dsmWealth: October 17, 2024

Plains Angels venture capitalists announce second flight
BY STEVE DINNEN

A new venture capital fund has opened in Des Moines, with plans to funnel money to startups across the state and, with any luck, make some money for investors.

Plains Angels Early Stages Fund intends to raise $6 million, or even up to $15 million if buy-in from investors goes exceedingly well. The fund is being managed by Tej Dhawan and JD Geneser, who have years of experience in venture capital and helped launch Plains Angels Investors in 2012. With the new fund, they hope to capitalize upon their earlier Plains Angels success.

The minimum buy-in price is $50,000, available only to accredited investors. Organizers said an initial payment of $5,000 will be followed by capital calls on an as-needed basis.

Their intent is to divide their pot into three pools. The first ($1.2 million) is meant for investments of no more than $50,000 for what they consider to be “promising companies in their pre-revenue stage.”

The second pool ($1.8 million) is aimed at early revenue companies that have patents (issued or pending) and are building out their management teams. It will provide funding of up to $100,000.

The third and largest pool ($3 million) will be spent on companies that have developed ongoing streams of revenue but have not yet attracted money from larger venture capitalists. The size of these investments there will vary.

There’s no shortage of opportunities to deploy this capital. Dhawan said the 2012 Plains Angels venture receives nearly 200 funding requests every year, and those requests can simply be turned over to Plains Angels Early Stages. Since Dhawan and Geneser have been involved in venture capital for more than a decade, they know where to look for opportunities. And they know that, by now, people trust them for opportunities.

Since this is Iowa, agricultural or insurance-related businesses are likely to pop up on the list of opportunities. The new fund’s founders aren’t especially interested in retail or real estate. For reference, some successes with the earlier Plains Angels project include a pet insurer and a company that has developed an algae-based system for wastewater treatment.

With venture capital, you lose most of the time and hope the winners carry you through to overall profitability. Dhawan said that in the case of the original Plains Angels fund, 12% of its investments failed outright, 12% have returned capital in various multiples, and the remainder are ongoing operations.

Nationally, contemporary models for long-term venture funds indicate that about a third of investments fail outright, while a third return one to three times the invested capital, and the final third show a return of three to 10 times the invested capital.

Social Security recipients can enjoy a new COLA
BY STEVE DINNEN

About that Social Security payout bump: What a difference a year or two can make.

For all you seniors qualifying for Social Security, you’ll see a 2.5% hike in payouts, starting next year. So come Jan. 1, a current $2,000 monthly benefit will grow to $2,434.

That pales in comparison with 2023, when the largest payout rise in 40 years hit 8.7%. In 2024, it was 3.2%. Since 2021, Social Security payments have risen 21.7%.

These are known as cost-of-living adjustments (COLAs) and are designed to keep up with inflation. They don’t, really, but they’re better than nothing.

Iowa joins 10 other states in exempting Social Security income from taxes. That includes states that have no income tax at all, such as South Dakota and Texas, and states with income taxes but an exemption for Social Security payouts, such as Illinois and Mississippi.

Iowa is now considered a rather tax-friendly spot for retirees. In addition to the new exemptions for Social Security income, Iowans age 55 and older are also exempt from paying state taxes on retirement income, including distributions from 401(k)s, IRAs, pensions, annuities and other assets.

The state is also moving toward a flat tax rate of 3.9%, starting in 2026. As recently as 2021, the state’s graduated tax rate topped out at 8.53% for incomes above $78,435, one of the higher rates in the nation.

Changing jobs can put a $300,000 dent in retirement savings
BY ANNE TERGESEN FOR THE WALL STREET JOURNAL

Switching jobs can boost your pay and prospects. It can also drag on retirement savings.

The majority of people who change jobs wind up putting less of their pay into their 401(k)s, often without realizing it, according to new research from Vanguard Group. That is because many job switchers either forget to sign up for the 401(k) plan, or get auto-enrolled at a lower savings rate.

Over a four-decade career, that can mean as much as $300,000 less in retirement wealth for someone with average pay, Vanguard found.

The 401(k) was supposed to solve a key problem of pensions: Workers had to stay in a job for decades to get a decent benefit. Even though 401(k) savings remain with workers who switch jobs to seek better salaries and more fulfilling work, this research suggests people who stay put keep the most momentum in their retirement savings.

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What 66 economists say about where the economy is heading, in charts
BY HARRIET TORRY, PETER SANTILLI AND ANTHONY DeBARROS FOR THE WALL STREET JOURNAL

Forecasters are increasingly upbeat about the economy’s prospects, according to the Wall Street Journal’s latest quarterly survey of business and academic economists.

With inflation easing, the labor market has increasingly become the focus of anyone trying to read the economy. Here, the expectations of economists were roughly in line with what they said in a Journal survey in July.

They continue to believe the unemployment rate will clock in at about 4.2% at the end of this year. The rate was 4.1% in September, according to the Labor Department’s latest jobs report.

They also expect the U.S. to add about 130,400 jobs a month on average over the next 12 months — basically unchanged from their July forecast of 130,900.

These forecasts show that economists do expect further cooling in the labor market, which has been slowing down this year. But they don’t see unemployment rising dramatically.

READ THE LATEST CHARTS that show what economists are thinking and how their predictions — and the economy — have changed over recent months and years.