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Chris ChenCDFA, CFP®

We help individuals, families and business owners reach their financial goals. We have a special emphasis on complex situations such as retirement, divorce, and legacy planning

Waltham, MA
Wealth Strategist, Insight Financial Strategists LLC
Fee Structures: Asset-based, Fee-only, Hourly

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  • 4 people found this answer helpful

    Hello, I am in my twenties and I want to start investing. I am interested in more risky options such as stock or efts. Can you recommend some education basics that can help me start out?

    Investing

    Congratulations on jumping into finances.  I recommend that you first clarify your goals for investing. 

    more »

    Congratulations on jumping into finances.  I recommend that you first clarify your goals for investing.  Once you do that you will be in a better position to judge how risky of a portfolio you want to have.  For instance, saving for a down payment on a house in a few years should take a different approach than saving for retirement in 40 years.

    You will then need to learn about the basics of investing: risk, diversification, modern portfolio theory, etc... In addition to the excellent resources suggested on this page, see if you can join a Meetup group that focuses on investing, or a class at a community resources.  Reading only goes so far.  You will need to get people interaction to digest your learning. 
    Along way you will need to decide how much you want to learn.  That is also a decision about how much you want to defer to the professionals, whether it is a financial advisor, or a mutual fund, or anything in between. 

    Good luck!

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  • 3 people found this answer helpful

    If I'm going to be taxed at a "normal" tax rate on my SEP IRA when I retire why don't I just invest without going through a SEP which means I'll only pay a 15% capital gains tax which is far lower than what I normally pay?

    Retirement Savings, Taxes, Retirement, Income Tax

    You make an excellent point.  The main advantage of tax deferred accounts such as the SEP IRA is

    more »

    You make an excellent point.  The main advantage of tax deferred accounts such as the SEP IRA is to defer taxes.  That means that you get an immediate tax deduction, in exchange for taxes in the future after you retire.

    Without using your SEP IRA, you would pay your marginal income tax (Federal + State) on your contribution, and then pay capital gains, which may be as high as 20% depending on your income, not to mention the ACA surtax.

    With the SEP IRA, you defer your income tax and your capital gains tax.  When you withdraw at retirement, you will pay your income tax on your original contribution, and you will pay ordinary income tax on your gain instead of capital gains.

    If your projected income tax in retirement is above your current capital gains tax it is a no brainer: go for the IRA.  Above that may require calculations.

    Personally I take my cue from Mitt Romney.  http://www.theatlantic.com/politics/archive/2012/09/whats-really-going-on-with-mitt-romneys-102-million-ira/261500/

    If it's good enough for Mitt, it's good enough for me :-)


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  • 2 people found this answer helpful

    I watch Squawkbox on CNBC once in a while. Should I pay much attention to what they advise?

    Investing

    Squawbox and similar shows are entertainment.  In the financial world we all learn about the efficient

    more »

    Squawbox and similar shows are entertainment.  In the financial world we all learn about the efficient market hypothesis.  Some of us believe in it more than others.  In a nutshell it says that the price of a stock reflects all available information, and thus fairly represents the value of the stock.  There is a large set of academic study that support that notion especially when it comes to public information.

    Anything they would say on a TV show would be public and reflected in the stock price faster than a non professional could act.  So the answer is

    NO



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  • 2 people found this answer helpful

    Are we anywhere close to being able to retire?

    Retirement Savings, Investing, Retirement, 401(k)

    Congratulations on having arrived at an enviable financial position.  Given your relatively young

    more »

    Congratulations on having arrived at an enviable financial position. 

    Given your relatively young age, you should plan for 30-40 years or more of retirement.  It is worth checking with a professional to make sure that the numbers add up.  According to Robert Shiller, the Economics Nobel Prize for 2013, people make better decisions with a financial planner.

    The first issue I would work on is what you would do if you were to retire early.  For many people, retiring sounds more idyllic when you are working, then when you are not.  You may want to examine why you want to retire.  Is it to pursue a hobby or because you don't like your job that much? How do you envision spending a week in retirement?  It's important to have a plan for that.

    Your travel plans ($10K a year) are not at a scale that it could not be done during your normal vacation.  Maybe you can travel more, and still work? 

    Financially, you would need a more comprehensive plan to ensure that you 1) account for all of your costs and potential costs, and 2) that you would have enough to cover them all. 

    I would suggest a comprehensive plan with a retirement specialist.

    Good luck!

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  • 2 people found this answer helpful

    My family is moving back to the U.S. after two decades living abroad. Good news: Debt free and about a year's salary saved. Bad news: No U.S. credit history. How will this affect getting car and home loans?

    Mortgages, Personal Finance

    Welcome home! The first thing to do is to establish a credit history.  Luckily it does not have

    more »

    Welcome home!

    The first thing to do is to establish a credit history.  Luckily it does not have to take long.  In some circumstances, you can even start on it before officially moving (for instance if you are moving back with a company, and if you have an address that you can use, like that of a friend or relative).

    The first thing to do is to acquire a credit card.  Ask for one at the bank you are using or will be using.  Open an account and apply for a credit card.  Many banks will approve you right away.  Then start using the card:  charge stuff, make your payments on time, and carry a small balance.  Small, so that there is one, and so that the interest charges are under control.  You will see your credit score increase rapidly.

    Acquire other trappings of modern life, such as a cell phone.  The credit threshold to get a cell plan is low, so that should not be a problem.  Pay your bills on time.  That will help with your credit.

    I actually like not to carry debt.  After all I am a Financial Planner, Certified too!  I recently bought a car.  The credit was denied because, according to the credit report, I did not have "sufficient installment accounts", ie I was akin to a credit deadbeat.  The moral of the story is you should carry a small balance on your credit card until you are settled.

    Btw, the dealership overrode the credit report and granted me credit.

    I moved back to the US about 10 years ago, and I have several clients who have moved here from overseas.  Having your employer help with employment letters, and asking the lenders to be reasonable, as in my car case should get your through the hump.

    Good luck!




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  • 2 people found this answer helpful

    Should I convert my SEP IRA to a Roth IRA given that I plan to be in a low tax bracket in 2014?

    Taxes, Investing, Roth IRA

    In principle it makes sense.  However, I would like to have more information. I like (for purpose

    more »

    In principle it makes sense.  However, I would like to have more information.

    I like (for purpose of a Roth conversion) that you have $0 income.  However, your wife has an income.  The combined income tax of your wife's income and that generated by your conversion may push you into a high tax bracket.  That may negate the intent of your conversion.

    One potential positive is that you are starting a business.  Normally a business in its beginning phase is likely to generate losses.  If you have organized it as a LLC or a S Corp, your losses will pass through to your individual income thus lowering you income potentially into negative territory.  At this point it would definitely make sense to convert to a Roth up to the amount where you would start paying taxes.

    Above that amount, I want to have a conversation with you first.  I would like to understand what kind of retirement income you plan on, and therefore the real breakeven point for your conversion.

    For the second part of your question, money in a SEP grows tax deferred.  You pay taxes on it when you withdraw in retirement.  You have already determined that you pay taxes on the Roth upfront.  That is why you are considering a conversion at a time when you will be in a relatively low tax bracket.  If you are going to be in the same tax bracket at the time that you withdraw compared to the time you contribute, Roth and SEP IRA are equivalent.  The Roth only makes sense when your contribution tax bracket is lower than your expected withdrawal tax bracket.

    Good luck!

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  • 2 people found this answer helpful

    Are there any penalties if you fund a Roth IRA from selling stock?

    Investing, Roth IRA

    When your parents are ready to start cashing their ATT dividends they are likely to pay 0% tax on the

    more »

    When your parents are ready to start cashing their ATT dividends they are likely to pay 0% tax on the dividends.  That's what you pay when your income is taxed below the 25 % bracket.  Since your parents are in the 10% tax bracket, it would work.   

    Selling the stock and putting it into a Roth seems like more work than it is worth.

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  • 2 people found this answer helpful

    I am the owner and sole employee of a small construction business in CT. I have both a ROTH IRA and a SEP. My accountant said I can contribute to both for the same tax year BUT the combined amount can not exceed $5,500 between the two. Is this correct?

    Retirement Savings, Taxes, Investing, Retirement, Roth IRA

    Have you considered doing a Solo 401k

    more »

    Have you considered doing a Solo 401k with Roth option?

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  • 1 person found this answer helpful

    I'm 40 years old, in good health, and considering a life insurance policy for the benefit of my wife and one-year old. Would you rather get a whole life insurance policy, or a term life insurance policy and "invest the difference" in the market?

    Insurance, Life Insurance

    It seems that your primary need right now is to cover your wife and kid in the event that you pass away

    more »

    It seems that your primary need right now is to cover your wife and kid in the event that you pass away prematurely.  Your need should be for the next 17-21 years (including college).  The best and least expensive way to address is to use term insurance.

    Don't forget that if your wife passes away prematurely in the same time frame, that you and your kid would have a similar need.  Hence, she needs a term policy as well

    With regard to whole life, do you have a "permanent" need for coverage? That is a need for funds in case you pass away beyond 21 years from now?  If so, you may want to consider deeper life insurance planning than can be given here.  To do that get a Certified Financial Planner from here

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  • 1 person found this answer helpful

    ROTH vs traditional IRA?

    Retirement Savings, Investing, Retirement, Traditional IRA, Roth IRA

    In addition to the answers that were provided by Brian, let me just add this one factor: it depends

    more »

    In addition to the answers that were provided by Brian, let me just add this one factor: it depends entirely on what you expect your tax rates in retirement to be vs now.

    As was explained, your contributions to a Regular IRA are pretax.  You will pay tax on the contribution and its earnings when you withdraw them in retirement.  On the other hand your contributions to a Roth IRA are after tax, and you will withdraw them tax-free in retirement (there are different rules if you decide to withdraw them before retirement).

    1) If you expect your tax rate in retirement to be higher than now, you are better off to contribute to a Roth IRA.

    2) If you expect your tax rate in retirement to be lower than now, you are better off to contribute to a regular IRA.

    When you do the math you will find that if you assume 1) the exact same investment return on the Roth IRA as on the Regular IRA, and 2) the same tax rate on your Roth IRA contributions today, as on your Regular IRA withdrawals at retirement, you will end up with the exact same amount of money to spend at retirement.

    How then should you decide? If you are at the peak of your earnings, and you can calculate that your income in retirement will be significantly less than it is today, investing in a regular IRA will save you tax money immediately.  Since you expect to be in a lower tax bracket, at retirement, you will end up paying less taxes. 

    If you are currently a low earner, and expect to have higher income in retirement than you have now, contributing to a Roth IRA will cost you relatively little taxes, and you will not pay any when you retire.

    How then can you figure out what your tax rate in retirement will be?  Clearly it is a challenge.  You need to predict your income in retirement, as well as predict the tax rate for that income, which may depend on all kinds of extraneous factors, as Brian started to address.  In my opinion it justifies a consultation with a professional planner .

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