Tag: Investing for Life

Market Viewpoints – Winter 2024

Posted on January 24, 2024January 24, 2024

Keith Bonjour, Portfolio Manager — Keith Bonjour, CFP® Vice President, Portfolio Manager

Both stock and bond markets closed in positive territory to end 2023 despite all the market worries throughout the year. Bonds staged a strong rally in both November and December, after turning negative earlier in the year, to break their two-year losing streak. Stocks also rallied in both November and December to finish the year on a high note after pulling back from August through October.

The Federal Reserve held rates steady at between 5.25%-5.50%, without adding an additional rate hike in the last quarter of 2023, which gave a boost to both the stock and bond markets. It seems likely the Fed will now hold interest rates steady for the first part of the year with rate cuts possible as early as March, but the likelihood is stronger they wait until at least May before starting a new rate cut cycle.

As the Fed held their own rates steady in the 4th quarter, we saw interest rates around the country decrease, spurring the bond market rally and increasing expectations that the Federal Reserve would begin its own rate cut cycle at some point in 2024. The bond market tends to increase, historically, prior to the Federal Reserve starting to reduce the Fed fund rate.

Estimates vary widely of when the Fed will choose to start cutting rates and by how much, but they are expected to cut rates several times this year. This should begin to take some pressure off markets as the Fed will be moving to a more accommodative posture assuming inflation continues to move in the right direction.

The economy proved to be much more resilient in 2023 than expected going into the year with consumer spending remaining strong, unemployment staying low, and both wage and price inflation cooling throughout the year. This led to better company earnings and strong economic growth which drove robust gains for the stock market last year. Markets are taking a more cautious approach as we move into the New Year. Election years typically see some increased volatility, at least in the first half of the year, and 2024 is unlikely to be an exception. However, chances have increased for the Federal Reserve to engineer a soft-landing of the economy without causing a recession. Recession odds are not zero, but they have come down from where they were at this time last year.

If the economy can avoid a recession this year, growth is still expected to slow meaningfully compared to last year. Lenders are becoming increasingly more cautious when underwriting new loans.

The unemployment rate remains low but has been increasing. New job openings continue to fall and are now well off from their peak. Also, revolving credit and delinquencies have been on the rise which shows that tighter Fed policy is having its intended effect to slow down the economy. The Fed now must prove that they can pivot at the right time to begin to ease financial conditions before the economy slows too much. As I mentioned previously, recession odds have been lowered but we are not out of the woods yet. There is a still a risk that consumers pull back more meaningfully this year, slowing growth and hurting company profits. There is also a risk that certain areas of inflation prove sticky and begin to move back upwards which would force the Fed to readjust their rate cut projections.

We continue to be mindful of all the risks the market faces in 2024, from a possible Fed policy mistake, inflation remaining elevated, company earnings coming under pressure, and continued geo- political risks. We recommend staying the course with your investment objectives with the understanding that markets go through cycles and both the stock and bond market show positive returns at higher percentage rates the longer the time-period measured.

Please communicate with us if any short-term cash needs arise so we can look for opportunities to be pro-active when raising cash for any necessary distributions, which helps to protect against possible short-term negative moves in the market. We appreciate the trust you have placed in us and will continue to make prudent investment decisions as we navigate markets in 2024.

2024 Social Security Updates

Posted on January 24, 2024

By Melanie Hamerlinck, Associate Investment Officer

Each year, the Social Security Administration makes updates to the social security retirement program. Below are some key changes to Social Security beginning January 2024 that will affect workers and retirees.

COLA Increase: Social Security benefits will increase by 3.2% due to the cost-of-living adjustment (COLA). This will boost the average monthly payment by $59.
Increase to Maximum Benefits: The maximum social security benefit for workers retiring at full retirement age (FRA) will increase from $3,627 to $3,822. This only affects those who will claim benefits at FRA, which is currently either 66 or 67, depending on the individual’s birth year.
More Income to be Taxed: The maximum amount of earnings subject to the social security payroll tax is increasing from $160,200 to $168,600. Per the Social Security Administration, only 6% of workers who pay social security taxes have earnings above the taxable maximum amount.

Please contact us with your social security questions. We have the tools and resources to help you organize your social security decisions.

In the Community – The Putnam Museum

Posted on January 24, 2024

Our Non-Profit Community Spotlight

The Putnam Museum

After nearly 40 years, the Putnam Museum’s regional history exhibit has received a major makeover. A three-year collaboration by Putnam; community partners such as Friends of Martin Luther King Interpretive Center, LULAC Council 10 and Azubuike African American Council for the Arts; and many guest curators, Common Ground: Our Voice, Our Stories opened in April of 2023. The newly remodeled exhibit both brings our region’s history up to the modern day and views that history through a more inclusive lens so that everyone can see their heritage represented and learn about the challenges and contributions people with backgrounds other than their own have made to the QCA.

Now told through a thematic lens rather than a traditional timeline, the exhibit will be able to evolve and grow without the need for further extensive remodeling. Common Ground also features many stories from voices that were under-represented in the previous exhibit. For instance, women’s stories are more prominently featured, including Marguerite LeClaire’s role in the founding of Davenport and her contribution to the Black Hawk treaty process as a woman of Native American and French descent.

Other areas explore historic episodes via stories of underrepresented populations such as Hispanic Americans and African Americans. Common Ground also features many digital interactives including clips from the Putnam’s film collection, a community poll where guests can share their thoughts on a variety of topics, and a storytelling booth where visitors can respond to a series of prompts to tell their story, which will be added to the Putnam’s digital archive.

Putnam staff is now hard at work on a related permanent exhibit that will open in April of 2024. The Quad City Innovators gallery will feature Inventors, Innovators and Trailblazers who hail from our region.

Not only will the exhibit explore the history of QC innovation, but it will also help inspire our region’s next generation of innovators. Longstanding relationships and a history of investments in the Putnam by individuals and partners such as Northwest Bank & Trust Co. have helped the Museum meet our community’s evolving needs for 155 years.

Upcoming Events from our Nonprofit Partners

Together We Care Tuesday | Tuesday, February 27 from 11:00 AM – 10:00 PM | Ridgecrest Foundation

Visit the Elmore Ave. Applebees and order from a special menu on Tuesday, February 27. 50% of proceeds will be donated to Ridgecrest Foundation!

Battle of the Bosses | Saturday, March 2 at 7:00 PM | Common Chord | Redstone Room

Corporate bosses and community leaders from around the Quad Cities will take the Redstone Room stage to perform their hidden musical talents, competing for audience votes and bragging rights as “the coolest boss in the QC”. This event will raise funds to support Common Chord’s accessible music education programs for youth throughout the region. Produced in partnership with the Quad Cities Chamber. More information available at commonchordqc.org.

Qualified Charitable Funds Offer Advantages to Giving Early in the Year

Posted on January 24, 2024

Community Foundation Corner

Quad Cities Community Foundation

By Anne Calder, Vice President of Development

At the Quad Cities Community Foundation, I frequently talk with donors about year-end giving. Charitable gift contributions before the end of the calendar year offer possible tax savings for that year, and the holidays are when many of us support the causes we care about.

I also let donors know that their approach to planned giving in a new year can be just as important. This is especially true for people age 70 ½ and older with Individual Retirement Accounts (IRAs). If you are in this group, you have the special opportunity to make charitable donations with extra tax benefits.

Once you reach age 73, IRAs have a yearly taxable Required Minimum Distribution (RMD). These IRA owners (or any IRA holder over age 70 ½) also have the unique option of making that distribution directly to a registered 501c3 charity. This is called a Qualified Charitable Distribution (QCD), and QCDs up to $105,000 do not count toward your taxable income.

So, why does timing early in the year matter? To ensure you receive the greatest tax benefit from a QCD, you must coordinate your QCD with your RMD. Why? The first dollars withdrawn from an IRA in any given year go toward satisfying your RMD. This is called the “first-dollars-out” rule. If you intend for your tax-free QCD to take the place of all or part of your taxable RMD, the QCD needs to come out before you take any RMD for yourself that calendar year.

QCDs are a fantastic option for people wanting to support communities and causes that matter most to them. Speak with a tax professional or your local community foundation to see how this giving option might fit into your generosity plans for 2024.

2024 Brings New Rules for Education and Retirement Investment Plans

Posted on January 24, 2024

By Dan Ahl, Associate Portfolio Manager

A new year means new rules for 529s, Roth IRAs, & employer-sponsored retirement plans. Every year we see updates to the rules and regulations on a variety of different investment accounts and we want to highlight some of the changes for 2024. We will start with Qualified Tuition Plans, otherwise known as “529s” or college savings plans, which saw several updates. These investment accounts are sponsored by states, state agencies, or educational institutions and are intended to help families save and grow their money to pay for qualified educational expenses.

First, as is typical most years, the annual tax deduction was increased in the state of Iowa for 2024. The deduction is now $4,028 per beneficiary, up from $3,785 in 2023. It’s important to note that in Iowa each parent may hold a separate 529 account for each beneficiary which increases the annual combined tax savings to $8,056 per year per beneficiary in a two-parent household. The state of Illinois remained unchanged, allowing for a $10,000 state deduction for single filers and $20,000 for joint.

Keeping it in the family, the grandparents of 529 beneficiaries are receiving some good news as well. Past FAFSA rules dictated that distributions from 529 accounts owned by a grandparent would be reported as untaxed income to the beneficiary. This could sometimes cost the student a whopping 50% in student aid eligibility. Beginning in 2024, however, any distributions from a 529 account owned by a grandparent will not be included in the FAFSA calculation. A student’s total income will only be derived from their individual federal income tax return, greatly reducing the risk to their student aid eligibility.

529 accounts saw some additional changes this year as well. For many years the “Achilles heel” of a 529 account was the issue of what to do with unused educational savings upon completion of their educational program. Perhaps the 529 owner saved “too much,” or worse yet, what if the beneficiary never ended up in the type of educational setting that qualified for the use of the funds? Prior to the most recent update both scenarios would require the participant (owner) to withdraw the funds as a non-qualified withdrawal and incur a 10% IRS penalty (no, thanks!).

Beginning this year, though, owners are permitted to roll over the funds into a Roth IRA for the beneficiary of the 529 account. However, this newly added, and much appreciated, flexibility does come with some limitations. First, the account must have been maintained for at least 15 years. Additionally, rollover contributions cannot exceed IRA contribution limits (currently $7000 for ages 49 and under) and is reduced by any other Traditional or Roth IRA contributions made by the beneficiary that year.

Perhaps one of the biggest hoops for this update is the one that has gained the least amount of attention. While rolling over 529 funds into a Roth IRA will negate any federal tax consequences, most states have yet to adopt this rule. Both Iowa and Illinois will still consider this transaction a non-qualified withdrawal as it is not being used for educational purposes. This subjects the transaction to “recapture” in most situations – meaning that any contributions to the plan that were deducted from previous years’ state taxes must now be included as income. It remains to be seen if, how, and when each state chooses to further address this. Will they join the federal government and adopt rules to make this a tax-friendly transaction? Perhaps. Or perhaps we will be stuck with the tax bill from the states. If you are considering this option, it is best to seek out a conversation with your tax advisor to understand how it will impact your own situation.

Lastly, keeping in stride with our college-related theme, is a lesser-discussed update from the Secure 2.0 Act. Beginning in 2024, employers now have the option to provide a “match” to employees’ 401(k)s if they are paying down student loans. Now, as with most new government-related programs, this one currently produces more questions than answers.

It will be interesting to see which employers, if any, decide to take this up. If they do, there will still be many hurdles such as: does the employer have an eligible retirement account (401(k), 403(b), 457(b), or Simple Plan), is the loan being repaid a qualified educational loan, do private student loans qualify, and how will the employee certify to the employer that they are indeed making the student loan payments? As a first of its kind benefit option employers have no prior example of how to implement this without creating a costly and time-consuming burden. If it were to be adopted by employers, it could be a game changer for many and a potential win-win. Employers could apply additional tax write offs to their bottom line while employees who can’t afford to save to their 401k, or even those who can only afford to save the minimum due to high student loan repayments, could begin saving to their retirement plans earlier.

All in all, we are excited about the changes to these programs in 2024. While we wish we had a bit more clarity on some of the potential downsides and unanswered questions, the important thing is that the changes are here and it is possible to benefit from them now. It remains to be seen if the states will follow the federal government’s footsteps and make 529 rollovers to Roth IRAs tax-free.

Also, will employers take up the option for employer student loan matches to 401(k) accounts even though the overall structure is not yet fully standardized? As the year unfolds, we will be watching and keeping you updated. Until then please feel free to reach out with any questions.

2024 Retirement Plan Contribution Limits

Posted on January 21, 2024January 24, 2024

By Rebecca Bitting, CTFA, CRSP, Vice President, Trust Officer

The Internal Revenue Service announced retirement plan contribution limits for 2024. For the most part the 2024 limits are unchanged from the 2023 limits. The notable changes were the increase in the Roth IRA eligibility threshold and the ability for 401(k) and SIMPLE IRA participants to increase their contributions, as well as IRA investors.

If you have questions or would like more details, please contact our Certified Retirement Services Professional (CRSP), Rebecca Bitting at 563.388.2575.

Market Viewpoints – Fall 2023

Posted on October 22, 2023October 22, 2023

The list of things to cheer about for markets this year has been few compared to the large list of things that are worrying the markets. Despite all the risks the market has been facing, stocks have continued to climb the proverbial “wall of worry” this year. Technology stocks have been doing the heavy lifting with the strongest returns overall. However, stocks cooled off in August and September after their strong rally to begin the year. The selloff was driven by many of the same technology stocks that had the largest returns to begin the year.

Bonds had finally rallied to begin the year after two straight years of negative returns. They gave up the majority of those returns over the last quarter though as yields continued to rise. This is worrying markets that the Federal Reserve may hike rates one more time this year and keep rates higher for longer next year. Both worries would weigh on economic growth and tighten financial conditions, along with increasing the risk of a recession.

The US economy has proved very resilient so far in 2023. GDP growth has consistently come in above expectations all year alleviating the market’s fears that a recession was knocking on the door. It is yet to be seen if a recession will be able to be completely avoided with the Federal Reserve achieving a soft-landing, or if stronger GDP growth and consumer spending in 2023 just kicked the can down the road until 2024. The higher the Fed raises rates, the more strain it can put on the economy since Fed rate hikes work with a considerable lag. The Federal Reserve runs the risk of raising rates too high and holding them at elevated levels for too long, which eventually leads to overtightening resulting in a recession.

Federal Reserve policy will continue to be watched closely by markets, looking for signs of when the Fed will stop its rate hike cycle. The Fed has said they will keep rates at a higher level until they are sure that inflation is on a path to reaching their 2% target.

Recent inflation prints have been slightly higher than expected due to the increase in oil prices and shelter costs continuing to weigh heavily on inflation. However, interest rates have also increased over that period which works to tighten the economy. The Fed acknowledged that the recent increase in rates may be doing the work for them, and they are still undecided if they will hike again during their November or December meeting, saying they will be data dependent between now and then.

On the bright side, shelter inflation costs should start to move down through next summer which should alleviate some inflation pressure since shelter costs have been a large driver of overall inflation. We will continue to monitor the data to determine its impact on economic growth and inflation.

We continue to be mindful of the risks the market faces going forward from an aggressive Federal Reserve policy stance, including sticky areas of inflation remaining elevated, company earnings coming under pressure, and continued geo-political risks. We recommend staying the course with your investment objectives with the understanding that markets go through cycles and both the stock and bond market will eventually find their footing.

Please communicate with us if any short-term cash needs arise so we can look for opportunities to be proactive when raising cash for any necessary distributions, which helps to protect against possible short-term negative moves in the market. We appreciate the trust you’ve placed in us and will continue to make prudent investment decisions as we navigate the choppy markets.

Social Security – Survivor Benefits

Posted on October 22, 2023October 22, 2023

By Melanie Hamerlinck, Associate Investment Officer

An important task to complete following the death of a spouse is to contact the Social Security Administration (SSA) if either spouse has started to receive benefits. In most cases, the funeral home contacts SSA to report an individual’s death; however, there may also be other important matters to discuss and consider in addition to notifying SSA of the passing.

Assuming the surviving spouse is at full retirement age, the survivor’s benefit is worth 100% of the amount that the late spouse was either collecting or would have been entitled to collect at the time of his or her death. If the surviving spouse is not yet full retirement age but at least 60 years of age, the benefit amount will be incrementally reduced based off the surviving spouses age at the time of applying for benefits.

If the surviving spouse is already receiving benefits on their deceased spouse’s earnings record, the surviving spouse does not need to apply for survivor benefits. The Social Security Administration will automatically convert the benefits from a spousal benefit to a survivor benefit once the death has been reported.

If the surviving spouse is not receiving any benefits or receiving their own Social Security retirement benefit when their spouse dies, the surviving spouse will need to apply for survivor benefits with the Social Security Administration. SSA will determine whose benefit is larger—the decedent’s or surviving spouses. The surviving spouse will be entitled to the larger of the two benefits as well as a one-time lump sum death payment of $255.

Keep in mind, you will need to call the local Social Security Administration office to report a death or apply for survivor benefits as neither can be completed online. If you have additional questions regarding Social Security survivor benefits, we would be happy to share a conversation.

Questions? Contact Melanie at 563.388.2628

Thank You For Your Vote!

Posted on October 22, 2023October 22, 2023

We are very proud to have been named the Best Investment/Financial Firm by the Quad City Times. We appreciate the time you took to vote for us as part of the Best Of the Quad Cities contest. Our team at the Investment Management Group has always made it our goal to successfully meet our clients’ investment objectives, and this reinforces that you appreciate our work.

Receiving this accolade has only pushed us to work even harder to maintain your trust. Thank you again for your votes.

In the Community – The Arc of the Quad Cities Area

Posted on October 22, 2023October 22, 2023

Our Non-Profit Community Spotlight

The Arc of the Quad Cities

Employment is an important part of community inclusion for people with disabilities. Meaningful work fosters personal growth, equal opportunity, self-sufficiency, and independence. During National Disability Employment Awareness Month, The Arc is celebrating the many contributions and achievements of employees with disabilities in the local workforce and raising awareness of employment-related advantages unique to hiring people with disabilities.

Meet Andy; he has spent the last two months learning the ropes as a Vending Clerk for The Arc of the Quad Cities Iowa. He spends one day a week filling the vending machines in the Illinois Goodwill’s in Moline and Rock Island, and the other day filling the machines in the Iowa Goodwill’s in Davenport and Bettendorf.

There was a lot to learn as this was a new position, but thanks to his job coach from The Arc of the Quad Cities Area’s Community Employment Services program he was able to navigate any challenges. He is also supported by his support staff from IAG (Individual Advocacy Group) who drives him to each location and assists in loading and unloading the beverages and treats he uses to fill vending machines in each store.

Andy has noticed that each store has their snack preferences, “The demographics of each store is different so the best-selling snacks vary.”

Although his favorite snacks are M&M’s and Fruit Gushers, he’s noticed that chips and soda are a favorite across the board, with the least-selling item being bottled water. “No one wants water,” he says.

The Arc of the Quad Cities Iowa, which was established in 1962 to enhance the lives of people with disabilities, has been a volunteer organization until just recently. It took 61 years to make Andy the first employee. It is significant that in an organization dedicated to people with disabilities, the first employee is someone with disabilities. The Arc is proud of Andy and this new venture.

Northwest Bank’s Investment Management Group and The Arc of the Quad Cities have been proud partners for over 17 years.

For more information about the Arc of the Quad Cities, visit www.arcqca.org.

Upcoming Events from our Nonprofit Partners

Enter raffle to win a trip to NFL game! | Handicapped Development Center

Want to see an NFL game in style? Get your chance to see the Bears v. Packers game with a private plane ride to the game, tailgating, and 4 tickets to the game. For your raffle ticket, contact Lexi Keppy at 563-391-4834 or lexikeppy@hdcmail.org or visit the HDC website at handicappeddevelopment.org.

Ridgecrest Foundation’s Annual Dinner| November 3, 5:30 PM | Ridgecrest Foundation

Register now for the Annual Dinner! Enjoy a cocktail hour, fine dining, dueling pianos, great conversation and wonderful philanthropy. Contact Carrie Dreifurst at cdreifurst@ridgecrestvillage.com for details.

Einstein’s Sister Album Release Show | November 4, 7 PM | Common Chord

One of the Quad Cities’ greatest bands presents their album release show in the Redstone Room.

Salsa Night| December 16, 8 PM | Common Chord

Sonora Sazon brings energy and grooves of salsa, cha cha, cumbia, and charanga to the Redstone Room.

Ellis Kell Winter Blues Camp| December 26 – 29 | Common Chord

Every year between Christmas and New Years Eve, students learn the forms, styles, and history of one of America’s first contributions to the world of music. Visit commonchordqc.org/camps for registration.

Noon Year’s Eve | December 31, 10 AM – 12 PM | Family Museum

Bring in the New Year at 12:00…noon! Midnight might be a little late for kids (and some adults), so join us for a countdown during the day! There will be activities before then a balloon and confetti drop at noon.