4-Minute Money Ideas

How to Overcome the Challenges of Receiving an Inheritance

By Douglas Goldstein, CFP®, - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

What would be your first reaction if you received an inheritance?

When a client received an inheritance from her elderly aunt, she told me:

“I thought she was going to leave everything to my cousin. I never imagined in my wildest dreams that any of it would come to me. Although the extra money will come in useful, I don’t know what to do with it! I spend my nights worrying about whether I should invest it or if I can spend any of it.”

You are not alone

This client’s anxiety about what to do with an inheritance is not unusual. Strange as it may sound, many people who receive an inheritance or windfall worry about losing their new assets, and this fear paralyzes them. Other people go to the opposite extreme and spend it all without a second thought.

Another common problem that inheritors face is when other people somehow find out about their new wealth and want some of it. In the same conversation, my client told me:

“When a distant cousin heard that I’d been included in my aunt’s will, he called me up for the first time in over 20 years and begged me for a sizable loan to start a new business. What do I tell him? It’s hard to say no to family.”

Get some answers

Since people often ask me questions on what they should do after they receive an inheritance, I created a 20-minute online webinar called, “How to Invest an Inheritance.” The webinar addresses the following points:

• What should be your initial response when you find out about your sudden windfall?
• When and how should you invest the money?
• What to do if you are approached for requests for loans or gifts.

Register for the webinar at: Profile-Financial.com/webinar so you’ll know what to do if you receive an inheritance.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.

Avoid This Portfolio Management Mistake

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

At an initial meeting, a new retiree told me, “I’m not really sure what stocks I own.” When I asked how he had put together his portfolio, he explained that some of the positions came from an inheritance, while others… “Well, I’m not really sure,” and a couple of stocks were recommendations from “this guy who sits next to me in shul.” When I asked him if that guy still thinks they’re good stocks, the gentleman admitted, “I don't know. I don't go to that shul anymore!”

This conversation is a superb illustration of a huge mistake that people often make with their investments: following a “hands-off approach to investing” – in other words, not having a clear strategy and buying/selling stocks without oversight. They don’t give much thought to important issues, such as setting goals, diversification, and risk management. I understand that not everyone wants to be involved in the details of their portfolio management, but that is not an excuse for your money to go unsupervised.

A great solution to handling money if you don’t like to deal with it

There is a way to have a properly managed account without having to do all the work yourself: using money managers and a Separately Managed Account (SMA). You can hire a professional money manager to make the day-to day buy/sell decisions on your account so you can sit back and watch from on high.

No matter how removed you want to be about the details of your finances, you (and your spouse) must be able to answer these basic questions:

1. When will you use your savings?
2. How much risk can you tolerate?
3. How much time do you want to spend dealing with the account?

Answering these questions will help you keep your financial focus.

How a money manager may help you

If your savings is meant to grow and be used in the long term, and market volatility makes you nervous, consider using an SMA to provide some oversight to your account. To learn more about money managers, watch a 12-minute video at: www.Profile-Financial.com/sma.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates

What Happens to Your Retirement Plans When You Make Aliya?

By Douglas Goldstein, CFP®, - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

As a Certified Financial PlannerTM sitting in Jerusalem, I work mostly with American immigrants who keep the majority of their assets in American investment accounts. When a recent oleh listed the various retirement plans that he held in the United States, he mentioned:

• Individual Retirement Account (IRA)
• 401(k) retirement plan from an old employer
• 403(b) plan from when he taught in a school.

Although he had some upcoming financial obligations, most of the money was intended for long-term investment.

He told me that his biggest financial problem was that his investments and money “were all over the place,” and with his busy schedule he was unable to keep track of what was going on.

Although each of the accounts came from different sources, now that this oleh was no longer working in America and contributing to the retirement plans, he could roll the 401(k) and 403(b) plans to an IRA. This would give him flexibility to choose the types of investments that he wanted and still maintain the tax-deferred status of the retirement plans, as well as avoiding the penalties for early withdrawal.

When I suggested this option of rolling over his accounts into IRAs, the oleh asked if he could still do this, even though he is now living in Israel. This is a question that many dual citizens ask, often thinking that if they inherit or have an existing IRA in the United States they must cash it out. Cashing out an IRA and moving the money overseas is a taxable event, and often a bad idea.

The good news for this oleh, and also for all Americans living in Israel, is that you can maintain your existing tax-efficient IRAs in American brokerage accounts while living in Israel. To find out more about managing your American assets from overseas, download the “Toolkit for Opening U.S. Accounts from Overseas” for free at www.Profile-Financial.com/toolkit

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.

4 Points to Remember at the End of the Financial Year

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

The end of the financial year is a good time to conduct an annual review of your financial situation. If your savings plan, or the market as a whole, has swerved off course, now is an opportune time to adjust accordingly.

Are your long-term and short-term goals the same as they were last year? If your goals are both time and dollar specific, it’s easy to tell whether you are on target to meeting them.

Does the saving component of your financial plan include tax-deferred pension plans?  Review the details of your pension plan to determine if the division of funds among the saving and insurance components of the plan is still appropriate for your current stage in life.

Once you’ve saved, don’t yet breathe a big sigh of relief. Now comes the hard part – making sure the funds are invested properly. Make sure your investments reflect your risk tolerance, growth objective, and time frame.

As the markets and your needs change, recheck your asset allocation to ensure that everything is in order. Consider, for example, if a stock or fund does extremely well (or extremely poorly) this can also affect the balance of a portfolio.

Before selling stocks/funds and actualizing profits/losses, ask your accountant about the tax ramifications of such sales. Depending on your situation, it may be wise to hold onto investments for at least one whole calendar year, to qualify for the long-term capital gains rate (if you are a U.S. taxpayer). While tax ramifications shouldn’t be the only factor in determining when to sell, they should certainly be taken into consideration.

Use it or lose it

In America, mandatory IRA distributions must be taken by Dec. 31. If you’re 70½ or older, you must withdraw your minimum required distribution by this date. If you haven’t done so, the IRS can impose a 50% penalty on the required amount you neglected to withdraw.

To learn what the most important variable in your financial review is, read my blogpost: www.richasaking.com/review.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.

What Happens When You File U.S. Taxes From Abroad?

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

American citizens living overseas often need to file U.S. taxes from abroad, even if they don’t owe any money. If you live in Israel, gathering the information you need to complete your taxes from Israeli banking and financial institutions can be tricky since foreign institutions don’t produce 1099 forms. So what is an American living abroad to do?

The IRS requires American citizens to disclose information about their investments, no matter where they are held.

The end-of-year statements from your Israeli bank or investment company don’t provide the same information that appears on a standard 1099 – and probably won’t be in English! This means that when filing your American taxes, you (or your accountant) will need to convert currencies, tax brackets, and other information in order to extrapolate the information the IRS needs. While this may not be a deal-breaker, it certainly adds time and effort to tax reporting, not to mention extra fees for accountants. Consider this issue when you are deciding where you want to invest your money.

YAHOO!

You Always Have Other Options. YAHOO isn’t only a search engine, but an acronym for a way to look at life… and investing! One possibility is to invest in Israel – but through the United States! There are many Israeli stocks, as well as exchange traded funds that track the Israeli market, which you can buy on the U.S. exchanges. That way, you can manage an internationally diversified portfolio through an American brokerage firm that issues you a year-end 1099. This would certainly make your American tax filing easier.

What you need to know to open a U.S. brokerage account from Israel

Go to www.Profile-Financial.com/interactive for an interactive questionnaire that customizes itself to your personal financial situation and helps you determine if investing with a U.S. brokerage firm is the right move for you.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.

Did You Get an Unpleasant Surprise From Your Stateside Broker?

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

When your stateside broker sent you a surprise letter, did it contain good news? Many Americans in Israel (and non-Americans, too) have received a letter from their U.S. investment firm or bank informing them that they need to close out their account. In some cases, the brokerage firm does not shut down the account, but limits its services because the client no longer lives in the United States.

10-step solution

I recently produced a toolkit, which you can download for free, which answers the most common questions about handling American accounts from Israel. One of the most popular sections of the toolkit is called, “10 Steps to Opening a U.S. Brokerage Account.” Get this great resource at www.Profile-Financial.com/Toolkit.

A quick and easy solution

Though some investment problems may be insurmountable, don’t worry if you get a letter from your U.S. brokerage firm about needing to transfer your account. If the firm doesn’t want to work with people who live overseas, it’s probably best for you to avoid keeping your account there. Maybe the firm doesn’t understand some of the basic, yet very critical, regulations that a licensed cross-border financial advisor would know, such as which mutual funds you could buy, which ones you absolutely need to avoid, and how to continue investing like you always have done in a diversified portfolio.

On the other hand, a “cross-border friendly” company can open an account for you in your own name in the United States and simply transfer the assets from your current brokerage firm to one with the know-how and experience to help out. These firms can manage your account because they have taken the time to fully understand the rules and regulations and have designed the systems to help people open and maintain investment accounts in the United States.

Have you received a letter telling you to get out? Let me know the details by calling (02) 624-2788 or emailing me at [email protected], and let’s find the best solution for you.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.

How to Grow Your Money Twice as Fast: Save More

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

What’s the best way to save, and how much money should you save?

As a panelist on the “Money Tree Investing Podcast,” I recently answered a question about how to invest monthly savings. Here’s what I advised:

Save more

Before discussing specific investment tactics, I suggested doubling the amount of money the listener was saving. My experience as a financial advisor has taught me that many folks don’t save as much as they can. One common rule of thumb is to save 20% of your income. If you reach that level or more, you’re well on your way to building serious wealth.

Choose investments carefully

There are two principles that every investor should follow:

1. Keep in mind your time frame: Long-term investors can be more aggressive than short-term investors because they have time on their side to recover from potential losses. Though past performance is no guarantee of future returns, it makes sense for a growth investor to place assets in growth mutual funds, ETFs (exchange traded funds), or managed stock accounts. Short-term investors and other people who can’t afford or tolerate a potential loss should invest in more conservative investments like highly rated bonds, bank deposits, or money market funds.

1. Keep in mind your risk tolerance, and invest accordingly. A sound investment portfolio takes into account an investor’s risk tolerance. Only choose investments that correspond to your personal risk threshold. Licensed financial advisors are trained to do risk analysis scenarios with their clients. If you don’t know what your risk tolerance is or whether your current portfolio matches it, meet with a qualified advisor today.

Once you have accumulated savings and determined how you should invest, take the next step and open a U.S. brokerage account to help further your financial goals. For resources on how to do this, download the free Profile Toolkit, a guide to opening U.S. brokerage accounts from overseas. Download the toolkit at www.Profile-Financial.com/toolkit.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.

If you worked in America before your move to Israel, chances are you have an IRA account. What should you do with this American account if you live an ocean away?

Should you transfer your retirement accounts to Israel?

An IRA is an “Individual Retirement Account.” There are several categories of IRA, including traditional, Roth, Simple, and SEP IRAs. The main differences between them relate to when taxes are paid. (Check with your accountant about your own situation since this article does not constitute tax advice.)

Another common type of retirement account in the United States is the 401(k), which is a “defined contribution” plan. Contributions to the account are deducted from your paycheck and you only pay tax on them when you make a withdrawal. Sometimes contributions are matched by employers, which make it an especially sweet way to save. However, when you work in Israel, you normally cannot continue contributing to the plans (unless you are employed by an American company). However, if you had such a plan in the United States, you can often roll it over into an IRA and easily manage it from Israel.

Useless or useful?

Having American retirement accounts when living in Israel can be useful. One reason is because the money invested can continue to grow. If you were to withdraw the savings and deposit them in Israel, depending on your age, you may be hit with penalties and taxes on the amount withdrawn.

A second benefit of having American retirement accounts while living in Israel is that the savings are held in America, and that means easier reporting on American taxes. Your pension plans produce IRS-friendly tax reports so you save yourself (and your accountant) hours of paperwork.

Also, American retirement accounts are already in Uncle Sam’s purview, and therefore don’t need to be reported on FBAR forms.

Everything changes when you move abroad

If you made aliya, the incongruity of the tax laws in America and Israel create certain complications that affect how retirement accounts are run and their tax status. Work with an international brokerage firm that understands the regulatory requirements of dealing with cross-border clients. In this way, you get the best of both worlds. You can live in Israel – and still benefit from your American retirement accounts.

To learn more, download the Profile Toolkit, a guide to handling your U.S. investments from Israel at: www.Profile-Financial.com/toolkit

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates

Should Your American Assets Stay in the United States?

 By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

When making aliya, many olim move their American assets to Israel and convert all their dollars to shekels. However, there is a strong case to be made for leaving your dollars in America. Here’s why:

Efficiency

U.S. securities markets may still be the most efficient, and individual-investor friendly in the world. You can have a diversified basket of global assets within a “regular” U.S. brokerage account, and do it cost effectively. America has an established market, with steady government regulations and investor protection programs like SIPC, protecting the investor and his assets.

Diversification

A U.S. brokerage account can host a variety of investment vehicles in American or global companies. Furthermore, you can have checks, debit cards, and other instant access to your funds, even if you are an ocean away.

Mutual funds

Mutual funds are an easy way to spread risk among different stocks and bonds. They are one of the most popular investment vehicles, both for beginning and professional investors, and they come in many forms, including “Exchange Traded Funds” (ETFs).

Uncle Sam’s bureaucracy

Having the majority of your financial investments in the United States means it might be simpler to file an FBAR, as there will be fewer foreign institutions and accounts to report. Having U.S. compliant accounts makes it easier to meet all your reporting requirements.

Cross-border expertise

Make sure your advisor is licensed in both the United States and Israel, and has experience dealing with issues that you are facing.

Free Toolkit

For more about having a U.S. brokerage account from Israel, download the most comprehensive, simple-to-use guide, “Toolkit for Opening U.S. Brokerage Accounts from Overseas” at www.Profile-Financial.com/toolkit.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.

Why Gender Bias is a Good Thing in Financial Planning

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

One area where gender bias isn’t discussed enough is in financial planning. Financial planning for women must be different than for men.

What do women need to know when planning their financial future?

Women work fewer years than men

Even though men are more involved with domestic duties than in previous generations, typically women take time off after childbirth more often than men take paternity leave. When children are young, mothers are more likely than fathers to work part-time or to stop working entirely for a few years.

Women’s pension savings tend to be smaller than men’s, due to fewer and shorter work years.  Compound this with the difficulty of advancing in careers due to working part-time or non-consistently, and the result is that many women have less money saved than their male colleagues.

Women live longer

Statistically, women tend to live longer than men, meaning they face more years of needing to support themselves after retirement.

I often see widowed women who are financially illiterate because their doting husbands handled the finances. Unfortunately, this means that these widows are helpless when their husbands pass away, and may not even know what assets they have at their disposal or what to do with them.

Take the reins

If you are working, or even if you are a stay-at-home-mom, make sure to put some money aside into savings. Be involved in your family’s financial decisions, rather than leaving it all up to your spouse. Financial communication and knowledge are essential to a good marriage.

Although gender equality has come a long way, I have found that women, especially elderly women, often have taken a backseat in handling their finances. If you’re nervous about managing your money, call my office (02-624-2788) to find out what options are available to you.

To learn more about financial equality for women, check out the video at www.Profile-Financial.com/women.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.