12/4 Weekly Email +AZDCA

Hi all, 

I have a few updates/reminders this week and then a writeup on the Arizona Deferred Compensation conference I attended a few weeks ago. 

January Member Meeting(s): UAEA will be having its first-ever annual members meeting on January 15th. This meeting will go over what UAEA worked on in 2025, what we’re planning to do in 2026, upcoming opportunities for member involvement, and will have a little time for one-on-one questions with the board. We are planning to do two sessions on January 15th, one at 5:30am at TMOC Building 1 (2090 W Rio Salado Parkway, Tempe, AZ), and one at 12pm at the Tempe Historical Museum (809 E Southern Ave, Tempe, AZ). Both sessions will be available virtually if you can’t attend in person, but we’d love to see as many members as possible. 

A form for rsvps is available here. Members can both rsvp and presubmit questions in advance. 

Blood Drive: The Tempe Historical Museum will be hosting a blood drive on Wednesday, December 17th, from 10-2pm. You can sign up at this link. 

Employee Development: I’ve attached an email from Employee Development discussing some opportunities in December and January. If you’re interested in mentoring I would recommend you attend the Tuesday, 12/9 webinar which will provide more information on how that will work. 

FHL, BD, and SK Reminders: Please remember that your deadline to use Floating Holiday Leave (FHL) or your Personal Day (BD) is Sunday, December 14th. Un-used FHL leave will be removed from your leave bank (which we then be refreshed in January), while unused BD time will be paid out. Please also remember that you have the option to convert sick leave in excess of 480 hours to be paid out to you (at a rate of 25%) or you can convert it to wellness leave at a rate of 60% if you have more than 240 hours accrued. Wellness leave is effectively vacation hours and can be used for any reason, compared to sick leave which has specific rules. See the attached emails for more information. 

AZDCA Conference: I attended the annual AZDCA (Arizona Deferred Compensation Association) conference on November 19th and walked away with some interesting information on retirement accounts and the future of retirement. (As a reminder the UAEA President attends this conference every year as the UAEA financial services representative from Tempe - other representatives from the 6-sided partnership in Tempe also attend). I will do my best to quickly summarize 6 hours of notes but want to caution people, like last year, that I am relaying information about the economy and market conditions that may or may not be accurate. I am not a source of investment advice and you should not make any changes to your investments or retirement accounts without doing some further research of your own. I am relaying my interpretation of information from 6-8 people who spend a lot of time studying economic trends - whatever you think about what I say, remember it is a paraphrased version of the words of a small sample of retirement specialists and may not reflect the prevailing opinions in the market. You can also read my summary of last year’s conference and see that several of the experts were very off-base with their predictions. With that out of the way…

The first session of the day had Economist Anne Vandenabeele discuss her opinion on the current state of the market. Anne predicts that there will be a slowdown in global markets over the next 12-18 months, starting with a US slowdown in the next 1-2 quarters. Many US companies stockpiled international goods prior to the implementation of tariffs in early 2025 - as they run out of those supplies they will need to replace them with tariffed supplies and consumers will see large rises in certain commodity prices. There will be lower hiring in the near future and less capital expenditures by companies - this may lead to the Federal Reserve cutting interest rates by 100-150 basis points by next Fall. She believes a big percentage of US growth will come from AI in the next few years - 5-8 AI companies already comprise about 30% of the valuation of the S^P 500. Many people are hoping that AI companies can help the US out of its current debt situation - the two narratives being discussed are that AI will generate so much value that the US can start paying down its debt or that inflation gets so bad that it becomes easier to pay off the debt since the dollar will have lost so much value. One scenario being discussed by economists is that AI implementation will lead to a “barbell” economy, where people with clerical skills are displaced by AI technology but people in blue collar and white collar roles remain mainly unaffected. There have been some concerns that weaknesses in the US economy may lead to the dollar being replaced as a reserve currency but Anne was unconcerned by that - she thinks there are still no good alternatives to the dollar and that the biggest threat is posed by Asian countries’ currencies, which do not currently have strong valuations against the dollar and lack the global use of the dollar. 

The second session was a panel where several retirement fund executive directors (including Paul Matson, Director of AZSRS) spoke about trends in public sector retirement plans. They mostly discussed their thoughts on how to structure plans to give options to participants - I felt most of this information was useful for companies that help run retirement planning websites, not people making decisions on behalf of employee groups. 

The third session dealt with Social Security - Douglas Ewing, VP of Nationwide, spoke at length about mistakes people might make when collecting Social Security benefits. One thing he mentioned that raised my eyebrows was that 23% of people collecting Social Security benefits start collecting at 62 and 24% start collecting between 62 and their full retirement age (FRA). A further 22% start collecting at their full retirement age, 8% collect between their FRA and 70, and 9% collect at age 70 or later. These stats are very important because people get significantly lower benefits if they collect their Social Security at 62, and slightly higher benefits if they start collecting at 70. Nationwide developed a tool to help people calculate when they should start collecting Social Security to maximize their lifetime benefits - using either estimates of normal life expectancy for your sex or your own custom life expectancy (such as a number based on the lifespan of family members), you can calculate the optimal time to start collecting to get the highest payout over the course of your life. You can also check how to maximize benefits between yourself and a spouse using the same tool. That tool is available here but you need to be logged into your Nationwide account to use it. 

Douglas also spoke about the possibility of Social Security going “bankrupt.” He noted that this term is very misleading - Social Security benefits will basically never go to zero. When people talk about the health of Social Security they’re really talking about how much money comes into the program each year versus how much is paid out in benefits. The concern is that incoming revenue is declining even as payments go up and the fund will reach a balanced state where revenue equals expenses in 2033. At that point, under current US law the Social Security Administration will need to reduce payments to the public to balance incoming revenue with payment amounts. The industry currently predicts that would lead to a drop in payments of at least 23%. That’s a bit concerning but Douglas believes there will be greater political will to resolve the issue as the 2033 deadline approaches - how that would manifest is unclear but many solutions have been proposed, ranging from increasing Social Security contributions from the wealthy to injecting money into the fund from other sources. Will any of that happen?…unclear. Stay tuned. 

The fourth session discussed the strengths of the public sector offering both defined benefit plans (ie, healthcare coverage) and deferred compensation plans. There were some interesting stats in here about how bad the private sector is in terms of offering deferred compensation or pension accounts but not a lot directly relevant to UAEA. 

The final session was an update on Washington DC and what changes could be expected from the federal government in the coming months and years. The panelists discussed how there have been a lot of changes discussed by both political parties in recent years but very little progress - their hope was that the future of retirement at the federal level will be attempts to not damage whatever infrastructure or incentives that already exist or that states have already established. 2025’s HR1 made a few changes to tax policy and retirement that may be relevant - children born between 2025 and 2028, for example, will get $1,000 deposited into a new type of IRA account to help them start savings. There are certain quirks of these accounts that make it easier for parents to put money in, but the details were not discussed. There are also new tax deductions for senior citizens that will save them money each year between now and 2028. 

In terms of other federal policy, the panel was unsure what would happen based on the midterm results, but had predictions for whether either party controlled the US House after the midterms. If the Republicans win, both members expected a federal crackdown on ESG initiatives and further deregulation of crypto currencies - this may temporarily boost markets and expand investment options in retirement accounts. If Democrats win both expect a push to expand access to retirement accounts for all government employees - there are some proposed pieces of legislation which would mandate state governments offer retirement accounts to their employees. There may also be additional legislation further restricting companies from accessing public sector retirement assets - apparently a big trend in private sector retirement funds is attempts by corporations to reinvest the assets in riskier investments with higher fees. 

Those are my notes from the conference. I know not all of it might have been directly relevant to UAEA but it hopefully gave everyone a better look at the investment industry

Again, I am not a financial advisor. Don’t make any financial moves based on what I’ve said here - talk to actual professionals, friends, family, etc before doing anything dramatic. 

Employee Development Survey: I’ve been working with Employee Development to identify some barriers employees face when trying to attend their classes. We have a little data but could use more to help us make fewer assumptions about employee behavior. We’re both very interested in ensuring that all employees, regardless of workgroup, work location, or work schedule, have access to at least 10 hours of professional development training each year if they want to take advantage of it. I’ve attached an anonymous survey that members can fill out - it should only take about 5 minutes and the information we get will be used to improve training access. 

Thanks for a great week, everyone!