4 Minute Money

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.

Is Risk Management the Best Financial Strategy?

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

What is risk management, and how does it affect your investment decisions?

Every investment is risky

Every investment carries a chance of making a profit – and a risk of sustaining a loss. However, some investments are riskier than others. Generally speaking, the more profitable investments contain the most risk; if an investment can potentially make a high profit, it can also cause just as much of a loss. So if you're thinking about an investment that could give a high return, ask yourself if you could handle that level of loss if it doesn't work out.

Is it worth taking a chance?

If you're afraid of risk, you may prefer to play it safe by keeping all your money in a savings account in the bank. You won't make much profit as interest rates are low, but at least you minimize your chances of losing money. Savings accounts, money markets, and CDs offer protection against risk. However, when the product becomes due, the real value of your money may have decreased if the interest rate didn't keep up with inflation.

Risk management vs. risk avoidance

Fortunately, when investing, there are many choices and you don't need to single-handedly embrace or reject high-risk investments. There's a middle ground: follow a policy of risk management.

For example, if you're young and have many working years ahead of you, you may be able to withstand more risk than someone nearing retirement since you have time on your side to recoup any market losses. On the other hand, an older worker may be comfortable with some aggressive pieces in his asset allocation, but he might feel the need to have a more conservative portfolio so he doesn't get a nasty surprise if the market crashes just when he's entering retirement.

Consult with a financial advisor to help determine your risk level and develop a strategy to manage risk in your investment portfolio. To learn more about investment risk, read: www.RichAsAKing.com/risk.

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.

Estate Planning: What Happens to Your Money After You Die?

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

One of the most important issues in estate planning is what happens to your money after you die. How quickly your heirs receive the inheritance depends largely on your estate planning. (If you're having any difficulties with an inheritance, please email me at [email protected].)

3 things to consider when planning your estate

When setting up U.S. IRA and brokerage accounts for clients who live in Israel, I ask them to consider what will happen when they no longer need their money. Here's where to start:

1. Provide beneficiaries for your retirement accounts. Individual Retirement Accounts (IRAs), 401(k) plans, and many other retirement and insurance programs can be transferred to heirs via a beneficiary designation, and therefore do not need to be included in a will. When you fill in the new account paperwork, provide details about who should get the money and what percentage they should receive.
2. Consider a trust. If simply dividing up the money amongst the children and grandchildren wouldn't work for your family, a trust can provide more control, though you should be wary about trying to control your estate from the grave. In cases where children might not have financial skills or where there is a risk of litigation, a trust can protect assets. Israel passed new trust laws recently, so if you already have a trust, or if you're thinking of establishing one, speak to an attorney to get proper advice.
3. Make a clear will. When my office helps to disburse deceased clients' accounts to the heirs, we find the process goes smoothly if the clients had written a clear will with the help of an attorney. Folks who try to save on legal fees can end up costing their estate a lot more in the end since problematic documents mean hours of a lawyer's time to handle.

When clients pass away, we work with the family and guide them step by step through the money transfer. If you have questions about handling your estate, send me an email ([email protected]) or call (02-624-2788) and let's begin a conversation about how to make the right moves.

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 These Common Mistakes When You Receive an Inheritance

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

A new client recently told me, "My late father left me an inheritance of an IRA (Individual Retirement Account) worth $1.5 million, and I'm the sole beneficiary. What should I do with it? If I bring the money to Israel, I'll have to sell the stocks and wire the money to my account here. But if I do that, I'll have to pay tax in the United States and maybe Israel, too."

Unfortunately, many beneficiaries make costly money mistakes. Read about the mistakes you should avoid if one day you receive an inheritance, and then check out our free interactive tool at www.profile-financial.com/interactive.

Don't take money out of the IRA

If a beneficiary withdraws the funds from the IRA, he'll lose a fantastic American tax benefit. People with regular IRAs only pay tax on the money they withdraw. Any money remaining in the account can continue to grow untaxed. An inheritor can transfer the original IRA into a "beneficiary IRA" (a.k.a. "stretch IRA") and this maintains the tax-deferred status of the account until the money is eventually withdrawn.

No U.S. capital gains tax on sales inside an IRA

According to IRS rules, U.S. citizens holding IRAs don't pay capital gains tax (or tax on interest and dividends) when they sell stocks for a profit inside their account. This is a huge benefit when compounded over many years.

Probably no estate tax

U.S. citizens who leave their estates to their American-citizen spouses or children don't have to pay estate tax as long as they don't exceed the "federal estate tax exemption," which is $5.45 million (as of 2016). (Be sure to consult with a qualified tax advisor in case there's any state or local estate tax.)

As I don't give tax advice to clients, I always tell beneficiaries of an inheritance to consult tax professionals. I often work directly with clients and their accountants to make sure that their investments and tax obligations are handled properly.

If you're getting an inheritance and you live in Israel, make sure to check out www.profile-financial.com/interactive.

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.