Making Aliyah is a huge decision, but one that has the potential to enrich your life in countless ways. In order to ensure that your move is as smooth as possible from a financial perspective, there are many elements that you need to plan and organize. The following paragraphs describe briefly some of the major issues that you should take into consideration, so that your move to Israel will be a realistic success.
Construct Your Personal Business Plan
Assess all the major areas of your life when putting together your plan:
- Tie up all your loose financial ends in your home country
- Consider selling your home and/or business
- Look into whether you will need to retrain or take licensing exams in Israel
- Cost of education for yourself and/or your children
- Travel and shipping costs
- Housing needs
- Residency issues in your home country
- Find a professional to assist you with regard to taxes, estate, investments and business planning
The First Five Years
Define your idea of a successful Aliyah. This is a crucial step, as what one person considers a success might not be viewed as such by another. Include any family commitments for the next five years. The following points may be relevant to you:
- Will you need to care for family abroad, either financially or physically?
- Will you need to travel? If so, how often?
- Does your immediate or extended family have special needs that might need extra attention in Israel?
- Do you have ’emergency funds’, approximately 18 months’ worth of living expenses?
- If you have any debt payments, can you continue to pay them off in Israel?
- What are your employment prospects?
Do You Sell Your Home?
Reasons not to sell your property include the fact that it represents a source of income, and also can be a fall-back option for you in case you need to return to your home country. On the other hand, you might want to consider selling your property as retaining it can be time-consuming and stressful, and you may well incur management fees and other costs. Also, living in Israel while retaining your property abroad may raise residency issues in your home country (consult professionals to assess its impact). Finally your house will be a non-liquid asset, and you might need the funds to buy a new home in Israel.
When contemplating housing in Israel you should consider whether to buy or rent. If you decide to buy, assessing the type of property you can afford is critical to your long-term financial health. Be aware of the various financing sources that are available to you in Israel. The Israeli mortgage market is very different to its North American counterpart.
You need to consider if it is worthwhile maintaining your existing policies. If you plan to keep them, ensure that the policies will be valid in Israel. Plan how you will continue to pay them. Any new policies should be taken out prior to making Aliyah – they are often only available to residents.
Prepare a tax plan to ensure that your funds remain tax-free. The insurance system in Israel is very different to the one in North America. For example, many life insurance policies are built into retirement saving plans rather than stand alone policies, and whole life policies are unavailable. Be aware that there are far fewer options, and prices can vary greatly and fluctuate over time.
The new tax laws for Olim provide some great opportunities for tax planning. The 10 year tax “holiday” on all income generated outside of Israel can make the transition to Israel much easier, while the “one year to decide” rule also gives you much more flexibility. Take the time and effort necessary to understand the Israeli system. Major differences between your home country and Israel can lead to pitfalls or alternatively, tax planning advantages. Major differences include the fact that there is no universal reporting requirement, and the fixed tax percentage on all investment gains. Consider the effect on your current assets and future potential revenue. Wills and trusts, together with general inheritance/estate planning issues, need to be re-evaluated to suit your new situation. Consult a financial planner, accountant or tax lawyer to ensure that your specific situation is planned and managed to its maximum potential.
The employment market is obviously specific to Israel. Although salary ranges are generally lower, there are various standard benefits which can represent a significant sum of money in the long run. Depending on your specific circumstance you may want to consider different employment options. Bear in mind that being an Atzmaii (independent worker) can be complicated from a tax and financial planning perspective. Salaries in Israel incorporate long-term retirement savings plans. Bituach menahalim, Keren Pensia, Kupot Gemel and Kranot Hishtalmut are different types of benefits that may be included in a monthly wage.
Administrating assets from abroad can be very difficult. Israeli markets are viewed internationally as sound investments, and you should seriously consider investing some of your money in Israel. Having at least part of your investments in the currency of most of your current and future expenses, reduces your exchange rate costs and country risk and is strongly advised. Be aware of how critical diversification plays in your investment plan, and ensure that your risk assessment plan takes into account the differences between the standard foreign and Israeli portfolios. Your asset manager needs to take into account many issues including those which impact on your overall plan and retirement issues.
Retirement and Disaster Planning
Your financial retirement plan must incorporate income streams from abroad, and your projected expenses. Consider other insurances (eg disability, health and long-term care) that could be necessary and available depending on your specific situation. Ensure that your will takes into account regulations that apply in Israel.
The above points are quite simply that! They are meant to point you in the right direction, to make you aware of potential differences between your current lifestyle and your potential one in Israel. Take the time to investigate the different issues raised in this document. Consult with experts in the various related fields, and let them clarify potentially complex issues for you. You can make the move successfully.
Congratulations on coming this far!
Baruch Labinsky, author of ‘A Financial Guide to Aliyah and Life in Israel’, is the founder of Labinsky Financial, a financial planning firm located in Ramat Beit Shemesh. Licensed by the Israeli Securities Authority as a portfolio manager, Baruch specializes in working with Olim, who are successfully transitioning their finances to Israel. Baruch’s book ‘A financial Guide to Aliyah and Life in Israel’ is available in bookstores, at Amazon and through Labinsky.com. Baruch lectures regularly for Aliyah organizations in Israel and around the world on various financial topics. Contact Baruch atBaruch@labinsky.com.