This articles is by Douglas Goldstein, CFP®
Having helped Olim for almost 25 years with handling their U.S. investment and IRA accounts, I’ve assembled a list of some of the most common problems that they face. Along with that, I’ve made or found some great free money resources that have helped lots of them. The investment tips here are general in nature, and not meant for everyone, but Olim should be able to benefit from most of them.
- Keep your IRA and 401(K) plans in America – Just because you’ve moved to Israel, it doesn’t mean all your assets need to make Aliyah. Moving across the ocean doesn’t mean all your investment accounts have to do so, too. There are certain tax and tax-reporting benefits to keeping them in America. However, be aware that some U.S. brokerage accounts are wary of maintaining clients with an Israeli address, and will either limit your account or ask you to leave. Don’t worry. You can still have a U.S. brokerage account. Though some companies may have a policy against foreign addresses, there’s no law against S. brokerage accounts for non U.S. residents. If you get such a letter from your brokerage firm, tell them “Good Bye” and watch this video that explains how a company that specializes in cross-border clients will enable you to continue with your IRA, 401(K), and other retirement accounts from Israel.
- Consider new investment strategies carefully. Sometimes people get all excited with their move to Israel and they begin to experiment with new ways of handling their money. Some new investment opportunities happen automatically through work, so be sure to read Nefesh B’Nefesh’s comprehensive article Employee Benefits 101.
- Avoid investing voluntarily in Israeli mutual funds and other passive investment programs. Complicated U.S. tax laws can limit American taxpayers from investing in overseas mutual funds. The IRS considers those investments “PFICs,” (passive foreign investment companies), and investing in them exposes you to additional American taxes and reporting requirements. When dual citizens invest, they need to check with tax advisors in both countries to learn the tax implications of any possible investment.
- Don’t feel pressured to buy real estate. Though there is a great emotional pull among Olim to buy Israeli property, be wary of jumping into a real-estate investment right away. Whether you want to purchase a residence for yourself or if you want to buy an apartment and rent it out, take into account that real-estate deals are complicated and often cost more than you expect. And the income you earn will likely be subject to U.S. tax reporting. Also, folks can normally afford to rent a property that would otherwise be too expensive for them to buy. On the other hand, if you buy a house and pay a monthly mortgage, you’ll build up your own equity in the property and won’t ever have to worry about your lease ending and being asked to move. Both sides in the debate have merit, and the bottom line is that you have to do what’s right for you, not just what someone else tells you. Listen to this clip called How to Make the Right Decision about Renting or Buying a Home for additional points to consider before purchasing real estate.
If you’d like more financial advice geared for Olim who have assets in America, sign up for my newsletter at www.Profile-Financial.com, and I’ll also send you a free copy of the ebook The Retirement Planning Book. For more specific questions about your specific question, email me at [email protected].
Douglas Goldstein, CFP®, helps people in Israel with their U.S. investment and IRA accounts. Doug is the director of Profile Investment Services, Ltd. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, FSI. Accounts carried by Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. His book, The Retirement Planning Book, is available for free download at www.profile-financial.com. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. The opinions expressed are those of the author and not necessarily those of Portfolio Resources Group, Inc. or its affiliates.