Q3 2023 Plan Performance
By Constantine Mulligan, Director of Investments Partner, Cerity Partners LLC
2023 is shaping up to be a tale of two drastically different halves. The first half consisted of no recession despite much anticipation and prognostication, stronger risk asset returns, and a perceived plateauing of broad inflation. The second half started with elevated market volatility, negative total returns across many asset classes (equity and fixed income), and the reemergence of fiscal policy and consumer spending issues. Broad equity indexes, both US and international, were down a few percentage points on the quarter while fixed income returns were also down as interest rates continued moving higher.
Overall, the investments in the Plan remain consistent and competitive over the long term on both an absolute and risk-adjusted basis when compared to respective peer group averages and indexes. They continue to do so at exceptionally low costs when compared to peer averages, as almost every fund can be found within the lowest-cost quartile.
A significant portion of plan assets are 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 are comprised of actively managed funds within each dated vintage, but are still considered low cost, all else being equal.
The JPMorgan Equity Income fund was added to the Watch List, given the recent retirement announcement by lead portfolio manager Clare Hart. There is not much immediate concern as the announcement has been well-telegraphed and includes a concrete long-term transition plan.
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.
3rd Quarter 2023 Economic and Market Recap
With three months left in the year, most U.S. recession forecasts have been postponed to 2024. A Fed hiking cycle, a troubled regional bank sector, an anemic housing market, and an unstable fiscal and political outlook have failed to pull Gross Domestic Product (GDP) growth much below trend, let alone below zero. After growing at 2.2% in Q1 and 2.1% in Q2, Q3 looks even stronger and should come in at around 2.5%. Underpinning this economic resilience is a still-flush consumer that has a job with a growing wage and continues to spend. Real (inflation-adjusted) Personal Consumption Expenditures continue to chug along at year-over- year rates north of 2%, with particular strength in the service sector. It will be difficult to see any recessionary scenario without a material slowdown in service spending, which makes up roughly half of U.S. GDP. Beyond some potential cyclical headwinds such as dwindling pandemic savings, and resuming student loan payments, we see new structural consumption tailwinds emerging as the baby-boom generation continues to retire.
The overall European economy continued to skirt a recession in the quarter, but growth is anemic with Germany likely in recession due to the pressure of higher energy prices and disappointing growth in China, an important export destination. The southern tier countries, which tend to have stronger services economies, are beginning to feel the impact of high inflation with consumer spending slowing throughout the quarter. The Japanese economy has been boosted by exports to the U.S. and a weaker yen, which declined another 2.5% during the quarter and helped boost exports.
Concerns about sticky wage inflation have kept the Fed focused on the tight labor market. The central bank’s goal of reducing job openings and employee turnover, rather than forcing layoffs, seems to be working so far. Wage growth has indeed begun to roll over without an accompanying increase in the unemployment rate, keeping soft landing hopes alive. After raising the fed funds rate by 25 basis points in July, the Federal Open Market Committee (FOMC) held rates steady at the 5.25%– 5.50% target range in its September meeting. A revised Summary of Economic Projections revealed a median estimate among Fed members of one more hike this year, and two cuts next year (down from four in the June release). GDP growth for 2023 was revised up to 2.1% from 1.0% while the year-end unemployment rate was revised down from 4.1% to 3.8%.
After a very strong first half of the year, U.S. equity markets lost some steam in the quarter. The S&P 500 Index fell by close to 4%, reducing its year-to-date performance down to a still strong 12%. Value stocks outperformed growth stocks as the energy sector emerged as a clear market leader, while the previously dominant “magnificent seven” (Meta, Alphabet, Amazon, Apple, Microsoft, Nvidia, Tesla) retreated. Developed international equity markets were down in the quarter, but outperformed US equities as they tend to be more exposed to the value or defensive sectors of the market. Emerging market equities declined as the Chinese market struggled with a slower than expected rebound after the removal of severe Covid restrictions and acute pressure on its property sector.
Higher interest rates, higher energy prices, and a potentially protracted United Auto Workers strike will likely exert some downward pressure on the U.S. economy in the fourth quarter. The resilient U.S. consumer will be tested, but job and wage growth over the coming months should continue to support spending. With the economy experiencing more of a rolling recession than an economy-wide decline, the housing market downturn, which began last year, appears to be bottoming — though mortgage rates will impede a near-term recovery. The manufacturing sector may be in recession moving into the fourth quarter as businesses work down excess goods inventories accumulated at the end of the pandemic. This leaves the service sector, which continues to grow at impressive rates through three quarters of the year. While higher interest rates and higher prices may reduce demand slightly, robust consumer income should prevent a meaningful downturn.
September 2023 Fund Performance Chart
Start Investing Today: The Magic of Compound Growth
Albert Einstein once referred to compound interest as the "eighth wonder of the world." This concept is at the heart of successful long-term investing. When you contribute to your 401(k), the potential for these contributions to earn interest, and then for those earnings to further generate returns, exists. The earlier and more consistently you contribute, the more you allow your investments to experience this growth effect.
Tax Considerations of 401(k) Plans
Traditional 401(k) plans offer tax considerations that might be beneficial. Contributions are typically made with pre-tax dollars, which could impact your current taxable income. Moreover, the growth within the account is usually tax-deferred until withdrawals begin in retirement.
Ease of Automatic Contributions
One notable feature of 401(k) plans is the convenience of automatic contributions. Funds are deducted directly from paychecks, streamlining the savings process. It's a straightforward way to maintain consistent contributions.
Path to Financial Flexibility
By consistently contributing to your 401(k), you're setting a course towards financial flexibility in the future. This isn't just about retirement—it's about envisioning a future where you have the autonomy to pursue what truly matters to you.
Why Choose the Vista 401(k) Plan?
The Vista 401(k) Plan, the choice of many, is a supplemental retirement plan that has been sponsored by your school district since 1987. It offers a diverse range of low-cost fund families to include American Funds, American Century, Fidelity, JP Morgan, Lord Abbett, Vanguard, and The Standard Insurance Company. To ensure the plan continues to achieve its goals, these funds are monitored on a regular basis by the Vista 401(k) Advisory Council, comprised of representatives from your employer, and Cerity Partners, a registered investment advisory firm. Plan participants can enroll in the plan and manage their assets through the Vista 401(k)’s retirement plan portal, a sophisticated technology backed by the Newport Group. Additionally, Cerity Partners offers a financial coach to help you understand your Vista 401(k) investment options and make decisions about your retirement account, at no additional cost to the participant.
The Retirement Services Department is also available for any administrative queries Monday through Friday, from 8:00 AM to 5:00 p.m., at (866) 325-1278.
The Sooner the Better!
Regardless of your current age, consider opening a Vista 401(k) account. While starting early can give your contributions more time to grow, every step taken towards securing your financial future is a step in the right direction. Today fewer than 5% of the participants invested in the Vista 401(k) plan are under age 40, and it appears that many realize the value of their supplement account only later in their careers. But why wait? The essence is simple: consider starting as early as you can, contribute regularly, and maintain this approach throughout your career. You can open an account online or download, complete, and submit an enrollment form.
Getting Started
For employees of Miami-Dade, Charlotte, Monroe, or Madison, initiating the process is straightforward:
- Visit the Vista 401(k) Plan website at Vista401k.com:
- Choose “Account Login/Enroll” and follow the prompts.
For employees of Okeechobee:
- Visit the Vista401k.com website.
- Navigate through “401(k) Plan” across the top of the homepage.
- Select “Forms” from the dropdown.
- Select the Okeechobee enrollment form, complete it, save it, and use the email address on the form for submission.
As an alternative, employees of all five districts can download the paper enrollment form from the Vista401k.com website and submit it via fax or mail:
- Fax to (850) 425-8345; or
- Mail to FBMC Benefits Management, Inc, P.O. Box 1878, Tallahassee, Florida 32302-1878.
Preparing for retirement should not be a scary proposition. It should be exciting. Something you embrace and plan for. Being proactive and thoughtful about your retirement can pave the way for an enriching and fulfilling next chapter in life.
Vista 401(k) Account Maintenance
Introduction
Navigating the financial path to retirement requires diligence and adaptability. A key element of this journey is the effective management of retirement accounts, like your Vista 401(k) Account. By understanding and addressing the various facets of this account, participants can better position themselves for a secure financial future.
Maintaining Your Vista 401(k) Account
Routine maintenance of your Vista 401(k) account is recommended to optimize your benefits, like the way routine maintenance is recommended to take care of your personal health or your home. To maintain your Vista 401(k) account, there are a variety of steps that should be considered on an annual basis.
Are Your Investments Appropriate?
Over time, a person's investment preferences and risk tolerance can evolve. An annual review can help ensure that your investments align with your current retirement goals and risk appetite.
The Vista 401(k) retirement plan portal, managed by Newport, provides tools such as the My Forecast Tool. This tool allows you to:
- Monitor your targeted monthly retirement income.
- Evaluate projected income availability.
- Forecast asset growth over time.
- Identify potential surpluses or shortfalls.
The portal also offers a Wellness Center covering various financial topics, including retirement planning, investment strategies, and more.
Another option is to reach out to the Retirement Services Department at (866) 325-1278 and ask to speak to a financial coach at Cerity Partners. This service operates in the same manner whether you have $1 or $1,000,000 invested in your Vista 401(k) Account, and it is available at no additional charge to the participant.
Have You Updated Your E-Mail And Home Address?
Throughout the year, a significant number of educational materials are sent via e-mail and, to a lesser extent, regular mail. This includes the Vista 401(k) Newsletter and quarterly reports. To make certain you receive this vital information, please visit your account, and verify the accuracy of your email address and mailing address.
Make Certain Your Beneficiary Designation Is Correct!
A change in recordkeeping last year requires participants to re-establish their beneficiaries. Beneficiary information should also be reviewed after significant life events. Changes can be made online via the Vista retirement plan portal.
If you have any questions about this process, please contact the Retirement Services Department at (866) 325-1278.
Periodic Increase
Regularly assessing contribution amounts can optimize benefits. The platform now offers percentage-based contributions, which will adjust with pay changes. You may also choose to automatically increase your selected percentage the first of each calendar year.
Consolidate Your Retirement Accounts
Multiple retirement accounts can accumulate over a career. The Vista 401(k) Plan provides an option to consolidate various accounts, offering a clearer view and potentially reducing complexity.
You may roll prior 401(k), 403(b), 457, IRAs and even roll DROP money into your Vista 401(k) account.
If you have any questions, please do not hesitate to contact the Retirement Services Department at (866) 325-1278.
Conclusion
Managing retirement accounts is a dynamic process, requiring periodic review and adjustments. By actively engaging with and maintaining your Vista 401(k) Account, you can pave a smoother road to your financial retirement goals.
“Nuts and Bolts”: Dreaming of Retirement?
View this Attached Video for Important Retirement Plan Information:
Buying Your Retirement
Most of us know it is smart to save money for those big-ticket items we really want to buy, such as a new television, car, or home. But you may not realize that probably the most expensive thing you will ever buy in your lifetime is your retirement.
Perhaps you’ve never thought of “buying” your retirement. Yet that is exactly what you do when you put money into a retirement nest egg. You are paying today for the cost of your retirement tomorrow.
Cost of Retirement
The cost of those future years is getting more expensive for most Americans, for two reasons. First, we live longer after we retire—with many of us spending 15, 25, even 30 years in retirement—and we are more active. Second, you may have to shoulder a greater chunk of the cost of your retirement because fewer companies are providing traditional pension plans and are contributing less to those plans. Many retirement plans today, such as the 401(k) plan, are paid for primarily by the employee, not the employer. Others may not have a retirement plan available at work or you may be self-employed. This puts the responsibility of choosing retirement investments squarely on your shoulders.
Unfortunately, only about half of all Americans are earning retirement benefits at work, and many are not familiar with the basics of investing. Many people mistakenly believe that Social Security will pay for all or most of their retirement needs. The fact is, since its inception, Social Security has provided a minimum foundation of protection. A comfortable retirement usually requires Social Security, pensions, personal savings and investments.
In short, paying for the retirement you desire is ultimately your responsibility. You must take charge. You are the architect of your financial future.
That may seem like an impossible task. Many of us live paycheck to paycheck, barely making ends meet. You may have more pressing financial needs and goals than “buying” something so far in the future. Or perhaps you’ve waited until close to retirement before starting to save. You still may be able to afford to buy the kind of retirement you want. Whether you are 18 or 58, you can take steps toward a better, more secure future.
Planning Ahead
Financial planning is the key to making a secure retirement a reality. It will help you clarify your retirement goals as well as other financial goals you want to “buy” along the way. It will show you how to manage your money so you can afford today’s needs and still fund tomorrow’s goals. It will help you make saving for retirement and other goals a habit. There is no such thing as starting to save too early or too late—only not starting at all! Learn how to save your money to make it work for you, and how to protect it so it will be there when you need it for retirement. Take advantage of retirement plans at work.
Yes, retirement is a big purchase—the biggest one you may ever make. But you can afford it with determination and hard work, a sound savings habit, the right knowledge and a well-designed financial plan.
Easy Ways To Ensure Financial Security In Retirement
Whether you want to retire early or plan to work well into your golden years, you must take control of your retirement savings to ensure that you’ll stay above water when you’re ready to put your feet up and relax.
Here are some things to consider when planning for your retirement:
- Obtain adequate assets before you stop working. Do not rely on Social Security as your sole income in retirement. Consider a 401(k), an IRA and other savings accounts and investment options.
- On average, women live longer than men; many married women outlive their husbands by at least 15 years. Economic decline often occurs after becoming a widow, so women need to prepare to be financially secure for their potentially longer lives.
- Outliving your assets is a reality. Life expectancy in 1952 was 68.6 years old. According to the U.S. Centers for Disease Control and Prevention, that figure has now risen to 78.8 years old. At this rate, this trend will continue because of lifestyle improvements and advances in medical care. It is wise to organize your portfolio so that a portion of your retirement assets cannot be outlived.
- Contribute as much as possible to your 401(k) savings plan. Time and compound interest will enhance your savings efforts.
- Save early and diversify your assets to maximize the return on your investments.
- Be prepared for changes in retirement. Remember to take inflation, a possible decline in your functional status, medical costs, the death of a spouse and other life changes into account when saving.
- Decisions made before retirement will affect you in your golden years. This includes taking a new job, getting married, getting divorced or having or adopting a child.
- Maintain your job skills to protect your financial security. Your benefits ultimately depend on your ability to make money. By keeping your skills up-to-date, you can better ensure that you are able to work and make money.
These are important points to consider as you plan for retirement. If you wish to discuss retirement preparation in greater detail please contact FBMC’s Retirement Services Department at (866) 325-1278.
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.