Consolidate Your 401Ks

July 9, 2017 – Wealth Strategy with Bryan Rigg, Your Wealth Professor
Listen In Every Week: Saturday on WRR from 7:00-8:00 am / Sundays on 570 KLIF

Folks, we’re glad you’re with us here for the next hour. I want to say thank you for letting us contribute to part of your day. We are here every weekend at this time. It is the weekend. It’s a great weekend. We’re looking forward to having you with us. We’re going to talk about a few topics today. We’re hitting on four in particular we think you might enjoy.

We’re going to lead off with insurance. Insurance, you need it for planning. People commonly have life insurance, but we’re going to get into some of the details about why it needs to be a part of your financial planning. We’re also going to find out what to do with previous employer’s 401(k)s.

Let’s say you’ve quit a job or you’ve moved on and changed careers. If you’ve got 401(k)s that are hanging around with other companies, let’s get those consolidated. The why and the what‑fors, we’re going to talk about later in this hour.

LISTEN TO THE SHOW HERE

DISCLOSURE:

RIGG Wealth Management offers securities to Broker Dealer Financial Services, Member SIPC and advisory services through Investment Advisors Corp and SCC registered investment advisor. RIGG Wealth Management is not a subsidy area of Broker Dealer Financial Services. Neither RIGG Wealth Management nor Broker Dealer Financial Services offer legal advice. Client should consult their attorney of choice on all legal matters.

Opinions expressed on this program do not necessarily reflect those of Broker Dealer Financial Services. The topics discussed and opinions given are not intended to address the specific needs of any listener. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk. Examples mentioned are for illustrative purposes only, individual results may vary. Past performance is no guarantee of future results. Investing involves risk including loss of principle. Rebalancing can entail transaction costs and tax consequences that should be considered when determining a rebalancing strategy.

SHOW TRANSCRIPT

SEGMENT 1

Rob Dalton:  Welcome to the weekend. I am Rob Dalton. This is “Wealth Strategy with Bryan Rigg.” Bryan is on vacation this week, so we’ve got a couple of studio guests today that work with Bryan day in and day out. We have David Rigg, his brother, and Gary Bilyeu, who’s great with pensions and TRS programs as well as insurance.

Gentlemen, introduce yourselves and tell us a little bit about

Gary Bilyeu:  Go ahead, Dave.

David Rigg:  I’m David Rigg. I’m Bryan’s older brother. I work with Bryan on a daily basis here at Rigg Wealth Management. We’ve been doing this now almost for a decade. Happy to be here, and happy to be on the show.

Rob:  Gary?

Gary:  I’m Gary Bilyeu. I am not a Rigg.

[laughter]

Gary:  No. I got my start in insurance. We all have the Marine Corps connection.

Rob:  True.

Gary:  I work with Bryan on a daily basis as well.

Rob:  Good. You don’t have the Rigg name, but you are a friend of the empire, as we say.

[laughter]

Gary:  That is correct.

Rob:  Folks, we’re glad you’re with us here for the next hour. I want to say thank you for letting us contribute to part of your day. We are here every weekend at this time. It is the weekend. It’s a great weekend. We’re looking forward to having you with us. We’re going to talk about a few topics today. We’re hitting on four in particular we think you might enjoy.

We’re going to lead off with insurance. Insurance, you need it for planning. People commonly have life insurance, but we’re going to get into some of the details about why it needs to be a part of your financial planning. We’re also going to find out what to do with previous employer’s 401(k)s.

Let’s say you’ve quit a job or you’ve moved on and changed careers. If you’ve got 401(k)s that are hanging around with other companies, let’s get those consolidated. The why and the what‑fors, we’re going to talk about later in this hour.

“Is now a good time to invest in the market?” That’s interesting, because we’re going to talk about the Dow Jones and the S&P 500. We’re also going to find out and ask these gentlemen, “Is now a good time to get into the market, or should we just kind of wait a while?”

We’ll get into the whys and what‑fors on that as well. Gentlemen, how’s your weekend so far?

David:  Fantastic.

Gary:  Going great.

Rob:  Coffee and breakfast, so we’re all set. Let me start this segment with insurance. Gary, I know insurance is a big part of your background and what you do for Rigg Wealth Management. When you get a new client, what are some of the surprises that you have if you deliver something they weren’t ready for?

Gary:  Obviously, that’s a big topic. There’s two guarantees in life, and that’s taxes and death. You would think that more people would focus on that, and focus on the life insurance piece.

We view insurance as one of many pieces that go together in your financial planning. We look at that. When we’re asking questions, we sit with a client, and we’re asking many, many questions to find out what they want to do, what their goals are, what they want their money to do for them.

Insurance is a piece of that, specifically, life insurance. It can be a very important part of your overall financial plan, and so we take a look at that. Life insurance is a way to protect, obviously family protection, but in order to get life insurance on someone, you simply have to have an insurable interest in that person.

We take a look at that, and many times, we’ll have business owners that have an insurable interest in one of their partners, and we can help with life insurance there. But on the individual side, if a husband and wife come to us, they’re at retirement age, close to retirement, they may already have life insurance, and that’s a good thing.

If they don’t, we show them how life insurance fits into their overall portfolio for their protection needs.

Rob:  You make it a piece of the bigger picture.

Gary:  We do. They may have their own insurance engine, and no problem, but if they don’t, and there is a gap there, that’s something we can help them with. I’ve said many times that everyone that’s listening should have a team of advisors.

They’re going to need some legal advice. They’re going to need accounting. They’re going to need a financial advisor, and they’re going to need an insurance agent to help them. Here, that’s what’s unique about us is we can help you with two of those. We can help you with the insurance and the financial advising.

Rob:  Two of three. I want to clarify something right up front, Gary, if you don’t mind. It may be simple, but I want to make sure. When you talk about life insurance, you don’t handle the auto and home, do you?

Gary:  We can. I’m licensed to do it all. I have a property casualty license as well, so I can do that. A lot of times when we have business owners, we’ll set up a 401(k) for a business, we’ll ask them about those needs. It may be health insurance needs. We can help them with that. It may be their commercial policy, their business policy. We can help them with that.

We can cover the full gamut of insurance needs, but what we really focus on as financial advisors is the life insurance piece.

Rob:  Take a moment, if you would. There are some younger people that are listening right now. I want them to understand, there’s typically the two types of insurance, term and whole life. Could you help define those for us?

Gary:  I break it down a little differently. There’s really term and permanent. Those are really the two.

Rob:  Permanent, thank you.

Gary:  Those are the two starting points. Term is exactly what the name implies. It is for a period of time, or a term. It can be 10 years, 15 years, 20 years, 30 years. You can pick and choose the term, and there’s a lot of people that, first off, young people. They’re bulletproof.

Death is not going to affect them. They’re not even considering life insurance until they get married and have that first child, and then everything changes, as you well know.

Rob:  It becomes a priority.

Gary:  It does. For most young people, term is usually the best option. It’s the least expensive each month, and you can get the biggest bang for your buck.

There are some people out there that will advocate ‑‑ they’re totally against the permanent side. When we say permanent, a lot of them are to age 100. It will cover you to age 100 or to age 120. It depends on the type of product. As long as you’re paying premiums, and the policy doesn’t lapse, you have coverage.

David:  That’s the definition of optimism, to 120.

[laughter]

Rob:  I was going to say, if I was 105, I think it’d be kind of hard to find insurance.

David:  “I feel good now.”

Gary:  What we’re saying…Dave’s almost there, so you’d better buy some…

[crosstalk]

Gary:  Why we say permanent is the intent is that you don’t outlive that policy.

Rob:  Which term can do. If you’re 25, and you buy a 30‑year term policy, it’s over at 55.

David:  Absolutely.

Gary:  Everybody 25 years old is expecting to live longer than 55.

Rob:  Correct, but that’s where the term comes from, and that’s why you say you can outlive your policy.

Gary:  That’s true insurance. It’s a pure insurance. They’re covering you for a certain period of time, and that’s the gamble.

Rob:  You pay for it, but you hope you never need it, a lot like auto insurance.

Gary:  Right.

Rob:  You pay for it every month, but you don’t want to need it.

Gary:  Very similar.

David:  Not to brighten up your morning with the death and taxes part of the show, but…

[laughter]

Rob:  Hello weekend.

David:  Exactly. The term is very important, at least in my mind. You need some sort of stop gap until your assets are built up enough to where the insurance needs may drop off as you get older. We just don’t know. My daughter’s 20 years old, and this last weekend, they lost the first person out of their high school class. They’re 20 years old.

Rob:  That’s humbling for her.

David:  It is, and it was a rude awakening for her that, “Wow. The thought that I am going to live forever, or that I’m only 20 years old, and I’ve got my whole life in front of me.” They just had a wake‑up call.

Rob:  That happens, and I’m sorry she had to go through that, but it does. You start seeing people at 25 and 28 start looking around, and that starts waking them up. Whether they’re married or not, you need to take care of your debt load or whatever. It’s not that expensive.

Gary:  One thing, the last thing I’ll add on that is life insurance is really a young person’s game. The younger you are, usually, the lower the rates.

Rob:  True.

Gary:  But 25‑year‑olds aren’t really thinking about life insurance until those life‑changing events happen, like marriage, and then the birth of the first child, things like that, or as David just mentioned, you have a friend, a peer, that passes away. Then reality sets in.

Rob:  Right. At our age, you notice it a little more often, but it can affect you even in your 20s.

I’m going to go off on a tangent here. We’re wrapping up here with a couple of minutes left in the segment. When parents get around into their ’70s or ’80s, they really don’t need life insurance for their own financial needs, but sometimes, they want to leave something as a gift for those they love.

They may not feel the need to buy insurance for themselves, because they’re set. They don’t really have to cover anything, because they’re nest egg and their portfolio’s pretty fair.

Here’s a thought that we’ve talked about before. You can buy, as an investment, life insurance on your parents demise.

Gary:  Sure. Once again, back to the…

Rob:  Because…Go ahead, Gary.

Gary:  …that rule of an insurable interest. It may be just a small policy. It may be just what we call a final expense policy that cover all the final needs and arrangements. I don’t think any of the parents out there want to be a burden on their children.

Nobody wants to, but they may be on a fixed income, and not able to afford the insurance, where you have children that are working and could probably afford those premiums.

Rob:  Could probably take over.

Gary:  Yeah. It’s all based on the insured. That parent, it’ll be based on their health condition. It’s real simple.

Rob:  You could get a $75,000 policy for someone aged 75, and it’s reasonable.

Gary:  It is, and it’d be more reasonable for the children versus the parent.

Rob:  The mom and dad, sure.

Gary:  Especially if they’re on a fixed income.

Rob:  A fixed income. You’re right. This has been a great subject. Anything you want to close with. We’ve only got less than a minute, but Gary, anything we need to know?

Gary:  A lot of people say, “I have plenty of life insurance,” and we say, “Get your policies. It’s part of our review. It’s all a courtesy, complimentary. Bring it all in. Let’s see where you are, and we’ll give you our honest assessment. You may be covered. You may be over‑insured. You never want to pay for too much insurance, but you don’t want to be under‑insured, either.”

Rob:  David, what’s the phone number there?

David:  The phone number to get in touch with us is 972‑383‑1210.

Rob:  Gary, the website?

Gary:  The website, www.riggwealthmanagement.com.

Rob:  And you’ll take emails. Coming up next, in our next segment, the Dow Jones and the S&P 500. We’re going to define what they are, and what those stocks actually mean. We’ll be right back.

SEGMENT 2

Rob Dalton:  Welcome back. Thank you for sticking around through the break. If you’re just joining us, we are “Wealth Strategy with Bryan Rigg.” Bryan is on vacation.

It is summertime, so we have two people that work with Bryan, day in and day out, and that is David Rigg and Gary Bilyeu. Gentlemen, thanks for being in the studio today. Thanks for being part of the show again.

David Rigg:  Thanks for having us, Rob.

Rob:  We’ve had you around for a couple of weeks. We wanted to bring you back, because you are intelligent. You are knowledgeable, you have a lot of practical experience, and we want that to come across to our listeners.

We’re here every weekend at the same time on this station, so that you can kind of become more familiar with financial planning. It’s not something that we like to talk about around the house or the dinner table, or especially pillow talk, but we do need to know what’s going on with our finances.

There are so many people that don’t understand it, and because they feel inadequate in understanding it, they, frankly, don’t discuss it. We are here every week to break it down into bite‑sized, digestible bites and bits so that you can understand it and maybe learn something.

Gary, I’ve had people tell me that with you guys being on the show the last couple of weeks, they’ve actually paid attention and learned something. How does that make you feel?

Gary Bilyeu:  Good. Dave told me it was because I had a face for radio.

[laughter]

David:  Exactly.

Gary:  But, thanks, Rob. I appreciate that.

Rob:  Yeah, people are learning, and that’s why we’re here. We want to make it a discussable topic, and we want to break down the barriers of forebodeness, and we want to tap on it. Today, this particular segment, we’re going to define the Dow Jones and the S&P 500.

We all hear about it in the news. If you watch CBS with Scott Pelley, you watch ABC, or even if you listen to the station you’re listening to now, when they talk about the Dow Jones and the S&P 500, how they acted today.

Those numbers go up and down. David, is that really a barometer of the market?

David:  It’s not necessarily a bad indication of the market. It really isn’t, but I think people need to understand that when we talk about the Dow Jones, we’re talking about 30 companies.

Rob:  That’s it, 30.

David:  30. They’re extremely large. You’re talking about General Electric, Exxon, or Home Depot, things of that nature. But if you’re not invested in those 30, you may or may not be tied to anything that’s going on with them.

The importance of those 30 companies as a bellwether or an indication of the economy, sometimes you can have a good indication from that, but it doesn’t necessarily mean it has anything to do with your personal portfolio at all.

Rob:  Wow, so really, with only 30 stocks under that umbrella, if one company has a good or bad day, it can really affect it.

David:  It can really affect it, yeah.

Rob:  I can see that, because it’s a big piece of the pie. What’s different about the S&P 500? I’m hearing the word 500.

David:  That’s exactly right. It’s 500 companies, basically, and a little smaller companies, normally. Once again, it’s still, even though you think 500 companies, that’s a lot, when you consider the number of companies here in the United States. It’s a very small slice. Both of them, even added together, 530 is all you’re talking about.

Rob:  At the end of the newscast, when they mention the Dow Jones and the S&P, that’s really only 530 stocks.

David:  That’s right.

Rob:  Do companies come in and out of that 30 and 500. Do they kind of rotate them around?

David:  Yes, they can.

Rob:  Probably more so in the 500 range.

David:  Well, yes, they’re in and out. The Dow Jones has made a few adjustments in the last few years, like Home Depot being added, for example.

Rob:  They’re pretty standard.

David:  Yeah.There’s not a lot of turmoil in those, at all.

Rob:  OK, but when the Home Depot went in, someone else had to drop out.

David:  That is correct.

Rob:  Really, Gary, when they hear the S&P 500 and the Dow Jones, is that something you watch and monitor with your clients?

Gary:  We watch it, and like Dave said, unless you’re invested in those 30 or in those 500, and not just in having those, but having them at the same allocation, the same percentage as the market calculates it, then it’s not a correlation, meaning as the market goes up, your portfolio is going to go up exactly the same, in parallel, or when it’s down, it’s going to go down.

We invest in some of those companies, but we tend to invest in a lot of dividend‑paying companies, because our philosophy is this. When you stop working, that’s when your earned income stops.

So now what has to pick up the slack is going to be your nest egg or your cash cow. What does that generate in income? Once you stop working, and no more earned income, what is your portfolio doing for you?

We spend a lot of our time evaluating different holdings inside that vehicle, whether it’s a retirement account or an individual account. It’s what’s under the hood, if you will.

Rob:  It’s the full diversity, as we often talk about.

Gary:  It is. A lot of our holdings…The market’s up, and you hear people. I’m sure many of our listeners have been around the water cooler, and you hear, “Hey, the market’s up. My portfolio is doing great.”

But you can ask one or two more questions and figure out that’s where the financial IQ really stops. The market may be up, and our portfolio may be down on value, but that really doesn’t mean anything. It’s a paper loss or a paper gain until you sell. None of that has any meaning until the moment you sell.

Rob:  I’m going to tap into something while you were…I’m going to get off‑topic and then back on, because you hit on a word I want you to be able to define.

If we rewind about a minute and a half, you mentioned the word dividend, stocks with dividends. Define how that plays in.

Gary:  These different holding, they will pay either in monthly or quarterly dividends, based on a number of shares. In our way of investing, the name of the game is the number of shares. If you buy in ‑‑ and I’m kind of getting ahead ‑‑ that’s your starting point.

That value, it changes every day. The analogy I’ve used in the past, investing is like walking up a flight of stairs with a yo‑yo, and the yo‑yo is the daily movement. It’s constantly moving. When we track it, it’s really every 15 seconds, we’re seeing things change.

[laughter]

Gary:  It changes, so when you get your monthly statement, that’s just point to point. That’s usually a 30‑day period, and it’s either up or down, and that’s what people know, but it changed, literally, hundreds and thousands of times in between that 30‑day period.

If you buy in, and then that price falls, and it’s time to receive that dividend, if you’re reinvesting it, you’re buying more shares. The intent is, if the company continues to maintain their dividend ‑‑ and a lot of the companies that we invest in have a fixed dividend ‑‑ we know exactly what that’s going to pay on a monthly or quarterly basis.

Rob:  And you can plan for it.

Gary:  We can plan for it. It’s very easy to calculate what your portfolio’s doing for you now. The discussion changes from, not the value of the account. It’s, “What is it generating in income for you?”

If you don’t need that income right now, then we’re reinvesting it. If you quit working today, and we’re calculating on a monthly and quarterly basis what it’s producing in dividends, is that enough to survive on? If it’s not, then we keep investing.

Rob:  Right, stay the course.

David:  “Is it cash‑flowing enough to make it work for you?”

Rob:  David, a dividend is like the company, in a way, rewarding you for having the stock.

David:  Absolutely.

Gary:  Yeah, that’s the incentive. There has to be an incentive.

Rob:  Right, and that’s what the dividend does. You can use that to buy more stock in that company. That’s a way of reinvesting the dividends, right, David?

David:  Or you can use it to buy stock in other companies.

Rob:  In other companies.

Gary:  We don’t subscribe to the buy‑and‑hope. A lot of people ‑‑ and let’s face it, when you buy a home, you buy a home at a certain price, and you hope that if you stay there 20‑30 years, pay off the mortgage, that it will appreciate in value. You’re hoping that it appreciates.

Rob:  It does in Dallas. [laughs]

Gary:  Yeah. But in 2008 and 2009, everything…The bottom fell out. We’re not a buy‑and‑hope, buy it now and in 10, 20, 30 years from now when you retire, that it appreciated, because we want it to generate cash flow, like Dave was talking about.

Rob:  David, getting back to the primary topic of the Dow Jones and the S&P, let’s say someone has ‑‑ even though we hear these numbers every day, and we’re going to go back. It’s only 530 stocks.

If they’ve only got two percent of their portfolio in the Dow Jones and the S&P, and the market’s are up…

David:  Theoretically, that two percent should be up.

Rob:  That two percent should be up, if they have all of those stocks, but if it goes down, they really shouldn’t panic.

David:  No.

Rob:  Because only two percent of their portfolio is invested in something within those…

Gary:  That gets us back to the diversification that we constantly preach.

David:  It also gets back to, if you look at historical data. The stock market has gone up, roughly, nine percent a year, so get back to Gary’s analogy of the stairs and the yo‑yo. As long as the stairs are still going up, theoretically, you’re not worried about the yo‑yo.

Rob:  Right, because your yo‑yo’s going to get to the top of the stairs.

David:  Eventually, it’ll be OK, so don’t…We have clients that come on board with us, and boy, they’re hawking everything every day. “What about this? What about that?” After a few months, they start to realize that it’s not that critical that they’re paying attention that often.

Rob:  Micromanaging.

David:  Yes. They start to trust us, see what they’re doing. They start to see what’s happening with their portfolio, and the nervousness kind of drops off a little bit.

Rob:  It’s like a sailboat. Sometimes you’ve got rough waters. You’re headed to the Cayman Islands, but sometimes there’s going to be rough seas. Sometimes there’s going to be calm.

David:  Exactly. It could be choppy, it could be smooth.

Rob:  Just stay with it. Stay on the rudder.

Gary:  As you get closer to that retirement age, then we’re watching it a lot more closely. It’s not on autopilot. We look at accounts on a daily basis, and manage it, because there’s buying opportunities. We may say that, “This is a very good play, a value play.”

The price may be depressed, because people are moving other places, but we don’t chase those returns. We try to be consistent, and over the long haul, we’ve been very successful.

Rob:  Good. Gary, what’s the phone number there?

Gary:  The phone number is 972‑383‑1210.

Rob:  David, if someone wants to reach out and ask you questions about the Dow Jones and the S&P, what’s the website they can send you an email?

David:  The website, www.riggwealthmanagement.com.

Rob:  Great. Take a visit, people. I’m telling you, they’re going to get back with you, and they can help you.

Coming up, we’re going to talk about 401(k)s at your old employers.

SEGMENT 3

Rob Dalton:  Welcome back. It’s nice to have you back. This is “Wealth Strategy with Bryan Rigg.” Bryan, our wealth professor, is on vacation this weekend, and he is not around. He’s out enjoying sun and surf somewhere, with any luck, maybe even palm trees.

In his absence, we’ve got two gentlemen that are distinguished enough to work with him, and I invited them into the studio to be a part of this show. We have with us older brother, David Rigg.

David Rigg:  That’s correct.

Rob:  And Gary.

Gary Bilyeu:  Gary Bilyeu.

Rob:  Gary Bilyeu is an expert…I say an expert, he has a lot of experience in the insurance, pensions, and TRS programs. He also works with financial management. David is getting into the business as well.

We’re going to talk about one of the topics that we discussed off air, and that’s what to do with 401(k)s that you have from previous employers. We often change careers, not just jobs. We’re either let go, or we’ve quit and moved on, or we had a bad staff meeting, and we get erratic and walk away.

[laughter]

Rob:  But when you walk away from a company, your employer‑contributed 401(k) ends up staying there until you do something with it. Gary, you mentioned someone had called you and asked what to do with it.

Gary:  Yeah, and I’m always surprised by that. I don’t leave five dollars on the counter. My kids would take it.

[laughter]

Gary:  I can’t imagine that people would leave 10s of thousands of dollars behind with an employer.

David:  But we’ve seen it.

Gary:  Yeah, we see it on a daily basis. That’s how I got started, is helping family and friends and acquaintances that changed employers. The misconception is, say, you mentioned leave on bad terms, that they think they have to call their employer or go see their employer again. They may have left on bad terms. You don’t have to.

A 401(k) has an administrator that’s totally separate from your employer, and so we simply can take a statement, and look at it, see who the administrator is, and it’s all done over the phone. Many times, we’ll get with our clients, and we’ll do a conference call, get them on there. They give us permission to talk to the administrator, and we tell them exactly what to do.

Usually, we’re on hold longer than it takes to actually make the transaction.

[crosstalk]

Rob:  To make the transaction.

David:  Yeah, to pull the trigger.

Gary:  It’s very simple to do. One of the advantages to that is two things. One, you’re able to take control. I’m not saying take possession of the money. If you take possession and put that in your bank account and spend it, you’re going to have some…

[crosstalk]

Gary:  It’s going to be treated…Yeah, tax consequences. It’s going to be treated…

[crosstalk]

Rob:  Right, we’ll get into that.

Gary:  …as earned income, and there’s going to be a penalty. You don’t have to do that, and that’s where we come in. We set up a like account, and we’re able to transfer that money.

Once it’s transferred, that’s a lump sum of money. Now you have control on what that money is investing in, instead of whatever mutual fund or whatever investment that your employer offered. We can…

Rob:  Which might be limited.

Gary:  It can be, and many times, it may only be a few mutual funds, or a mutual fund family with choices. Sometimes the choices can be overwhelming inside of that.

Rob:  The employer is managing it, or at least the facilitator is managing it, not the employer.

Gary:  The employer is simply sponsoring the plan and giving you an opportunity to invest, but the administrator sets up the actual investments that go in there. Many times, more times than not, those are mutual funds.

Really, the responsibility of the investing is now on you as the individual. We are not born with a high financial IQ, and so we can help with that. We take those lump sums, and now we understand what you want that money to do, and now we can go outside the mutual fund realm and other spaces, and…

Rob:  Open it up.

Gary:  …get that money working for you the way you want it to work for you.

David:  We can consolidate it, and get the same set of eyes looking on it every day, and start putting it to work for you.

Rob:  David, I want to ask you before we get to the end. I want to go back to the beginning. Take a moment and define what a typical 401(k) is.

David:  Like Gary said, it’s a company‑sponsored plan. It’s a defined contribution plan, as opposed to a defined benefit plan. The old defined benefit plan would be like a pension plan or something like that, that you used to see…

[crosstalk]

David:  …used to be pretty common. Now it’s not. Most of the employers have gone to the defined benefit plan, because it’s cheaper.

Rob:  This is where it comes out of your paycheck.

David:  Absolutely. If you so choose. You don’t have to participate in it, but…

Gary:  I find that there’s many people that don’t participate.

David:  Absolutely.

Rob:  They don’t know what they’re missing.

Gary:  Many employers have a matching contribution.

Rob:  David, define the matching contribution element.

David:  It depends. It’ll vary from employer to employer, but a lot of times they’ll say, “We have a three percent match,” or, “We have a five percent match.” You put in three percent of your paycheck, and they’ll match another three percent.

For a financial advisor ‑‑ at least at Rigg Wealth Management ‑‑ this is the first thing we’ll encourage our people to do. We don’t make anything off of that. That’s their plan with their employer, but from a financial standpoint, it makes very good sense to…If you can put five percent away, and the company’s going to match five percent…

Rob:  Oh my goodness.

David:  …that’s a huge bang for your buck.

Rob:  It is. It’s like a five percent raise. It’s like an allowance that we used to get when we were kids. “If you save 50 cents, I’ll give you 50 cents.” It’s along the same realm for adults.

David:  Absolutely.

Gary:  Once they reach that maximum contribution amount, and if you want to put more away for your retirement, then that’s what we talk to people about. We’re not going after everything. We encourage people to max out their 401(k) first, and then any excess money, we can help you with that.

But now we know that it’s more. We need to know how big of a piece of the pie you’re giving us to manage. Where does it fit in? That’s where a lot of the conversation’s coming in to play.

David:  We don’t have any problem, either, with looking at what your employer offers, as far as what mutual funds, or…

Rob:  They could bring their investment options to you…

David:  Absolutely, yes.

Rob:  …for a consult.

Gary:  To be very clear, if we’re not the administrator of the plan, then we have to be very careful with that. But if they say, “Here’s what I’m investing in,” and we understand that they may be very conservative, but they’re in all aggressive holdings, then we can explain that to them. “Understand with your options, if you’re going to be conservative, you may want to lean towards these funds.”

Rob:  Or at least the balance.

Gary:  Yeah, understand what they’re trying to do, and give them general advice. Like I said, if we’re not the administrator, we’re going to be very careful what advice we give. But a lot of times, we find when people…After you start visiting with them, and you start building that trust and that rapport, they’ll open it up. “Here’s my shoe box with all my statements.”

[laughter]

David:  Yeah. “Here’s what I’ve got.”

Gary:  “What do I really have?” That’s what most people want to know. “Where am I now?”

Rob:  David, have you seen many shoe boxes?

David:  [laughs] No, I haven’t, but I have seen people that came in, and they have, just like Gary said, they’re very conservative individuals, and their 401(k) does not match that. It’s not what they’re intentions and what their comfort level would indicate they should be invested in.

Rob:  They may have done it one time three years ago, but they’ve never adjusted it.

David:  We see a lot of that.

Rob:  They just fire and forget. They let it…

David:  Exactly.

Gary:  You’ll see a lot of 401(k)s will have a default. You just pick a date that you’re anticipating retiring, and go from there. It automatically rebalances.

Rob:  Often, out of sight, out of mind. You just know that your five percent’s going in there, and you let it go. Look at your statements. But they can bring in statements to you.

David:  Absolutely, sure. We’ve heard…

Rob:  If you’ve got clients, they can phone call, correct? They don’t have to come into the office? They can, with the rapport they’ve established, you can give them advice over the phone?

David:  Sure.

Gary:  We still like to be face to face and understand. People should interview us, because we’re interviewing them, and we want to make sure that it’s compatible, it’s a good relationship. We want to make sure that we can help.

If you come to us and say, “I have $1,000 and I need $1 million next year,” we’re probably not going to be able to help you.

[laughter]

David:  No.

Gary:  It needs to be realistic goals, and you’ll find that we’ve glossed over a lot of this, but many people want to know where they are now. Sure, we can help you with that, but where are you going? Your point A is where I am now. Point B, what are your goals?

Rob:  What’s your destination?

Gary:  We help you bridge the gap in between.

Rob:  Let me ask you. Let’s say I’ve got someone that has three or maybe four 401(k)s with different employers. Two of them, they completely forgot about, because it was 18 years ago.

Gary:  We get that quite often.

Rob:  David, you work with those, too.

David:  Absolutely. We’ll bring them in. We’ll probably set up, like Gary said, a like account, something like an IRA, and then try to roll those into an IRA.

Rob:  The rollover. I was waiting for that word to come up in conversation. That’s what they do is they roll it over.

Gary:  Yeah. You may have three small accounts out there, 401(k)s with three different employers. We roll them, consolidate them, into a rollover IRA, and now we can get all that money working for you.

Rob:  It’s funny, because that exact thing happened to me, back when I was with ABC Radio. I had $2,000 in Disney profit sharing, and I had completely forgot about it. I get a once a year, annual statement. I was like, “Oh my goodness. I’ve got to do something with this, besides it just sitting there.”

When you get those statements, people can just get hold of you, and roll them over if they choose to.

Gary:  Sure.

Rob:  Consolidate, right? People do actually make mistakes. We know someone close to us that…A lot of this has to do with youth and a lack of knowledge and information and experience.

David:  He’s close to us, like in eight feet.

Rob:  Yeah. [laughs] She’s one of our executive producers. I don’t know if she wants to know, but initials, Allie.

[laughter]

Rob:  She was with…

David:  Sounds like.

Rob:  Sounds like Sally. Luckily, she’s laughing with us, ladies and gentlemen. I promise.

She had left an employer. Didn’t have a whole lot in there, but she had a little bit. It was a couple thousand. When it came time, they asked her, “What do you want to do with it?” She just took it out.

David:  Yes. Paid the penalty.

Rob:  Again, what are the ramifications of that?

Gary:  Did she know her options? That’s what we like to…Don’t do anything. It’s better to wait and talk to an advisor, and find out what your options are, and then make…

Rob:  Knowledge is power.

Gary:  It is. That’s one of the things that I think that we bring to the table is we can tell you what your options are in that situation, and then you can make the decision that’s best for you.

David:  You have to weigh your options. New shoes? Financial penalties. Apparently, the new shoes…

[crosstalk]

Rob:  The new shoes will cost you financial penalties.

David:  Exactly.

[laughter]

Gary:  Have you seen those shoes?

David:  If you really know how much those shoes cost, after you factor in the penalties?

Rob:  The penalties, right. But really, $2,000, let’s say that’s what it was. That’s really not too much. It’s something that you can save for later. I want to hear your analogy, Dave, of time and money.

David:  Our business has two components. It’s time and money, and that $2,000 30 years from now could be worth 10, 15. Who knows?

Rob:  Who knows?

David:  Who knows? Now it’s going to be worth nothing. I doubt if she’s wearing those shoes 30 years from now.

[laughter]

Rob:  …find out?

Gary:  Dave, if you don’t have a whole lot of one…

David:  You need a whole lot of the other.

Rob:  Right. Not a lot of time, you’d better have a lot of money.

David:  A lot of money, absolutely.

Rob:  Got it.

Gary:  You said it’s only $2,000, but if somebody gave you $2,000 and said, “Invest it,” you would.

Rob:  You would, sure.

Gary:  You would.

Rob:  Right, and the penalty on $2,000 may not be that much, so it’s not going to hurt, but you’re missing that opportunity of leveraging time over time.

David:  Down the road.

Rob:  Yeah, and really, $2,000 isn’t too little to invest or save.

David:  But if you save $15,000, which is the potential loss over your learning…

Rob:  What you’re not getting.

David:  Yes.

Rob:  What’s the website people can visit and send you an email, David?

David:  Www.riggwealthmanagement.com.

Rob:  You’re good about emails? You guys are quick to reply?

David:  Hopefully within 24 hours.

Rob:  Excellent.

Gary:  One thing I would say is, you may have a specific question or a very general question. We just want to see your questions. If you send us something, we’ll get back to you.

Rob:  What’s the phone number if they want to get with you personally, Gary?

Gary:  It’s 972‑383‑1210.

Rob:  We started off this, one of the topics at the top of the hour was Dow Jones and the 500, S&P. We’re going to come back to, “Is now a good time to get into the market?” I’m curious to find out their opinion. We’ll be right back.

SEGMENT 4

Rob Dalton:  We’d like to say welcome back. I’m Rob Dalton. With me is our two guests. David?

David Rigg:  David Rigg.

Rob:  And?

Gary Bilyeu:  Gary Bilyeu.

Rob:  They both work with Brian Rigg, our wealth professor who isn’t right here right now. He’s probably thinking about us, wishing he were here this weekend, but chances are he’s not. He’s going to be on vacation somewhere with a beach, and sand, and water, and palm trees, with his kids, which is important.

I am Rob Dalton. I’m here every weekend with you. We’re here to talk about finance with you, our WRR listeners. We thank you for including us as part of your morning routine this Saturday. This particular segment we’re going to talk about, some liquidity options, opportunities in life.

One of them that we want to talk about is divorce. 50 percent of us who get married will end up with a divorce, and at the end usually ‑‑ we’ll talk in generalities ‑‑ but usually there’s what we call a liquidity event where someone’s getting cash as a form of the settlement, whether it’s equity, or stocks, or splitting of the ROTH, and 401(k) in retirements.

There’s usually some liquidity involved. Whether it’s he or her, someone or both are getting a certain cash influx. That’s what we work with, because some people don’t really think about it until it happens. Isn’t that right, David?

David:  Of course. Just like we were talking about the parachute of the divorce, nobody goes into a divorce realizing 50 percent will fail. If they think it’s going to be them, they wouldn’t do it. They wouldn’t get married.

Gary brought up a good analogy. If you thought your parachute wasn’t going to open 50 percent of the time jumping out of an airplane, you probably wouldn’t jump out of an airplane. It’s the same deal.

Rob:  Good point. It’s true. It’s still sad, but it’s a reality that 50 percent of the marriages out there will end in divorce. Whether it’s 3 years or 30 years, you’re going to end up with someone getting some cash. They often don’t know what to do with it.

Just as a general rule of thumb, most of the time in a marriage again whether it’s 3 years or 40, the guy, the husband, the man tends to do most of the financial investing. Just as a general rule of thumb. So that all of a sudden when it’s over, the wife, the ex, the woman, she all of a sudden has this money and has no idea what to do with it.

David:  We’ve had several clients that this has happened to and are getting half of the investments, the 401(k)s, the IRAs, they’re selling a home. She’s getting half of the cash out of the home, or rent houses, or whatever, and trying to set them up and get that working for them so it’s not just wasted in a way.

Rob:  It needs to be purposed.

David:  We’ve also seen where it all just trickles away.

Rob:  Oh my gosh.

Gary:  You know Rob, you said this when you led into this. There’s many different types of liquidity events where you come into cash. This is that unique one that needs a lot more attention. Using the scenario that you mentioned, if you have a spouse that was not involved in any of the finances, when they do, first off they may get half, but half of what?

That’s just the starting point. [laughs] Once they get their half, what do they do with it? And they’re going through the emotional ups and downs of a divorce. I bet you there’s not too many of our listeners out there that haven’t been affected by divorce, one way or another. It’s just so common in our society.

This is that one liquidity event that needs some dedicated time, and attention, and compassion. It’s a very emotional time.

Rob:  It is. Go ahead David.

David:  I’ve also seen this when one of the spouses passes away. I had a relative of mine, and this is an older generation, but he passed away. She didn’t even have a checkbook. She had no idea where the accounts were. She had no idea what they had. She needed a lot of help. [laughs]

Rob:  She needed ground up kind of work.

David:  Ground up kind of help. Now I don’t see that with the younger generations. They were in their 80s, and he had always taken care of everything. All of a sudden, she had a life insurance policy.

A liquidity event had come in with the life insurance paying, she was running the finances of the house, she was running all the investments and everything all at once, and she had no idea where any of that was.

Rob:  Going back to the all days, and I’m just going to say people 60 plus, they dealt with a lot of mail. One person would get the mail and file it away. Now things are online, you mentioned younger generation, it’s easy to share those kind of things.

David:  It’s a lot easier to have visibility too. You’re not waiting for the next statement next month. You can get on and you can check it right now, and find out what’s going on.

Gary:  I think that a lot of people just want to know…they need a starting point. What are my options? How do I start?

[crosstalk]

Gary:  Time continues to tick along. As Dave mentioned, you got the next mortgage. Just because you get a divorce or someone passes away, the bills keep coming.

Rob:  They still. They do.

Gary:  They keep coming.

Rob:  I was going to go somewhere and I just forgot. [laughs] These aren’t events you plan for. You can with a state planning and things, and you know the divorce is coming. Let’s say you’re separated for nine months, you know there’s a finality coming.

I think having someone like yourselves at Rigg Wealth Management, whether it’s Brian, or you David, or you Gary, and being able to share that burden with somebody else who handles that, much like a CPA and even the legal matters with a lawyer. Just having that go‑to person relives so much of the burden, but they just need to make that decision.

David:  Most people going through a divorce are not thinking about the financial. There’s emotions involved, there’s regret, there’s…

Rob:  Shock.

David:  …anger, shock. That’s what they’re dealing with. Most people. I’m not saying some haven’t, but most people are not sitting back in a logical frame of mind thinking about what they’re going to do with their finances when this is all done.

Rob:  It’s true they’re not. If they know it’s coming, a preemptive consultation with you guys might be a good idea.

Gary:  Yeah. Very few of them, clients that will come that are getting divorced, sit down and say, “Hey. We have agreed to this.” Usually one side or the other is completely caught off guard, shocked by this, and they need the most help. Every situation is different.

Rob:  Let’s just go with the norm. Even if it’s the woman that’s shocked, she still may have 401(k)s and plan contributions that she’s got to worry about that are hers, plus the sudden cash flow.

David:  A lot of times you’ll see it all has to get split up. It’s a community property deal.

Rob:  True.

Gary:  I think that’s why it’s important to have a trusted financial adviser for this situation.

Rob:  As part of your…

Gary:  As part of your team.

Rob:  …life grouping.

Gary:  Yeah. You’re going to deal with attorneys. You’re probably going to deal with some accountants when you file your taxes next year. You need a trusted financial adviser, and then you may have to have life insurance needs. There’s a full spectrum of things.

Rob:  Kids or no kids. There’s so many different variables. You guys, you’ve been around a long time. You’ve seen it all. If someone wants to visit your website, find out the kind of states you handle, and financial plan you guys are good at, what’s the website?

David:  Www.riggwealthmanagement.com.

Rob:  They can email someone there?

David:  Sure.

Rob:  You guys are responsive. I’ve seen you do it. Gary, what’s the phone number over there at Rigg Wealth Management?

Gary:  The phone number is 972‑383‑1210.

Rob:  383‑1210. Where are you guys located exactly? I know we’re Dallas‑Fort Worth Radio in North Texas. Where is your office located?

David:  We’re just off the Tollway, just north of 635.

Gary:  Spring Valley in the Tollway.

Rob:  Spring Valley in the Tollway. All right. Folks, it’s been a pleasure. Thanks for being around this segment on WRR. We love having you here every Saturday morning, and we really hope that you come back. We’ll be here. We’re coming back after this break. Stick around.

SEGMENT 5

Rob Dalton:  Welcome back. This is the final segment of the hour, and I want to say thank you from all of us for being around and being a part of our show. You’ve made us part of your day, and in doing so, you’re part of our day, and we appreciate sharing the knowledge.

Remember that this talk we’re talking about ‑‑ this investing and wealth management, and knowing and managing your finances ‑‑ it’s a little bit lofty, but I’m going to go back several hundred years and say that we aren’t genetically inclined to save. We aren’t conditioned to save and save and save and enjoy our future, money and wealth and happiness, and livelihoods.

Instead, we were hunter‑gatherers, and lived and worked as long as we lived. Now, we’re outliving our work life, and we have to plan for it. In the past couple of generations, we’re starting to actually, here in America, have the opportunity to save for the future, because when we stop working, we stop getting the income, and we need to continue that.

So what we’re having these conversations to teach and educate you that you can do something, that making no decision is a decision. Isn’t that right, Gary?

Gary Bilyeu:  I think so, and if you’re not planning for your future, then essentially, you’re counting on the government to take care of you, and… [laughs]

Rob:  Are you OK with that? [laughs] That’s a personal question.

Gary:  Yeah. If you are, then that’s fine, but the fixed income and dealing with all the rules that the government will place on you, do you really want that? Retirement should not be about survival. “What’s my fixed income from the government going to be?”

It should be about what you want to do in retirement. Do you want to just go fishing? Do you want to travel? Do you want to go see grandkids at opposite coasts?

Being in a position to do the things that you want to do is really what retirement’s about, and so a lot of times, that’s where our discussions start. “What do you want to do when you stop working?”

Rob:  Yeah, because, David, it’s not just the money, it’s the time.

[crosstalk]

David Rigg:  You can finally have the time available. You brought up a good point, before. When we had a life expectancy of 40 years, or basically, as long as you had teeth. When your teeth fell out, and you were gumming your food, your health went pretty quickly after that.

Now, our life expectancy is so much longer that you need to prepare for that, because it should last quite a while after your working life is over.

Rob:  But it’s not just going to happen.

David:  No.

Rob:  You absolutely have to plan for it.

David:  You have to plan for it, or it will not happen.

Rob:  This is why we’re here every week. We just want people to understand that.

A quick reset. I am Rob Dalton. I have two guests in the studio. This is “Wealth Strategy with Bryan Rigg.” Bryan is on vacation.

This’ll be the last segment of the hour, but David Rigg and Gary Bilyeu are with me. They both work at Rigg Wealth Management.

This particular topic here we’re going to wrap up the hour with is, “Is now a good time to get into the market?” We had a segment earlier about the Dow Jones Industrials and the S&P 500s, and how there are only 530 stocks total, when we discussed those two topics. Is now a good time to get into the market?

Where do we want to start? Timing is everything. David, is now a good time to dive in?

David:  It depends on what you’re talking about, the market. We are…

Rob:  I asked a broad question. I’m glad you got…

[crosstalk]

David:  It is a broad question, and we are at all‑time highs. There’s probably parts of the market, I don’t know if it is a good time to jump into certain segments of the market.

Rob:  Exactly.

David:  But there’s always other segments that would represent a good value.

Rob:  Gary, give me an example.

Gary:  We focus on several different sectors.

Rob:  Sectors, OK.

Gary:  Sectors of the market. We’re going to dissect every bit of this. We started at the market, what are those, and we talked about two indices.

We get into different sectors within the markets, whether it’s real estate, whether it’s financials, energy, things like that. It may be bonds, muni bonds, different segments. That’s our job, is to figure out what you want to do, and then to pair you up with the appropriate type of investment.

My take’s a little different. I would encourage people to start planning now. It depends on what your risk tolerance is.

We don’t chase performance, the hottest stock or a stock tip. By the time you’ve heard about, our listeners heard about it at the water cooler, it’s overpriced, generally speaking, and the value is gone.

But there’s plenty of people that hear about it, and then they throw all their money in it. That’s what we call chasing performance. We don’t do that.

We try to be very consistent all the way through. We believe that our core holdings are very sound. They continue to pay good dividends.

That’s our job, is to monitor those investments. We go and do what they call due diligence meetings. We will travel to the different financial sectors throughout the US, whether it’s in California, Chicago, New York, Boston, and here in Dallas. Huge financial sector here.

It’s our job to not only advise you, but to keep up with your accounts and understand that those holdings, that they still are of value, and it’s still appropriate for what your goals are and what your trying to accomplish.

Rob:  You have to have the consultations and the rapport, and build relationships for that. David?

David:  Sure. We need to get to know what your needs are. We have to know what your risk tolerance is. We have to know what your burn rate is, what your needs are.

Gary:  Your time horizon.

David:  Your expenses. How much time you have. There’s a lot of things that go into putting the correct portfolio together for someone.

Rob:  Right. There’s a lot of, as one percent…

David:  A lot of pieces.

Rob:  …a hundred different 1 percents make the 100 percent, so it’s all part of it.

You mentioned chasing performance. I have the image of ‑‑ anyone who’s probably working now and been through college knows ‑‑ the bell curve.

If you’re kind of tapping in at the top of it, you don’t know that that’s the top of the bell curve. But if the stock’s doing really good, and it’s been traveling up for a while, you kind of want to stay away from the top of the bell curve.

David:  I think a good example of that would have been the dot‑com stuff 15 years ago. Everybody was going crazy, but these companies had really very little as far as assets and value to them. It was…

Rob:  Almost an ethereal company.

David:  Yes, exactly.

Rob:  A lot of them were.

David:  And a lot of people were chasing that, because they were seeing these stocks go up and things. That’s something we do try to avoid. We do try to avoid that.

Gary:  We call those bubbles, but there have been countless bubbles over the years in history, here and Europe, and there are many good books that outline some of those. I think the dot‑com was just the latest of many. I don’t think that’s going to be the last, either.

Rob:  You mentioned bubble. That would be a bubble for a sector?

Gary:  It is.

Rob:  You mentioned the word “sector” earlier. I was trying to reattach it to our conversation.

Gary:  It can be. Two sectors that we follow very closely are the energy and real estate. In 2008 and 2009, the real estate market…

David:  We had a bubble there.

Gary:  Yeah, with the mortgage, so people shied away from real estate. As the prices of those holdings dropped, it was a great time to get in.

Rob:  Value.

Gary:  Yeah, and more recently is the energy sector. 18 months ago, two years ago, when oil was trading over $100 a barrel, and then when we started seeing the bottom fall out of that, and it gets down in the $30 range, people were shying away. They were putting their money elsewhere. They were going and looking for something else.

They want to buy when it’s high, and then they want to sell it when it’s low, and we should be doing just the opposite. That’s what we do at Rigg Wealth Management. We’re really contrarians.

Whatever the market’s doing, we’ll take a look at it. If it’s still a good value play and it is appropriate, then we have no problem purchasing those assets and those holdings. But we’re looking at what’s down right now, and buying it at a very good value.

Rob:  Because that has the potential to have a bigger return on the investment over time.

Gary:  I’ve mentioned this before. A lot of these holding pay dividends, so it’s not just a “buy and hope it appreciates.” We want to make money along the way, each month, and if it’s down, and we can buy it and get a good dividend and reinvest that, we’re buying more shares.

If it appreciates, great, but once again, that’s a paper gain or a paper loss until you sell.

David:  It all depends on how much volatility someone’s willing to tolerate.

Rob:  We talk about risk management and risk appetite. It’s really what they’re comfortable sleeping with at night. They’re not going to check their statement every day, but they still have to be able to sleep at night, knowing that they’re diversified.

[crosstalk]

Gary:  I think people just want to understand what their investments are, and I think we do a good job at Rigg Wealth Management explaining that and helping them along the way.

Rob:  I have my money with you, and I’m comfortable with where it’s going. I can say that the conversations and the counseling has been just what I’ve needed.

What’s the website, David, people can go to?

David:  Www.riggwealthmanagement.com.

Rob:  Is there an email button, or somewhere they can send you a question?

David:  Sure, right there. They can send a question.

Rob:  Good. If they want a little personal one on one, what’s the phone number there?

Gary:  They can call and set up an appointment. The number is 972‑383‑1210.

Rob:  Ladies and gentlemen, it’s been a great hour. Thank you. Call them or email them. Bryan Rigg, the wealth professor, also you can get hold of Gary Bilyeu and David Rigg.

We thank you for participating. Thanks for keeping us in your dial. We’ll see you next weekend.