reached at (866) 325-1278 or by email at 401k@vista401k.com.
Financial Wellness: Save for your Children's Future
Parents of college-bound children can expect to pay approximately one-half to one-third of the cost of their children’s education with their current income, savings and loans. Unfortunately for your pocketbook, aid from the government, colleges and private scholarships pay for only about one-third of all college expenses. Therefore, parents should start saving for their children’s future sooner rather than later—even the day that your child is born isn’t too early. The sooner you start saving, the better off you will be in the long run.
Saving early is the key to financial success in the future. Even modest savings can grow into significant investments by the time that your child is ready to head off to school. For instance, putting away $50 a month beginning at your child’s birth would yield $20,000 by age 17, with a 7% return on your money. Bump that up to $200 per month, and you would yield almost $80,000 by age 17.
All in all, it is far less expensive to save ahead of time than it is to borrow money. When you save, your money earns interest, as opposed to when you borrow and must pay interest.
Tips for Easy Saving
- Start saving the day your child is born and save as much as you can. Start small and adjust your spending to increase your savings. Compounding interest will also make your savings grow.
- Save money on a consistent basis rather than on a random schedule. Consider setting up an automatic payroll deduction or have your bank automatically move money from your checking account to a college savings account.
- Establish a savings goal to measure how well you are saving and modify that goal as your salary increases.
- Save windfalls such as inheritances, income tax refunds or bonuses.
- Increase the amount you save by 5% each year to keep up with the college tuition inflation rate.
- Ask other relatives, such as grandparents, to contribute to the savings account in lieu of gifts.
- Place the money you once used for expenses that are no longer applicable into the savings account.
- Cut down on normal living expenses that are unnecessary and redirect that money to your savings account. This could include anything from extra movies and TV channels to meals out and shopping sprees.
- Teach your children about saving by getting them involved in the financial preparation for their education.
Plan Ahead
Get your own finances in order while you save for your children. Make sure to pay off your credit cards, maintain a reserve of six months’ pay in case of a job loss and save for retirement so that you are just as financially cushioned as your child’s college fund.
Financial Wellness: Managing for a Lifetime of Financial Growth
You probably will experience several major events in your life that can make it more difficult to start or continue saving toward retirement and other goals. The key is to have a clear plan, to stay focused on your goals and to manage your money so that life events don’t prevent you from keeping on target. Here are some suggestions for saving for retirement while financially managing some common life events.
Marriage
Getting married creates new financial demands that compete for retirement dollars, such as changing life insurance needs and saving to buy a home. Assess your combined income and expenses and create a savings plan together.
Raising Children
The U.S. Department of Agriculture estimates that it costs the average American family over $245,340 to raise a child to age 18. In some cases, a spouse may stay out of the workforce to raise children, thus cutting into income and the opportunity to contribute to retirement savings. Having a child may alter your major financial goals but should never eliminate them. Your savings plan will have to allow for expenses for your child(ren) but should also continue to contribute money to your nest egg. Also, many financial planners stress that saving for retirement should have priority over saving for a child’s college education. There are financial aid programs for college-bound students but not for retirement.
Changing Jobs
It’s estimated that the average worker changes jobs 10 times and careers three times in a working lifetime. Changing jobs often puts you at risk of not vesting in your current job’s retirement plan, plus a new job may not offer an employer-sponsored plan. Consider rolling money from an existing company retirement plan into a new company plan or an IRA. Don’t cash out and spend the money, however small the amount.
Divorce
It’s important that you know the laws regarding your spousal rights to Social Security and pension benefits. Under current law, spouses and dependents have specific rights. Retirement assets may well be the biggest financial asset in marriage. Be sure to divide those assets carefully. It’s also critical to review your overall financial situation before and after your divorce. Income typically drops for partners in the wake of a divorce, particularly for women.
Disability
A severe or long-lasting disability can undermine efforts to save for retirement. Although Social Security disability benefits can help sustain a family if severe disability strikes, you may wish to explore the availability and cost of other forms of disability insurance now, before a disability occurs.
Death
The premature death of a spouse can undermine efforts for the partner to save for retirement, particularly if there are dependent children. That’s why it is important to check your Social Security statement to find out how much children will receive if a parent dies. Maintaining adequate life insurance is also important. Be sure that you have properly named the beneficiaries for any insurance policies, retirement plans, IRAs and other retirement vehicles.
Facts Women Should Know About Retirement
Women face challenges that often make it more difficult for them than men to adequately save for retirement. In light of these challenges, women need to pay special attention to making the most of their money.
- Women tend to earn less than men and work fewer years.
- Women tend to change jobs or work part time more often, and they may interrupt their careers to raise children. Consequently, they are less likely to qualify for company-sponsored retirement plans or receive the full benefits of those plans.
- On average, women live five to seven years longer than men, and thus need to build a larger retirement nest egg for themselves.
- Some studies indicate that women tend to invest less aggressively than men.
- Women tend to lose more income than men following a divorce.
- Women are twice as likely as men during retirement to receive income below the poverty level.
These are important life events to keep in mind as you progress in your career and plan for retirement. If you have any questions please contact the Retirement Services Department @ (866) 325-1278 or by email at 401k@Vista401k.com.
Helpful Links
The material herein is provided for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. The material is not intended to be used as a general guide to investing, or as a source of any specific investment recommendations. Situations differ among individuals and you should not assume that these generalizations or information apply to you. Keep in mind that past performance is no guarantee of future performance, and investments involve the risk of loss of principal and earnings. Additionally, neither your employer nor the plan administrator nor FBMC is able to provide you with investment advice--if you would like specific investment advice, you should consult Cerity Partners or your own personal investment advisor.