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Qualified Retirement Plan Limit for 2022 and 2023

The following chart shows the qualified retirement plan limits that apply for 2022 and 2023:

Q4 2022 Plan Performance

By Constantine Mulligan, Director of Investments Partner, Cerity Partners LLC

Vista 401(k) Plan Fund Performance

Despite a slight resurgence in the fourth quarter, 2022 closed out the year with drastically lower returns across most asset classes relative to what investors have become accustomed to over the last decade. There were very few places to hide when looking at common asset classes often included in retirement plans. Both equities and fixed income were negative for the most part, with many asset classes down double-digits on the year.

It is important to keep context of the larger picture in volatile markets such as that in 2022. The Plan’s funds were generally able to remain consistent with their respective peers and indexes over this shorter-term, with some generating considerable outperformance on a relative basis. Intermediate and longer-term periods remain attractive for most of the strategies when compared to general peers, mostly falling in the top half in terms of total return and risk-adjusted return.

Many of the assets remain in the diversified target date offering (the American Funds Target Date Retire funds). While they have not been immune to the downturn seen in 2022, they have held up well relative to their own indexes and peer group averages across most of the dated vintages. Long-term, these funds continue to be one of the strongest performing target date funds from both an absolute and risk-adjusted perspective, especially when considering the low cost for these funds which directly benefit the end participants of the Plan.

The T. Rowe Price Blue Chip Growth fund remains on the watch list due to management turnover, underperformance and an increasingly concentrated portfolio.

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.

4th Quarter 2022 Economic and Market Recap

Persistent inflation, carried over from 2021 and exacerbated by the Russian invasion of Ukraine and the imposition of harsh sanctions on Russia by the Western allies, was the primary driver of the global economy and markets in 2022. Supply chain disruptions caused by the war interrupted the expected progress on inflation as food and energy prices rose sharply in the first half of the year. Inflation ultimately peaked in June (hitting a 40-year high) and began to dissipate in the second half of the year, but not fast enough as shelter and a few other services sectors proved sticky in their ability to maintain price increases. This forced the Federal Reserve (Fed) and eventually other central banks to become much more aggressive in their tightening policies. The federal funds rate rose throughout the year from effectively zero in January to roughly 4.50% by the end of the year, as the Fed was forced to implement four 75-basis-point rate increases during the year.

Interest rates across the Treasury yield curve also increased sharply as the 10-year U.S. Treasury Note rose from 1.50% at the beginning of the year to nearly 4.25% by October. The unprecedented increase in policy rates from extremely low levels heightened fears the Fed was tightening into an already slowing economy. This concern was best reflected in the eventual inversion in the yield curve as the spread between the 2- and 10-year U.S. Treasurys turned negative in July. While there were extenuating circumstances around trade and inventories, gross domestic product (GDP) in the United States contracted in the first half of the year, which further added to the belief the economy was already in recession.

Higher interest rates resulted in one of the worst years ever for the bond market and were the biggest drivers of the equity bear market that developed during the year. The bond market, as measured by the Bloomberg U.S. Aggregate Bond Index, had its worst year since the index’s inception in 1977. Major equity indices posted their worst returns since 2008 during the peak of the Great Recession. Despite the negative first and second quarter GDP prints, corporate earnings likely grew around 6.0% for all of 2022 as the U.S. economy resumed its GDP growth in the second half of the year. However, without the energy sector, earnings would have fallen by 1.5%. Valuations on this earnings growth declined rapidly as cash and fixed-income securities were finally able to compete effectively after years of extremely low yields. Particularly hard-hit were the more speculative and growth- oriented stocks whose valuations benefited greatly from near- zero interest rates in 2020 and 2021. This allowed the value style of equity management to significantly outperform growth stocks throughout the year.

Despite higher interest rates and higher prices, U.S. consumers remained resilient, fueled by continued job and wage growth and the ability to tap into the accumulated savings from pandemic- driven fiscal relief packages delivered in 2020 and 2021. Businesses grew more cautious in their spending as the year progressed, but they still committed to capital projects that would satisfy consumer demand. There were some indications of excessive spending on inventory accumulation in certain goods sectors, which should help alleviate inflationary concerns in 2023. Notable in the business spending statistics was the healthy commitment to technology and intellectual property, which should enhance workforce productivity as manufacturers secure their supply chains by shifting more production back to the United States.

Oil prices, which spiked higher early in the year due to feared supply disruptions from sanctions placed on Russia, reached a peak in mid- year and then began to trend down as Russian oil was still able to find its way into markets and production began to increase in non-OPEC nations. The resulting decline in gasoline and other energy prices in the United States helped reduce inflation at the end of the year. In China, the maintenance of “zero-COVID” policies and the imposition of harsh lockdowns in cities that experienced only a few cases hampered production in various regions throughout the year. President Xi Jinping effectively consolidated his authority at the Communist Party Congress and began to overtly favor state-owned enterprises over the entrepreneurially based industry champions in the technology and communication services sectors. With the property sector struggling with high debts and the effects of overbuilding and the pressure on exports from continued trade battles with the United States, the Chinese economy slowed more than expected in 2022.

Should the U.S. economy indeed fall into recession in 2023, it would be the most anticipated recession over the last 60 years, as nearly 50% of economists surveyed believe the economy will contract over the next year. Certain key economic indicators such as the monthly ISM manufacturing survey are beginning to signal recession. However, the ISM services survey remains comfortably in expansion as consumers were generally sated in their goods demand over the past few years and notably shifted their spending patterns toward services and experiences such as travel, events and dining out after having been largely denied these spending opportunities due to the pandemic. The strong labor market with ample wage growth is another factor pushing back on the belief that a recession is inevitable. Perhaps these are both lagging indicators that are destined to begin declining due to higher interest rates. Nevertheless, this inherent strength in certain sectors of the economy could allow for any recession to be short and shallow and may be already fully priced in by markets.

Looking at market indicators of the state of the economy and possibility of recession, the sharply inverted yield curve stands out as a sign the Fed may be tightening too aggressively, as longer duration bond buyers remain willing to accept yields below 4% going into the new year in anticipation of near-term Fed ease due to an oncoming recession. A market indicator that rather strongly counters the notion that the United States is on the precipice of recession is the interest rate spread between high-yield debt and that of same maturity Treasurys. Historically, this spread widens to roughly 1,000 basis points as fears increase of rising defaults on below-investment-grade debt in an oncoming or existing recession. The spread is currently below the long-term average of 500 basis points, which means so- called “junk bond” buyers remain relaxed around future defaults.

2022 was an unusual year in markets with both equities and bonds suffering sharp declines as investors were reminded how inflation can ravage financial asset portfolios. While monetary policymakers were caught somewhat off guard by the persistence and severity of the first true inflationary cycle in 40 years, rate increases implemented during the year and the natural reaction of supply to higher prices should prevent any recent inflation from becoming entrenched.

December 2022 Fund Performance Chart

Click here to View the Chart Below

Choose a Supplemental Retirement Plan

How much will I need to retire? What do I want to do in retirement? Is the Florida Retirement System pension plan sufficient to meet my needs? These are important questions that must be addressed whether you are just out of school, mid-way through your career, or approaching retirement. Let us begin by exploring the FRS pension plan.

Florida Retirement System Pension Calculations

The FRS pension plan normally provides a monthly benefit at retirement equal to the following formula:

Years of Service x Percentage Value (based on service classification) x Average Final Compensation divided by 12 (number of months in a year)

If we plug sample numbers into the above equation it will calculate as follows:

Jane Doe: 30 Years of Service x 1.6 Percentage Value (regular class) x $50,000 in Average Final Compensation / 12 = $2,000 per month (or $24,000 per year). This monthly benefit is further reduced by federal income tax, which varies depending on your tax bracket.

Will this be sufficient to meet your retirement needs?

Imagine Retirement

How do you determine your retirement needs? The first step should be imagining retirement. What will you do? Where will you live? How often will you travel? It is important that you place dollar amounts on your retirement goals. How much will you need to invest today? What do these goals typically cost? You need to be realistic. Once you know what you want to do, you can move forward with your plan. Start investing. Continue to evaluate your goals along the way. Finally, you may want to take advantage of the Vista 401(k) My Forecast tool on the website. This tool shows you a picture of where you are on the path to your desired retirement destination. The website displays your monthly income retirement goal, the amount of income you are on track to have, the projected growth of your assets over time, as well as any surplus or shortfall. The My Forecast tool can be found here: My Forecast

You may also wish to speak with someone at Cerity Partners, an independent investment advisory firm, that services the Vista 401(k) Plan. They offer one-on-one financial coaches who will answer your questions and help you make sound Vista 401(k) retirement account decisions. They can be reached by calling the Retirement Services Department’s Help Desk at (866) 325-1278 and asking to speak to a Cerity Partners representative. This service is provided at no additional cost to the participant.

Imagining your retirement and utilizing these tools will assist you in reaching your retirement goals.

Plan for Longevity

According to Harvard Health Publishing, the average American lifespan for a man is 73.2; for a woman, 79.1. Have you considered how long you may need to draw on your retirement funds? If you find you may not reach your retirement goals, make some adjustments to ensure your savings will stretch a bit farther. Adjustments in your Vista 401(k) plan can be made at any time at no cost to the participant.

Start Early

Very few employees select a supplemental retirement plan, such as the Vista 401(k) plan, in their twenties and thirties. They, often, wait until they reach their forties or fifties before investing. While it’s beneficial to invest at any age, it is even more important to start saving when you are young. Various models show that if you do not start at a young age you may miss out on significant retirement growth. Time is on your side, so do not waste it. That being said, if you are approaching retirement, it’s not too late. Remember that you may utilize the catch-up provision if you are 50-years old or older and make certain your allocations match your risk tolerance.

Be Consistent

Contribute every pay period without interruption. Increase your contribution whenever possible. Try to avoid taking a loan against your Vista 401(k) account. Consistently contributing to your retirement will place you in a better position to retire in a comfortable manner.

Preparing for retirement should not be a scary proposition. It should be exciting. Something you embrace and plan for. It is essential that you be honest with yourself and think about how you hope to live. Done properly, you will enjoy your golden years and share your wealth with those you love!

“Nuts and 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 on your employer portal. 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 transmitted via U.S. mail is your quarterly statement. If you fail to update your e-mail and home address, this important information may never find you.

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) Plan. 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 appropriate form can be found here: Vista401k.com/401k-plan/forms. It is called the Designation of Beneficiary Instructions and Form. 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.

Things to Know About the Vista 401(K) Plan

The Vista 401(k) plan is a supplemental retirement plan sponsored by your school district. It was created by your employer to provide the option of a supplemental plan above and beyond the mandatory Florida Retirement System Pension Plan should you wish to save additional retirement funds. As is the case with all retirement plans, it takes planning, commitment and, yes, money. If you have not selected a supplemental retirement plan it is 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.

Enroll Year-Round And Immediately

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.

Manual Enrollment

Did you know the word “Vista” noted on your W-2 is not related to the Vista 401(k) plan? In fact, if you do participate in the Vista 401(k) plan it will be noted on your W-2 as a number. There will be no reference to a 401(k) plan. Please note that the school board will NOT automatically enroll you in the 401(k) plan. If you would like to open a Vista 401(k) account, you can contact the Retirement Services Department by phone at (866) 325-1278 or via email at 401k@Vista401k.com. You may also visit our website at Vista401k.com.

If you have a Vista 401(k) account, you will receive a Vista 401(k) statement every three months. If you are not receiving a statement, please contact our office at (866) 325-1278.

Tax Deferral Benefits

Did you know you receive a tax break when you contribute to a 401(k) account? You contribute pretax money from your salary which lowers your taxable income and helps you cut your tax bill now. Further, your invested funds as well as any gains grow tax free which will serve to increase your saving and grow your account. You will pay taxes on principal and earnings at time of withdrawal. To enroll, please follow the directions detailed above.

Recordkeeper Change

A recent recordkeeper change has resulted in a new online retirement plan platform to manage your account, which you can access via the Vista401k.com website.

This retirement platform includes many new and useful features:

  • My Forecast – an interactive planning tool designed to help you determine your retirement readiness
  • Financial Wellness Center – a library of multi-media resources
  • Intuitive Navigation – manage transactions and research investments with a few simple clicks

FBMC Benefits Management, Inc. will continue to provide administrative services for the Plan.

Investment Decisions & Cerity Partners

Did you know that you are responsible for all investment decisions on how to allocate your contribution among the available investment options? If you do not select any options, your money will default to the American Funds Target Date Fund closest to your 62nd birthday. To remove some of the investment decision burden, Cerity Partners, an independent registered investment advisory firm, is available to provide 1-on-1 counseling. They will analyze your retirement portfolio and make investment recommendations based on your set of circumstances at no additional charge to the participant. Contacting a Cerity Partners advisor is as simple as calling FBMC’s Retirement Services Department at (866) 325-1278 and requesting to speak to a Cerity Partners financial advisor.

Enjoy Retirement

The Vista 401(k) Plan is a flexible benefit option offered to all eligible School Board employees. It is an excellent vehicle that will enable you to properly save for retirement. Now is a good time to start, restart, or increase your Vista 401(k) contribution so that when you retire you can enjoy life and do everything you were unable to do while working.

If you have any questions, please contact the Retirement Services Department via phone, (866) 325-1278, or email, 401k@Vista401k.com.

Financial Wellness: Avoiding Debt and Credit Problems

High debt and misuse of credit cards make it tough to save for retirement. Money that goes to pay interest, late fees and old bills is money that could have been contributed to a retirement fund.

How Much Debt is Too Much Debt?

Debt isn’t necessarily bad, but too much debt is. Add up what you pay monthly in car loans, student loans, credit card bills, personal loans—everything but your mortgage. Divide that total by the money you bring home each month. The result is your “debt ratio.” Try to keep that ratio to 10% or less. Total mortgage and non-mortgage debt should be no more than 36% of your take-home pay.

What’s the Difference Between “Good Debt” and “Bad Debt”?

Good debt is debt that provides a financial payoff. Borrowing money to buy or remodel a home, pay for a child’s education, advance your career skills or buy a car for getting to work can provide long-term financial benefits. Bad debt is when you borrow for things that don’t provide financial benefits or that don’t last as long as the loan, such as vacations, clothing, furniture or dining out.

Do You Have Debt Problems?

You may have debt problems if one of the following applies to you:

  • You’re borrowing to pay off other loans
  • Creditors are calling for payment
  • You’re paying only the minimum on credit cards
  • You’re maxing out credit cards
  • You’re borrowing to pay regular bills, or you’re being turned down for credit

What Can You Do?

Focus on the total cost of the loan—the principal and the interest. Don’t just focus on the monthly payment. Here are other tips:

  • Handle your credit cards wisely.
  • Keep only one or two cards.
  • Don’t charge big-ticket items.
  • Shop around for the best interest rates, annual fees, service fees and grace periods.
  • Pay off the card each month (or at least more than the minimum).
  • If all else fails, leave the cards at home.

If you are in severe debt, a credit counseling service can help you set up a plan to work with your creditors and reduce your debts, or you can work directly with your creditors to try to work out payment arrangements.

Financial Wellness: Investing for the Long Haul

Financial market ups and downs are challenging, to say the least, for many investors. Saving for retirement makes you a long-term investor, but it is important that you shape your investment strategy by revisiting a few fundamental investment concepts every 6 to 18 months, regardless of market conditions.

Revisit Your Risk Tolerance

What level of investment risk is suitable for you? Are you still an aggressive investor, or has your personal situation changed since the last time you evaluated your risk tolerance? Are you still a long-term investor, or are you getting close to retirement and therefore need to be more conservative? If your needs have not changed and you still are investing for the long term, this may not be the time to change your investment mix.

Don't Chase Returns

How many people do you know that bought into the “hot stock” they read about, without evaluating the risk involved? This is a risky strategy, as such stocks may be overvalued and end up losing money instead of making it.

Diversify

Every asset class (investment category) has its ups and downs. If your portfolio is well diversified, you will be in good position to benefit when an asset class excels—as opposed to chasing returns after the fact. For example, when growth stock funds were excelling, value funds were not; when stock funds declined, bond funds did well. Over the course of time, a well-diversified portfolio can provide increased performance while decreasing risk. In addition, diversification is a disciplined approach to investing, rather than relying on emotions or impulse.

Keep Investing Through Payroll Deduction

When the market is down, you are buying more shares or units for your dollars. Investors should feel good about buying in when the market is low; ideally, when you reach retirement, those shares will be worth more.

Invest for the Long Haul

Remember your long-term goals and invest for the long haul, rather than for short-term market swings. Statistics show that staying the course, rather than switching in and out of funds, is typically the wiser choice. Often, investors make the mistake of selling when the market is declining and buying back when it is going back up. This is the opposite of what they should be doing to maximize returns.

What About Current Events?

The uncertainty surrounding current events poses significant challenges for investors. One thing we do know: the stock market hates uncertainty. Thus, having diversification of investments is key! A mix of investments—cash, bonds, stocks—will help minimize the risk of a large loss.

Though a large event may cause a serious market reaction in the short-term, often the market balances out after the event has passed. The secret to weathering all types of market swings is to resist the temptation to panic or overreact. Stay disciplined, keep a long-term approach, and maintain a diversified portfolio balanced appropriately for your particular risk tolerance. These basics of long-term investing can be your blueprint for not just surviving but succeeding in the market.

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.