By Alerus
Higher for Longer: Interest Rate Impacts for Business Planning
The Federal Reserve raised rates faster in 2023 than it has in the past 40 years. It is widely held that interest rates will remain at elevated rates through at least the first half of 2024 before the Fed begins slowly reducing rates, so long as the so-called soft landing is achieved. How should businesses prepare for this “higher for longer” interest rate scenario?
Businesses with loans should evaluate their terms and options for refinancing as they plan for 2024 to ensure they are prepared for potential increases. If a loan from several years ago is coming due to refinancing, factor in higher payments than the business has budgeted for in the past.
Businesses should also consider how rising interest rates may impact their customers and workforce. If the business relies upon consumers having extra spending money, a higher rate environment may call for reduced revenue forecasts. Higher mortgage rates may make it more challenging to recruit or relocate employees who would be looking to buy or sell a home. If employee recruitment or relocation is a critical aspect of the business plan, business owners may want to consider providing an incentive to subsidize increased mortgage costs.
Higher interest rates are not bad for all businesses. Businesses that can increase revenues to offset higher interest costs by increasing prices or expanding their customer base may see minimal impacts to their bottom line. An elevated rate environment can also offer opportunities to maximize yields on balance sheet liquidity, so businesses in this position should ensure their deposit strategy takes advantage of available opportunities.
The past decade has provided an unusual stretch of steady, low interest rates, which may make it challenging for some businesses to adjust their planning to include the uncertainty of fluctuating rates. A skilled business banker can help strategize and find solutions to navigate times of change, keeping the business on track to achieve its longterm goals.
Visit with an Alerus Business Advisor to talk about your 2024 plan
Secure Act 2.0: Retirement Plan Changes In 2024
SECURE Act 2.0, the comprehensive retirement plan reform package passed in late 2022, is designed to encourage more people to save for retirement by improving retirement plan regulations and lowering the cost for employers to provide retirement plans to employees. The package includes new provisions coming into effect in 2024, including:
- New safe harbor plan options for employers without a current retirement plan
- Permitting emergency savings accounts within plans
- Enabling matching contributions for some student loan payments
It’s important for businesses to know which provisions may impact their existing plan or enable them to add a plan or new features, which can also enhance employee recruitment and retention. Alerus is one of the top independent retirement and benefits providers in the nation, with extensive expertise in serving small and mid-size businesses. Business retirement specialists can help navigate upcoming changes, serving as a partner to foster smooth administration and employee participation.
Contact an Alerus Retirement Specialist to learn more
Trust products and services are offered through Alerus Financial, N.A., which does not provide legal or tax advice. This information is general in nature and is not intended to provide legal or tax advice or recommendations for any particular situation or type of retirement plan. Nothing in this communication should be construed as the sole authority on any regulation as it applies to a specific plan or situation. Plan sponsors should always consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues. Statements of fact are from sources considered reliable but no representation or warranty is made as to their completeness or accuracy.
Build and Protect: Smartly Managing Your Wealth for the Long Term
Alerus has been providing personal and business banking, wealth management, and retirement services since 1933. As a highly diversified, publicly traded community bank (Nasdaq: ALRS) with a long-tenured history, our clients rest easy knowing our business is sound, our expertise is extensive, and their deposits and financial futures are secure with us. As fiduciaries, we have a vested interest in our clients’ success and take our role as financial partners seriously, with the resources to meet almost any financial need.
Our experienced wealth management financial advisors create comprehensive financial plans based on each person, family, and institution they serve. Investments are managed with long-term goals in mind. As fiduciaries, we offer faithful, objective execution of trust provisions, careful attention to detail, and skilled management of assets.
Connect with an Alerus Financial Advisor to discuss your goals
Alerus Financial N.A., Member FDIC.
Trust products and services are offered through Alerus Financial, N.A.
Investment products are: I) Not FDIC insured, 2) Not guaranteed by bank, 3) May lose value.
