Q2 2024 Plan Performance
By Constantine Mulligan, Director of Investments Partner, Cerity Partners LLC
Capital markets delivered mixed results in the second quarter of 2024, with key economic areas facing setbacks due to relatively weaker economic data. US large-cap stocks continued to lead, while small caps and international equities were flat to mildly negative in total return. Multi-asset portfolios managed to achieve modestly positive returns for the quarter.
The Plan's investments mirrored overall capital market trends, remaining competitive against their respective indexes and peer group averages. Notably, the Plan's investment costs by fund stayed highly competitive relative to similar peer groups, which is an important component for future returns.
The Plan’s target date funds, managed by American Funds, generated positive returns for the quarter. The farther-dated vintages experienced higher returns compared to those closer to retirement. The long-term benefits of this target date suite remain strong, with a competitive return profile and low investment fees providing a solid experience for participants.
The JPMorgan Equity Income fund remains on the Watch List due to the upcoming retirement of lead portfolio manager Clare Hart. While this transition has been transparent and includes a thorough long-term plan to hand over to capable managers, it remains a point of caution. However, there have been no significant concerns associated with this change to date.
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 2024 Economic and Market Recap
In the second quarter, weaker economic data raised doubts about the resilience of the economy, despite earlier concerns about persistent inflation. This shift led markets to anticipate potential rate cuts by the Federal Reserve (Fed) later in the year, as moderating labor markets and consumer spending suggested inflation might stay low enough. While certain sectors sensitive to interest rates struggled and others weakened from "very strong" to "strong," overall economic activity remained steady. The Atlanta Fed’s GDPNow model projected a 1.7% growth for Q2, up from Q1’s 1.4%, which was held back by weak inventories and net exports.
Reflecting on recent economic progress, the disinflation experienced has been relatively painless. The Consumer Price Index (CPI) fell from a peak of +9% in June 2022 to +3%, while the economy added over $1 trillion to annual output and created more than 100,000 new jobs each month. Historically, significant inflation spikes usually require a recession to curb, with the last exception in 1951 during the Korean War. In that instance, inflation was controlled without a recession due to the Fed’s regained control over interest rates.
This time appears different, as inflation has moderated without a recession. However, the Fed's goal remains a 2% inflation rate, though core Personal Consumption Expenditures (PCE) is closer at 2.6% as of May. Stickier inflation components like shelter and services continue to pose challenges due to housing shortages and resilient consumer demand supported by solid wage growth.
Policy rates remained unchanged in the quarter, and the Fed’s June meeting revised expectations for rate cuts in 2024 from three to one, aligning with market pricing adjustments. Despite these delayed rate cuts, weakening economic data stabilized longer-term interest rates, with 10-year U.S. Treasury yields peaking in April and settling by the end of June. The 2-year U.S. Treasury yield indicated a persistent yield curve inversion, usually resolved by rapid rate drops due to economic shocks.
Globally, other central banks have begun cutting interest rates ahead of the Fed due to weaker economies and better inflation progress. In the U.S., labor markets show signs of convergence with fewer job openings rather than layoffs. The unemployment rate slightly increased to 4% by May, partly due to increased immigration, but job creation remained strong.
The housing market continued to struggle with high rates and low affordability, but home prices climbed due to limited supply. Despite declining housing starts and sales, homebuilders provided some economic support. Equity markets saw mixed performance, with large-cap technology stocks, especially Nvidia, driven by AI advancements, boosting the tech-heavy Nasdaq, while smaller stocks struggled amid inflation and higher interest rates.
High-yield bond markets remained stable despite inflation and economic moderation, with default rates low but refinancing risks rising. Internationally, developed markets underperformed compared to U.S. large caps due to weaker economic outlooks, while Japanese and emerging markets also struggled.
Looking ahead, the U.S. economy’s slight slowdown might revive disinflationary forces without sparking recession fears. Consumer spending driven by job and wage growth, along with potential fiscal spending in an election year, could support economic growth. Businesses may increase capital spending in response to productivity needs. The housing sector’s contribution to GDP growth depends on mortgage rate declines, likely later in the year. Global geopolitical tensions and trade constraints pose risks to economic stability.
Overall, slower economic growth and ongoing inflation control measures suggest a gradual easing of monetary policy, with the Fed likely to begin rate cuts cautiously as inflation nears the 2% target.
June 2024 Fund Performance Chart
Invest Early and Often!
Investing in Your Future: The Importance of Starting Early with Your 401(k) Plan
Planning for retirement may seem distant and abstract when you're young, but establishing good financial habits early on can significantly impact your future financial security. One of the most powerful tools available for retirement savings is your Vista 401(k) plan, and starting to invest in it at a young age offers numerous advantages that can shape your financial well-being over the long term.
Building Long-Term Wealth
Investing in your Vista 401(k) at a young age allows you to harness the power of compound growth. Compound growth refers to the process where your initial investment earns returns, and those returns are reinvested to generate more returns over time. Even small contributions made in your twenties or thirties can grow substantially by the time you reach retirement age, thanks to compounding.
Tax Benefits
Contributions to your Vista 401(k) plan are typically made on a pre-tax basis, which means they are deducted from your taxable income for the year in which you make the contribution. This can lower your current taxable income and reduce the amount of income tax you owe. Additionally, the earnings on your investments within the Vista 401(k) grow tax-deferred until you start making withdrawals in retirement. Starting early allows you to take full advantage of these tax benefits over a longer period.
Flexibility and Security
Contributions to your Vista 401(k) plan are deducted automatically from your paycheck, making saving for retirement a disciplined and consistent process. This automatic saving mechanism helps you develop good financial habits early in your career.
Mitigating the Effects of Market Volatility
Investing in your Vista 401(k) Plan at a young age gives you the advantage of time to ride out market fluctuations and economic cycles. Historically, the stock market has shown long-term growth despite short-term volatility. By starting early and maintaining a diversified investment strategy within your Vista 401(k) Plan, you can potentially benefit from market upswings over the course of your career while mitigating the impact of downturns.
Planning for a Comfortable Retirement
Ultimately, investing in your Vista 401(k) Plan at a young age is about securing your financial future and ensuring a comfortable retirement. Your Florida Retirement System Plan along with Social Security benefits may not provide enough income to maintain your desired standard of living, making personal savings through your Vista 401(k) Plan crucial. Starting early allows you to set realistic retirement goals and take proactive steps towards achieving them.
Conclusion
Investing in your 401(k) plan at a young age is a proactive step towards securing your financial future. By harnessing the power of compound growth and benefiting from tax advantages, you lay the foundation for long-term financial security and a comfortable retirement. Starting early allows you to navigate market fluctuations, develop disciplined saving habits, and set realistic retirement goals. Remember, the decisions you make today can have a profound impact on your financial well-being tomorrow
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Get started today by visiting Vista401k.com or calling us at (866) 325-1278.
Start Maximizing Your Retirement Strategy
The Benefits of Consolidating Your Retirement Accounts
As retirement approaches, many individuals begin to contemplate the management of their qualified retirement plans. There's a common misconception that you must move your Vista 401(k) account when you retire. This is not the case. You can leave your Vista 401(k) account as is and roll other qualified retirement plans into your existing Vista 401(k) account. Let’s explore why this approach can be advantageous and how it can streamline your retirement planning.
Understanding Your 401(k) Options
Option 1: Leaving Your Vista 401(k) Account Alone - Contrary to popular belief, you do not have to move your Vista 401(k) Account when you retire. You can leave it with your current employer, even if you no longer work there. This option allows you to benefit from the Vista 401(k) plan’s competitive investment options, low fees, and access to your Registered Invest Advisory Firm, Cerity Partners.
Option 2: Rolling Other Retirement Plans into Your 401(k) Account - If you have accumulated retirement savings in other qualified plans, such as a traditional IRA, 403(b), 457, DROP funds, Bencor funds, or a previous employer’s 401(k) plan, you can consolidate them into your Vista 401(k) Account. This will simplify your financial management by reducing the number of accounts you need to monitor.
Benefits of Consolidating Your Retirement Accounts
1. Streamlined Management - Managing multiple retirement accounts can be cumbersome and may lead to oversight or missed opportunities. By consolidating into your 401(k), you have a single account to monitor, making it easier to track your investments and manage withdrawals in retirement.
2. Investment Flexibility - 401(k) plans often provide access to institutional-class investments that may not be available in individual IRAs. Consolidating your retirement savings into your Vista 401(k) account can give you access to a broader range of investment options and potentially lower-cost investment management services.
3. Simplified Required Minimum Distributions (RMDs) - Once you reach age 72 (73 if you reach age 72 after December 31, 2022) the IRS requires you to start taking minimum distributions from your retirement accounts. By consolidating your retirement savings into your Vista 401(k) account, you may simplify the calculation and distribution of these RMDs, potentially reducing the risk of penalties for missed distributions.
Conclusion
You do not have to move your Vista 401(k) account when you retire. Instead, consolidating other qualified retirement plans into your existing Vista 401(k) account can be a strategic move to simplify your financial life, potentially reduce costs, and enhance your investment flexibility. Before making any decisions, it’s advisable to consult with Cerity Partners by calling (866) 325-1278. This Registered Investment Advisory Firm will help you assess your specific circumstances and ensure that your retirement strategy aligns with your long-term goals. By taking proactive steps now, you can optimize your retirement savings and enjoy greater peace of mind as you prepare for the next chapter of your life.
Prepare for the Future
Why Increasing Your Vista 401(k) Contribution is a Wise Move
Planning for retirement involves making strategic financial decisions today that will impact your future financial security. One of the most effective ways to bolster your retirement savings is by increasing your contributions to your Vista 401(k) plan. Let's explore why increasing your Vista 401(k) contribution is a prudent financial decision and how it can benefit your long-term financial goals.
Assessing Your Current Contribution
Assess your current financial situation and retirement savings goals. Review your budget, expenses, and other financial obligations to determine how much you can comfortably allocate towards your retirement savings.
Benefits of Increasing Your Contribution
- Accelerated Retirement Savings - Increasing your contribution to your Vista 401(k) plan allows you to accelerate your retirement savings growth. Every additional dollar you contribute benefits from compound growth. This compounding effect can substantially increase the value of your retirement nest egg.
- Tax Advantages - Contributions to a traditional 401(k) plan are made on a pre-tax basis, meaning they reduce your taxable income for the year in which you make the contribution. By increasing your contribution, you lower your taxable income and potentially reduce the amount of income tax you owe.
- Financial Discipline and Retirement Readiness - Increasing your Vista 401(k) contribution demonstrates financial discipline and a commitment to your long-term financial well-being. It prioritizes retirement planning as a fundamental financial goal and encourages regular saving habits.
Practical Steps to Increase Your Contribution
- Evaluate Your Budget - Review your current budget and cash flow to determine how much you can afford to increase your Vista 401(k) contribution. Consider reallocating discretionary spending or adjusting your budget to prioritize retirement savings.
- Take Advantage of Salary Increases - If you receive a raise or bonus at work, consider allocating a portion of these additional earnings towards increasing your 401(k) contribution. This allows you to boost your retirement savings without significantly impacting your current financial situation.
- Gradual Increases - If increasing your contribution substantially is not feasible immediately, consider implementing gradual increases over time. For example, you could increase your contribution by 1% or 2% each year until you reach your desired contribution level. Please note that you can set up a yearly automatic increase either online or by completing an enrollment form and selecting yearly automatic increase along with your desired percentage increase.
- Monitor and Adjust - Regularly monitor your Vista 401(k) account and review your investment performance. Evaluate the impact of your increased contributions on your retirement savings growth and adjust your contribution levels as needed. Stay informed about changes in contribution limits or tax regulations that may affect your retirement savings strategy.
Conclusion
Increasing your contribution to your Vista 401(k) plan is a proactive step towards enhancing your financial future. It accelerates your retirement savings growth and leverages tax advantages. By demonstrating financial discipline and prioritizing retirement planning, you position yourself for greater financial security and peace of mind in retirement.
Nuts & Bolts: Update Your Vista 401(k) Account
Update Your Home and E-Mail Address
This may fall under the umbrella of a housekeeping item, but it is, nonetheless, very important. Review your account to make sure your home address and e-mail address are up to date. Please log into your school district online portal or contact your employer to make all address changes. We send a significant amount of educational material via e-mail throughout the year, including this newsletter. We also send updates about changes in laws and rules that impact your plan. Although we primarily communicate through e-mail, a significant amount of information is delivered by traditional mail as well. One very important item that can be transmitted via U.S. mail is your quarterly statement.
How To Receive Your Quarterly Statement
- By default - all statements are automatically uploaded to your Vista 401(k) account each quarter.
- U.S. mail - If you choose to receive your statement via U.S mail you must log onto your Vista 401(k) account and make the following selections:
- My profile
- Paperless Settings
- Printed
If you choose to receive your statement via U.S. mail, please make certain your mailing address is noted correctly on your school district online portal and updated when necessary.
Regardless of how you receive your statement, it is important that you review it each quarter. This will allow you to ensure you are properly invested and that your investments are delivering satisfactory returns. Should you wish to discuss your investment selections in great detail, please call (866) 325-1278 and ask to speak to Cerity Partners.
Update Your Beneficiary Designation
Life changes over time. People get married, divorced, have children, adopt children. All these events could impact your Vista 401(k) account. You want to make sure your loved ones are cared for should something unforeseen happen. Keep your beneficiaries current and avoid any issues in the event of your death. These are not things your loved ones want to argue over while they are grieving their loss. The Designation of Beneficiary Instructions and Form can be found by visiting your online account or contacting the Retirement Services Department at (866) 325-1278.
Please use this form to make any necessary changes and call us at (866) 325-1278 if you have any questions. You may also visit Vista401k.com to make changes.
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.