Nov 01

Four Keys to Successful Investing

By Jim Wood | Financial Planning , Investment Planning

Four Keys to Successful Investing

Successful Investing

Warren Buffet

On September 8, 2015  Beverly Quick of CNBC “Squawk Alley” spoke with Warren Buffett about investing:

According to Buffett: “ I’m no good on what’s going on in the markets . I have no idea what will happen tomorrow or next week and sometimes they get very volatile like this and other times they put you to sleep, but the important thing is where they’re going to be in five or ten years. And I’m confident they’ll be considerably higher in ten years, and I really have no idea where they”ll be in ten days or ten months.”

an investment plan utilizing a systematic approach will eventually pay off

Warren Buffett is arguably one of the outstanding investing gurus of our age and if he does not believe that he can “time” the markets, why should we believe that we, our brokers, financial planners, stock market letter writers, and, especially, television market commentators can make accurate predictions about stock prices and market levels?

As has been demonstrated by Buffet, an investing plan, utilizing a systematic approach will eventually pay off over a long period of time regardless of all market perturbations if adhered to conscientiously.

The keys to successful investing are to

1) Determine your goals,

2) Determine the time you have left to accomplish these goals,

3) Determine a savings plan, and

4) Invest in a fully diversified portfolio.  

With the memories of the Great Recession of 2008 still fresh in our minds, it is understandable if the unsettling stock market of the past few months, would instill in us a sense of panic.

That would be the wrong move.

The right move is to make sure that your investing reflect your goals, your time horizon, and your means .  A Wealth Strategist with a steady hand can help you ensure that you get on the right path and stay there.

Please note: The above blog post is general in nature and not intended to address any specific person’s needs or circumstances.  Investment advice is specific to each individual and is provided only after detailed discussion and understanding of personal circumstances. The above article is general in nature and not intended to address any specific person’s needs or circumstances.   

A previous version of this article appeared in the Colonial Times of Lexington MA

Sep 29

Pension Division in Divorce

By Chris Chen CFP | Divorce Planning , Financial Planning , Retirement Planning


Pension Division in Divorce

Pension Division

Themis, Goddess of Justice

Jenni (specifics details have been changed) came to our office for post-divorce financial planning. Jenni is 60, a former stay-at-home Mom and current yoga instructor with two grown children. She never had a professional career and spent much of her adult life with a series of low-paying part-time jobs. She is thinking about retiring now and wanted to know whether she would be able to make it through retirement without running out of assets.

Jenni traded her interests in her husband’s 401(k) in exchange for the marital home, an IRA and half of a brokerage account . The lawyers agreed that the 401(k) should be discounted by 25% to take into account the fact that a 401(k) holds pretax assets.

Adjustments to the Value of a 401k

That sounds reasonable on the surface. But as a professional financial planner, I believe that it was a mistake for Jenni to agree to a 25% discount adjustment to the 401(k). After analyzing her finances, it became clear that Jenni would likely always be in a lower-than-25% federal tax bracket after retirement. Had she met a Divorce Financial Planner sooner, he or she would have likely advised against agreeing to a 25% discount to the value of the 401(k).

Jenni and Ron, her ex-husband, also agreed that she would get half of her marital interest in a defined-benefit pension from his job as a pediatrician with a large hospital.  At the time that pension division was agreed to, Ron thought that there was no value to the pension, and it was probably “not worth much anyway.” Neither lawyer disagreed.

[A Pension does] not come with a dollar balance on a statement

This underscores the importance of seeking the advice of the right divorce professional to analyze financial issues!  Working in a team with mediators and divorce lawyers, divorce financial planners usually pay for themselves .

After a little research I found that Jenni would end up receiving a little over $37,000 a year from the pension division at Ron’s retirement, assuming he is still alive then. This is far from an insignificant sum for a retiree with a projected lifestyle requirement of less than $5,000 a month!

There are also restrictions with dividing Ron’s defined-benefit pension: the ex-spouse or alternate payee (Jenni in this case) can get his or her share only when the employee takes retirement. Furthermore, the payments stop when the employee passes away. (Each defined-benefit pension has its own rules . Each defined benefit pension division should be evaluated individually ).

The Value of  Pension Division Analysis

A defined-benefit pension such as this one does not have a straightforward value in the same way as a 401(k). It does not come with a dollar balance on a statement. A pension is a promise by the employer to pay the employee a certain amount of money in retirement based on a specific formula . In order to get a value and for it to be fairly considered in the overall asset division, it needs to be valued by a professional.

In her case, Jenni’s share of the pension division was 50% of the marital portion of the defined-benefit pension. Was it the best outcome for Jenni? It is hard to re-evaluate a case after the fact. However, had she and Ron known the value of the pension, they might have decided for a different pension division that may have better served their respective interests. Jenni may have decided that she wanted more of the 401(k), and Ron may have decided that he wanted more of the pension. Or possibly Jenni may have considered taking a lump-sum buyout of her claim to Ron’s pension . In any case, they would have been able to make decisions with their eyes open, instead of taking the path of least resistance.

The news that her share in Ron’s defined benefit pension had value was serendipity for Jenni. It turned out that the addition of the pension payments in her retirement profile substantially increased her chances to make it through retirement without running out of assets. But it is possible that an earlier understanding of the pension division and other financial issues could have resulted in an even more favorable outcome for Jenni .


A previous version of this article was published at Kiplinger.

Sep 23

Planning for Long Term Care

By Jim Wood | Financial Planning , Retirement Planning

Planning for Long Term Care

Long Term CareLive Long.   We are, and that is the problem.

However, without early financial planning we may not” live long” in prosperity. Many of us will outlive our resources.  According to the Social Security Administration, the average 65 year old woman will live to 86. The Federal Government says that 70% of people turning age 65 will use some form of long term care” .

Do you have an integrated financial plan that takes the high likelihood that you will need Long Term Care into consideration?  

The need for long term care will affect all of us in one way or the other

If we do end up in a nursing home, the AVERAGE cost today is $76,000 for one year in a nursing home according to the American Association for Long Term Care Insurance (AALTCI).  In Massachusetts the average cost of a private room in a nursing home is $141,894 .

Long Term Care is not something that we rush to buy.  Before you delay it too long, you may want to consider how the denial rate goes up with age.  If you wait too long you may not be able to get it. Review the information at both the and the AALTCI web site for a broader understanding of these topics.


Coverage Denial Rate

40-49 11%
50-59 16%
60-69 24%


In broad terms, there are four ways to fund long term care :

  1. Spend out of your own funds.  You need to make sure that there will be enough.  Consult a financial planner to make sure that this is the case
  2. Medicaid planning.  With this method you would be putting your asset in a trust that would shelter them from the government.  Medicaid would end up paying for long term are.  This is a complicated procedure that requires careful financial and legal planning.
  3. Long Term Care insurance. With this method, a senior can shift the responsibility for long term care  expenses to a third party.
  4. A combination of the above.  For instance many people end up using a combination of spending their own funds and long term care insurance.

Most Long Term Care Insurance Policies buy you a “Pool of Money” that can be used for home care, assisted living, nursing home and adult day care.  Importantly, most seniors prefer to stay home as long as possible.  Most long term care policies will pay for home care.  For example, 40% of people buying a Long Term Care Policy bought a policy with 3-year of benefits (with an inflation rider) valued at $165,000. Costs and policy benefits vary greatly from company to company and policy to policy so close attention to detail is required as is a financial soundness assessment of the insurance company under consideration.

Wealth Management often ties in different disciplines. Planning for long term care needs to ensure that all the other parts of the retirement puzzle (investments, cash flow planning, other insurance, tax planning) are tied together.

The need for funding Long Term Care will affect all of us in one way or another . Give yourself your best chance of a good outcome by starting your planning now to avoid what could become a crisis.


A Previous version of this post appeared in the Colonial Times of Lexington MA

Sep 09

Stock Market Blues

By Chris Chen CFP | Financial Planning , Investment Planning

Stock Market Blues

Stock Market BluesAs the stock market plunged almost 10% on Monday August 24, following similar plunges in China and Europe, it is natural to ask whether one should be invested in the stock market at all. After all a 10% drop is significant, and the media makes sure that we know that.  

the average equity fund investor made on average 5.19% a year

And it is not just the US stock market. We have heard rumblings since June now about economic malaise in China, including a similar drop of 8% in the Shanghai stock market on August 24 as well. We have fretted about Grexit, the potential Greek exit from the Eurozone. We have seen gas going down at the pump, and we cannot even feel good about that!

So then, is it time now to get out of the stock market? Or if you have cash on the sidelines, is it time to get in?

It is worth pondering that from 1900 to 2010, 10% corrections have happened on average three times a year. 20% corrections have happened on average every 3.5 years. In other words, stock market corrections happen “all the time”. Based on statistical evidence, the only thing that your Financial Planner can tell you with regard to future stock market directions is that it will go up and it will go down!

I know, it’s not very reassuring. Your adviser or financial planner has probably told you that you need to be invested for the long term. That requires us to be committed, and to be invested. (If we have needs that are not long term, say college tuition for the next term, that money should not be in the stock market).

When, then, should we get in or out? The fact is that no one, not even the smarty pants who run your mutual funds, are able to time the market with any reliability. That is one of the reasons why mutual funds are consistently invested; they don’t get in and out of the market based on short term fluctuations.

In a recent study, Dalbar found that from January 1995 to December 2014, the average equity fund investor made on average 5.19% a year, while the equity markets went up on average 9.85% annually. One of the key contributing factor to this huge disparity is that individual investors have a tendency to get out when the stock market is low, and to get in after it has recovered.

Yet, it is natural to be scared. If you feel scared about the financial markets, today may be a good time to call your Financial Planner. If you manage your own money, today may be the time to set an appointment with one!

A previous version of this article appeared in the Boston Globe on August 24, 2015

May 27

Steps to a Divorce Diagnostic

By Chris Chen CFP | Divorce Planning

Steps to a Divorce Diagnostic

Divorce DiagnosticPeople who are contemplating divorce are often overwhelmed with the process. That’s completely normal. After all divorce is not something that you do every day.

As a Divorce Financial Planner and Wealth Strategist, I work with women and men who are contemplating divorce, going through divorce or recovering from divorce. Every one of these men and women are going through significant upheaval in their lives. They all need a Divorce Diagnostic .

So, where should you begin?

As a Divorce Financial Planner, it should come as no surprise that I would advise you to deal with your finances first and get a Divorce Diagnostic . There is an old saying that marriage is about love, and divorce is about money. This is not entirely true. Divorce is an emotionally draining process that is about a lot more than money. Yet in the end, whether it is the amount of assets you will get, the child support you will pay or the legal retainer you will pay, it often comes down to the money.

After a divorce there will usually be a lot less money with which you will now have to run your households. You will have to consider the tax and cash flow consequences of keeping or selling the marital home. You may need to reconsider your retirement planning. The list is long.

However, there are seven steps that you can take before you start your divorce process leading to a Divorce Diagnostic ™ that may make the process less painful.

1. Take an inventory of all your financial records.

As a first order of business, you need to gather all financial records of both you and your spouse, including bank account information, tax returns, mortgage statements, credit card bills, wills, trusts, life insurance policies and retirement accounts, to name a few. Be especially mindful of assets either of you believes have no value or indeterminate value, such as employee stock options, unqualified executive compensation plans and defined benefit pensions. Disputes often center around specific assets. It is important to know what they are and where they are.

2. Open new bank and credit accounts in your own name.

You should have your own source of funds. Open a checking account in your own name, preferably at a different bank from where you hold your joint account. If you do not have a credit card in your own name (not a joint credit card), get one. If you have no income of your own that may be difficult. Before you open your checking account, you may want to verify that the bank will give you a credit card also.

3. Monitor your credit report.

This is a good way to keep a pulse on how your financial situation will be evolving until you divorce. The credit reporting companies allow you a free copy every year. You should take advantage of this offer.

4. Start budgeting for legal and professional fees.

Divorce is expensive. You will likely require the help of professionals including lawyers, mediators, divorce financial planners and mental health professionals. Make sure that you have funds available for these expenses.

5. Consider alternatives to litigation.

Explore options such as mediation or a collaborative divorce. If you have reasonably good communication with your spouse, these alternatives may be quite a bit less expensive than the traditional litigation model. The goal is to get through divorce intact, not to spend all your assets on legal fees.

6. Assemble a team.

Not unlike a sports team, each player has a role. You will need a family lawyer to review the legal aspects of your divorce. You may need a therapist to help you deal with the emotional rollercoaster. You and your spouse may decide to use a mediator. And you will need a Divorce Financial Planner to help you with the financial aspects of divorce.

7. Conduct a Divorce Diagnostic ™.

A Divorce Diagnostic ™ will allow you to get a good grasp of your financial situation, and likely outcomes, right at the beginning of the process. You will then be able to plan accordingly and make sound decisions on how to move forward. Gaining control of the process before it gets control of you will allow you to best achieve a favorable outcome.

Divorce is a lot of work that can seem daunting. Completing these seven steps will help you feel more in control and better equipped to make thoughtful, reasoned decisions.

You want to come out of divorce in the best financial and emotional shape possible, with the well-being of your children protected, your assets preserved and a sound long-term financial plan in place.
(A previous version of this post was published in the Boston Globe)

Apr 12

The Dirty Dozen Tax Scams

By Chris Chen CFP | Financial Planning , Investment Planning , Tax Planning

The Dirty Dozen Tax Scams

IRS Tax buildingI recently read the IRS Dirty Dozen Tax Scams, 2015 edition, the government’s annual guide for taxpayers to potential tax scams, so you wouldn’t have to!

The first item of interest, although at the bottom of the IRS list, are issues with various phone or email scams.  “Whether it’s a phone scam or scheme to steal a taxpayer’s identity, there are simple steps [for consumers] to take to help stop these con artists,” IRS Commissioner John Koskinen says.

At the top of the list of things the IRS wants us to beware of are telephone and email scams. If someone calls claiming to be from the IRS and pressures you to give him or her money, hang up. If you receive an email from someone claiming to be with the IRS and asking for personal information or money, delete it.

The IRS also advises that taxpayers stay on the alert for identity theft, especially around tax time.

(earlier versions of this posts were published on nerdwallet and the Christian Science Monitor)

Mar 03

How should I use the 529A Account?

By Chris Chen CFP | Financial Planning

How should Iuse the 529 Account?

author: Julia Wolf thru wikimedia commons;; no changesThe first part of this post described 10 key features of the new 529A Account created by the ABLE Act that was passed by Congress in December 2014.  Let us know if we can send you a copy or a link to the entire article.  This second and final part discusses implications for disabled loved ones.

The 529A comes with built-in advantages such as relatively low costs (expected), tax advantages, and the ability to have up to $100,000 in assets without jeopardizing access to public support programs.

The new plan should be very attractive to many middle class families. Similar to the intent of the the 529 college plan for college bound students, the 529A allows families to set aside money for their disabled loved one, and use it as needed, while limiting the impact of unforeseen expenses on their lifestyle.

However, the 529A has restrictions for annual contributions and maximum balance which may make an account delicate to manage. It is not a vehicle for disabled people to accumulate more than $100,000. In fact due to the relatively low balance limit, the vagaries of market fluctuations that it may be subjected to, and the inevitable withdrawals that will occur, many people will want, if they can afford it, to supplement a 529A with a Special Needs Trust.

Due to the contribution limit, the accumulation phase of the 529A could last up to 7 years, making accumulation a medium term investment horizon. Perhaps one way to manage accumulation would be to contribute $14,000 for three or four or five years and then let the investment grow (hopefully to $100,000) over time. The distribution phase starts as the balance approaches $100,000. While it appears that according to the rules the beneficiary’s Supplemental Security Income will suspend when the balance goes over $100,000, it is not clear yet how this suspension would be implemented. Will “any” peak above $100,000 trigger the suspension? Or will it be the balance as of an arbitrary date, say at the end of the month? Rules and regulations are still being written, so we don’t have that answer yet.

Nonetheless, the key is that the balance will have to be managed, and drawn down as necessary so as not to exceed the magic $100,000 balance limit. Given the general upward bias of financial markets, it would imply that it may be best to 1) manage the balance to a level of safety below $100,000 like, say, $90,000; and 2) plan a periodic monthly withdrawal to cover ongoing expenses.

Using the 529A as a checking account cum investment account is not necessarily optimal. Most of us dissociate our checking accounts from our investment accounts for good reasons. And yet, the 529A seems to be designed to be used as both, primarily because 529A investment earnings are expected to be tax free (checking accounts are effectively tax free since they have no earnings to tax). Hence the only way to earn a windfall from the 529A is to invest.

Many readers will be familiar with the sequence of return problems that can come with a retirement account: when a new retiree takes initial withdrawals in the same period that the financial markets experience a downturn, the risk of running out of money before end of life increases tremendously. The same will be true for the 529A, especially since the time horizon can be so much longer than for retirement. While a 30 year retirement is common, it is likely that many 529A beneficiaries will need their account for up to 60 years or longer. In the absence of a party willing and able to replenish the account, for instance, by another relative after the parents pass away, 529A accounts may still need to be supplemented by Special Needs Trusts. Actually, 529 accounts fit well as a stop-gap before Special Needs Trusts are funded, as many Special Needs Trusts remain unfunded until life insurance pays up after the death of the parents.

Since 529A accounts are not offered yet as of the time of this writing, we don’t know what kind of investment options will be available. As mentioned, the accumulation phase could be for as little as 7 years, which makes it a medium term investment horizon, followed by a very long distribution phase (up to 60 years or longer) during which the main investment need will be for income, and the need to manage the balance to under $100,000. That is very different from 529 College plans which have up to 18 years accumulation and then distribute over a 4 to 5 years period.

States which will offer 529A Plans will be well advised to propose different investment offerings than those offered for their college plans. For instance, the standard age based investment options currently offered by most college plans will probably not be appropriate. In addition, because participants will sometimes draw from the 529A account in declining markets, they will likely demand solutions that are relatively insensitive to downward market fluctuations. The temptation will be to leave it in cash or near-cash, thus giving up on a critical feature, the ability to grow investments tax-free.

The 529A is not a perfect vehicle. However, it is a great new tool to help disabled people. It will allow more families to plan support for their disabled family members with an easy-to-use framework that should be relatively low cost and may provide additional funding in the form of tax free earnings. In addition, 529A Accounts supplement rather than replace Special Needs Trusts by filling a gap for the period before Special Needs Trusts are funded

Let us know if you would like a copy of  Part 1 and Part 2 of this article on the new 529A, or if you have further questions.

(A previous version of this article originally appeared in

Feb 13

10 Things to know about the 529A

By Chris Chen CFP | Financial Planning

Ten things to know about the 529A Account

529AIn the week leading up to Christmas 2014, the US Congress passed the Achieving a Better Life Experience Act (the ABLE Act) , creating the 529A account to provide tax advantaged benefits for disabled individuals. It is a significant change to the financial planning landscape for special needs beneficiaries, with the potential for helping many families with disabled members.

The 529A plan is modeled after the Section 529 College Savings Plans, which are widely used for college planning. The 529A account is meant to allow tax advantaged accumulations and distributions for a wide range of expenses for the disabled beneficiary. The following lists some of the specifics, similarities, and differences that the 529A Account features:

1. The 529A Account uses the Social Security definition of disability. In addition it can benefit only people who have been diagnosed with a qualifying disability prior to age 26.

2. Like the 529 College Plans, the 529A plans will be set up on the state level. Presumably, the same state agencies that oversee the 529 College Plans will be responsible for the 529A, although that may differ from state to state.

3. There can be only one 529A account per beneficiary, normally in his or her state of residence. That is different from the 529 college plans, for which there is no limitation on which state plan is used, and where the distributions are made.

4. Spending for a beneficiary can occur only in his or her state of residence. This will allow simplified compliance verification for federal and state agencies.

5. Contributions in the 529A are with after tax money and are limited to $14,000 a year (in 2015) for each beneficiary from all sources. Individual states may choose to provide additional tax benefits.

6. Investment growth in the 529A is tax-free.

7. Distributions are tax-free so long as they are used for qualified expenses. Otherwise, earnings on distributions are taxed at ordinary income rates with a 10% penalty added. Qualified expenses include housing, transportation, health and wellness, education and more.

8. Having a 529A does not disqualify the disabled individual from Federal and State aid, such as Supplemental Security Income or Medicaid, so long as the amount held in the 529A does not exceed $100,000. Effectively that caps the 529A Account to $100,000.

9. Should the 529A account balance exceed $100,000, Supplemental Security Income would be suspended, but not terminated. Once the balance falls below $100,000, benefits would be resumed.

10. The limitations on contributions and on balance levels suggest that the 529A could be used as a hybrid between an investment account and a checking account.

In the next post we will discuss some of the subtleties and implications of the 529A for planning for disabled love ones.  Let me know if you would like me to email you a link to the next post!

(a previous version of this post appeared on
Jan 14

3rd Annual Symposium on Divorce Financial Issues

By Chris Chen CFP | Divorce Planning

3rd Annual Symposium on Divorce Financial Issues

Highlights include overall tax considerations, retirement planning, child & spousal support, social security both now and in the future, and more.

While marriage may be about love, divorce is usually about money. As such, the Symposium on Divorce Financial Issues is aimed at providing a deeper perspective of tax and other financial issues. Divorce is a critical decision-making time in people’s lives; it occurs in a highly stressful environment where husbands and wives often don’t grasp all the facts and thus may be ill-equipped to evaluate the long-term implications of their decisions.

This symposium is directed toward divorce professionals, including lawyers, CPAs, mediators, coaches and any other professionals interested in divorce issues. Our goal is to ensure that your divorcing clients become better informed of all financial issues and any consequences.

The day’s agenda will cover a broad spectrum of financial issues. Financial planners often spend 80% of their effort dealing with tax issues which impact only 20% of a divorced person financial future, while non-tax issues often contribute 80% of the financial impact on a divorcing individual’s life and get a lot less attention. This symposium will open the doors to better service and results for your clients.

The Symposium will be held on Friday February 13 February 20 from 8:45 AM to 4PM at the Oakley Country Club in Watertown at 410 Belmont Street, Watertown, MA 02472.

The program speakers are a distinguished group of divorce practitioners and will include Justin Kelsey, Esq, Chris Chen, CFP®, CDFA™, Diane Pappas, CDFA™, Tom Seder, CDFA™, Jessie Foster, CFP®, CDFA™

The cost of attendance to the Symposium is $95 for early birds who sign up before February 6, and $195 for others, including a continental breakfast and a buffet lunch.  The profits from the Symposium will be donated to the Greater Boston Food Bank.  Please sign up here and enter code EARLYBIRD for the discount.

Jan 10

New Year Resolution

By Chris Chen CFP | Financial Planning

New Year Financial Resolution

New Year Champagne

New Year Financial Resolutions

According to the Fidelity New Year Financial Resolutions Study (that was completed late in 2013) 54% of Americans were considering making a New Year resolution regarding their finances, as compared to 35% who reported this in 2009. As New Year receded into a snow storm, there were probably even more of us who made a financially-related New Year resolution, in addition to others.

The top three financial New Year resolutions are:

  • saving more (54%)
  • Paying off debt (24%)
  • Spending less (19%)

Survey respondents favored long term financial goals over short term goals by 53% to 39%. The leading long term financial goal was saving for retirement in a tax deferred account such as a IRA or a 401(k) (53%), followed by savings for college (35%) and saving for retirement health care costs (28%).

However, our good intentions notwithstanding, almost half of us were concerned that the continuing uncertainty around the economy, the debt ceiling struggles, and the ongoing threat of higher interest rates could deter our good resolutions. In addition, as we all know from experience, New Year resolutions are not easy to implement. How are you doing with your New Year resolution?

While we may not be able to help you stick to your gym routine, we can help you with financial New Year resolution. Here are a few things to keep in mind:

  • Make a plan! It is very easy to stray when you haven’t set specific goals for yourself.   We can show you how to get your plan in order.
  • Determine risk. The proper level of risk is different for every investor. We can help make sure you are not taking on more risk than you are willing to take. If you are concerned that the market has become too exuberant, pay particular attention to risk.
  • Consolidate. Are your investment accounts scattered? Combining old or ineffective accounts can maximize your return and make tracking your investments much easier.
  • Know what it is costing you. Beware of hidden fees and costs that can impact your investments. We make sure you are aware of all costs and fees to ensure you know exactly where and how your investment dollars are being spent.

Every good New Year resolution needs a support system. A best friend to keep you honest at the gym. A house mate to give you the eye when you head to the fridge. And a financial planner to guide you to the most informed investment decisions. Contact us so today so we can help you put your New Year’s resolutions back on track.


A previous version of this post was published in the Boston Globe