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 doug@profile-financial.com, 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:
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 doug@profile-financial.com.)
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:
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 (doug@profile-financial.com) 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.
A Guide to the Tax Implications of a Legal Settlement
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
This is a two-part article addressing questions that arise when people receive lump sums. For the entire article, go to: www.profile-financial.com/settlement.
I recently helped a number of people who are in the midst of receiving a cash settlement from a lawsuit, and had to point out that winning a lawsuit is not “free money.” In addition to having survived personal injury and a long-drawn out legal case, there may be tax implications to a legal settlement.
Lost wages or profits
If you are unfairly dismissed from employment, you may receive a settlement for lost wages, benefits, severance, back pay, or other income. According to the IRS, this settlement is considered regular income, even though severance pay is often tax free in Israel. This kind of settlement is also subject to the Social Security wage base table and Medicare tax rates for the year in which you were paid. Reporting legal compensation for lost wages is similar to reporting income for regular pay when you were employed.
Interest payments
Interest on any settlement, as with any income, is taxable and should be reported as “interest income.”
Punitive damages
Punitive damages are taxable and therefore must be reported, even if received in a settlement for personal or physical illness or injuries.
Estimate tax
Make estimated tax payments early if you know you’re going to owe at least $1,000 in income tax from having to report receipt of a legal settlement amount.
Taxation on settlements is complicated. Remember to speak with a qualified tax advisor to get advice since this article is just for general information. We help people manage their U.S. investment account, not file their tax returns.
Free information
To get this complete article along with the IRS’s information about what you need to report to the IRS regarding a legal settlement, go to: www.profile-financial.com/settlement
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.
A Guide to the Tax Implications of a Legal Settlement
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
This is a two-part article addressing questions that arise when people receive lump sums. For the entire article, go to: www.profile-financial.com/settlement.
I recently helped a number of people who are in the midst of receiving a cash settlement from a lawsuit, and had to point out that winning a lawsuit is not “free money.” In addition to having survived personal injury and a long-drawn out legal case, there may be tax implications to a legal settlement.
Lost wages or profits
If you are unfairly dismissed from employment, you may receive a settlement for lost wages, benefits, severance, back pay, or other income. According to the IRS, this settlement is considered regular income, even though severance pay is often tax free in Israel. This kind of settlement is also subject to the Social Security wage base table and Medicare tax rates for the year in which you were paid. Reporting legal compensation for lost wages is similar to reporting income for regular pay when you were employed.
Interest payments
Interest on any settlement, as with any income, is taxable and should be reported as “interest income.”
Punitive damages
Punitive damages are taxable and therefore must be reported, even if received in a settlement for personal or physical illness or injuries.
Estimate tax
Make estimated tax payments early if you know you’re going to owe at least $1,000 in income tax from having to report receipt of a legal settlement amount.
Taxation on settlements is complicated. Remember to speak with a qualified tax advisor to get advice since this article is just for general information. We help people manage their U.S. investment account, not file their tax returns.
Free information
To get this complete article along with the IRS’s information about what you need to report to the IRS regarding a legal settlement, go to: www.profile-financial.com/settlement
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.
Did You Make a Mistake When You Opened Your Bank Account?
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
What happened when you opened your first Israeli bank account after making aliya?
A new oleh recently told me: “I just tried your online tool [www.profile-financial.com/olim] to find out what I need to know about having a U.S. brokerage account now that I’ve made aliya. But I think I made a mistake when I opened my new Israeli bank account.”
He had gone to a local bank and told them that he wanted to bring some money over to Israel. The clerk there answered that as there is now an information exchange agreement between Israel and the United States (true), he needs to sign an IRS form called a W8 (false). The mistake was the form number, not the fact that the details of the Israeli bank account would be available to the IRS.
What forms do I sign?
If you open an Israeli bank account, you need to sign a W9 form (not W8), which tells the bank that you are a U.S. citizen. It provides the bank with your Social Security number to allow for easy reporting to the IRS. The W8 form is used for non-U.S. citizens.
You might be familiar with the W9 form from opening accounts in the States. In fact, when we help American olim with their IRA (Individual Retirement Account), brokerage, or other investment accounts, we have them sign a W9.
Are there restrictions on my investments from Israel?
Now that you live overseas, you may find that some companies, banks, and mutual funds won’t want to work with you. But don't worry. Even if your old firm has a problem with overseas clients, it’s easy to set up a U.S. brokerage account while you live in Israel. You can find answers to many common questions on this subject at www.profile-financial.com/olim . If you’d like to discuss your situation, call 02-624-2788.
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 You Need to Know About Premium Bonds
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
Premium bonds may be a good investment choice for retirees looking to increase their income. (For solutions to other problems retirees face, download a free copy of The Retirement Planning Book at www.profile-financial.com/rpb.)
Consider premium bonds
In today’s low interest rate environment, if you park your money in bank deposits or money markets, the interest you receive generally will not be enough to pay your bills. Even leaving a million dollars in Certificates of Deposit (CDs) in a bank will only generate a few thousand dollars a year of spending money. So how can retirees supplement their income without too much risk to their principal?
A solution may be to purchase bonds, especially “premium bonds.” Buying a bond means lending money to a country or a company. In return using your money for a set period of time, they pay you interest. Since bonds are not as safe as bank deposits, they generally pay a higher yield.
Some bonds issued previously offer high “coupon rates.” They may be higher than what newly-issued bonds pay today. Since everyone wants to get a higher interest rate, these high-coupon bonds sell at a premium price. By buying a premium bond, you get more cash flow from your investments than if you buy a bond at par or at a discount. When the premium bond matures, you won’t get the same amount back that you paid. But you will have received more cash flow every year, which means that you have effectively achieved your goal.
Premium bonds are not for everyone, and they carry risks, but anyone who is looking for income should consider if they are appropriate for their individual situation. For more information about how to have a financially stronger retirement, download a free copy of The Retirement Planning Book at www.profile-financial.com/rpb. Alternatively, call me on 02-624-2788 and let’s start talking about the best way to get income from your investments.
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.
The Best Way to Invest When You Want to Gift Money
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
Recently, a couple with four children of various ages asked me for advice on how to invest funds that they had just inherited. They didn’t need the inheritance for themselves, and they wanted to pass it along to their children.
The couple’s oldest child was married and wanted to buy a house, so getting her share of the funds now made a lot of sense. “What stocks should we invest in for her?” the clients asked. “None,” I said. “Money that you want to use in the short term should be in cash or short-term bank deposits because it needs to be safe. The stock market carries risk.”
As the next two children wouldn’t need the money for the next four or five years, they could afford to take some risk and try to grow their gift. A broadly diversified portfolio that included stock and bond funds could increase their odds of growth. Before getting started, though, I explained the level of the risk and tried to give the clients a sense of what to expect with regard to volatility.
Should you invest aggressively?
The couple’s youngest child was only 14 and would not need the money for some time. So the clients thought that they could afford to take more risk with his portion and put it all into stocks. I warned them that even though the stock market has traditionally offered stronger returns than other asset classes, growth is not guaranteed and they could lose money. In the end, the couple chose to use a “money manager” to handle that portfolio as they felt that this would be the best way to diversify and manage these funds.
To find out more about using a money manager, watch the 12-minute video at www.profile-financial.com/videos/SMA. To start a conversation about handling your investments, call my office (02-624-2788).
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 Interest Rate Risk is Important
By Douglas Goldstein, CFP®
Conservative investors who buy bonds to avoid high risk might inadvertently be exposing themselves to a potentially devastating risk: interest rate risk.
If you are concerned that you may have interest rate risk or other hidden risks in your investments, call my office at 02-624-2788 to discuss your portfolio.
Are bonds safe?
When you buy a bond, you lock in a specific interest rate that you'll earn until the bond matures. Assuming the issuer of the bond remains solvent, you’ll receive your interest payments (usually every six months), and on the "maturity date" you’ll get the principal value of the bond. That’s what happens in most cases. But…
When interest rates rise, people who have locked in a lower yield discover that their bonds decrease in value. For example, let's say you own a $50,000 bond that pays 3%. After you have bought the bond, if rates for similar issues rise, say to 5%, the principal value of your investment drops. It drops, since a 3% return pales in comparison to a 5% yield. If you hold your 3% bond to maturity, you will get your principal paid back, but if you need to sell it beforehand, you will likely lose money. That is interest rate risk – the fear that if you have to sell your bonds before maturity you’ll potentially lose out on regaining your full principal.
Longer term bonds and preferred stocks
If the bonds you own will reach maturity relatively soon, the rise in interest rates will have a limited effect on their price. But longer term bonds and preferred stocks (which often act like long-term bonds) can drop in value significantly if interest rates rise.
If you own bonds and would like to discuss the risks, please call (02-624-2788). If you see yourself as a conservative investor but worry that you might be exposed to interest rate risk, be in touch right away.
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. Accounts carried by Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates
What You Need to Know About Financial News
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
Should financial news and media reports affect the way you make your investment decisions?
Recently, a client said: “I just read about _________ (fill in Israeli company name) in The Jerusalem Post, and I’d like to buy 1000 shares.” I hear comments like this fairly often. Since I help people who live in Israel with their U.S.-based IRA and brokerage accounts, I am able to help them trade stocks. However, before putting in an order, I recommend that they ask a few questions before considering buying an investment.
How accurate is the news?
The media frequently misrepresents information. News reports are only as accurate as the journalist’s orientation. Therefore, it may be reasonable to assume you are not getting the complete story.
Is the information fresh?
Once “hot” news reaches the general media outlets, it probably isn’t hot any longer. It might be warm at best. Some types of news items about long-term company strategies might give you an indication of where the firm wants to focus its growth. Such reports (e.g., that the company wants to enter the self-driving automobile market) may not have an immediate impact on its stock price. However, if you believe in the future of the product/company then it may be appropriate to invest. However, if short-term news breaks, for instance, a drug company receives FDA approval, and you think the stock will shoot up in value as a result of the new information, be aware that you’re possibly already too late for the party.
Does news make you a better investor?
Studies have compared investors who have made decisions with the input of news versus those who made decisions in a news vacuum. Interestingly, those folks who weren’t distracted by the media hype outperformed their well-informed peers. I wrote about this, along with many other behavioral finance facts, in Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing. Check it out, and sign up for the free articles and podcast at www.RichAsAKing.com.
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 Increase Your Retirement Cash Flow
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
When you retire, your cash flow changes. Since most pensions won’t replace 100% of your pre-retirement income, you need other ways to increase your monthly cash flow.
A bank may not meet your needs
If you put your money in a regular savings account in the bank, you have little risk of losing your principal. But, you also will receive relatively low interest, as banks normally pay the lowest yields in the world of fixed income. This prevents you from “growing” your money. Whatever money you have may lose value due to inflation. If you have the tolerance to take on some level of risk, consider adding bonds to your portfolio. (Watch a 12-minute video on bonds at www.profile-financial.com/bonds.)
Bond coupons are usually higher than bank rates
A bond is a loan that you make to a country or company. You lend them money, they pay you interest on a set schedule, and at some point in the future, on the “maturity date,” they return your principal. The main risk of bonds is that the issuer of the bond will default. However, default in the quality bond market is not common. Bonds are rated according to their risk level, and more conservative investors choose high-rated quality bonds to generate income from their portfolio.
An easy tool to buy bonds
Depending on the amount of money you want to invest, you may buy a portfolio of individual bonds yourself, or you might find a bond mutual fund (or exchange traded fund - “ETF”). These investment vehicles own lots of different bonds and you own a piece of the whole pie, which gives you instant diversification. Make sure to check with an investment advisor and read the prospectus before investing, though, since there are real risks.
If you are worried about cash flow during retirement, email me (doug@profile-financial.com) to start a conversation about whether bonds make sense 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.
What to Do When You Inherit an IRA?
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
If you inherit an IRA (Individual Retirement Account), you may be tempted to simply withdraw the funds and put them into your own name. But if you do, you would possibly be making a big mistake. Instead, you should transfer the money into a “beneficiary IRA” account.
Money in an IRA is tax deferred in America, meaning that any interest, dividends, and capital gains inside the account are not subject to U.S. taxation. Once you withdraw the money, or move it overseas, you’ll probably owe money to the IRS. So by asking the brokerage firm to set up a beneficiary IRA for you, and moving the assets directly from the deceased’s IRA account into a beneficiary IRA in your name, you can continue to benefit from the tax-deferred status.
Can I open a beneficiary IRA from Israel?
Many Americans living outside the United States find that brokerage firms are not willing to set up an account for them, due to restrictions imposed by strict anti-money laundering legislation. But this does not apply to all companies.
Besides keeping the American tax-deferred status of your inheritance, there are many advantages to having an American brokerage account. For example, U.S. markets are among the most efficient and investor-friendly in the world. You can also diversify easily through the various investment vehicles that a U.S. brokerage account offers, and having this type of account makes U.S. tax reporting a lot easier.
If you are interested in finding out more about opening a beneficiary IRA account to deal with an inheritance or any other issue concerning American brokerage accounts, check out www.Profile-Financial.com/10-Steps, or call 02-624-2788 and let’s review your situation.
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.
Do You Need to Worry About a Market Crash?
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
No one knows if or when there will be another market crash. Anyone who could accurately predict the ups and downs of the market on a consistent basis would make an absolute fortune.
Even if the market’s exact moves can’t be predicted, you can be sure that the market will take a hit sometime in the future. In fact, if you’re planning to hold investments for the next few decades, get ready for many crashes, of varying degrees. That’s the way the market works. Successful investors, by and large, are those who are well prepared to ride out volatility.
Smooth out the ride
Naturally, you don’t want your account to nosedive. So what should you do? If you are the kind of person who would sell out in the event of a huge collapse in the stock market, maybe it is better if you don’t get in at all. On the other hand, if you have the tolerance to take on some level of risk, there are tools that can help to minimize the risk inherent in market volatility.
One tool to minimize market risk is diversification. By spreading your investments among different sectors, you minimize the chance of all your investments dropping in value simultaneously. Own some positions in equities (a.k.a. “stocks”) and some in bonds, cash, or funds that invest in other areas, like real estate. By diversifying, you can lessen risk. Some money managers try limiting volatility in their investments by adjusting the amount of cash in their portfolios in line with macro-economic trends.
Do you have an investment account in the United States? If you are worried about its risk level or that it might lose value, call the office (02-624-2788) to discuss the risk level in your account. Also, subscribe to our free newsletter for tips on handling your money and managing risk at www.profile-financial.com.
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 Really Happened in the 2008 Market Meltdown: A book review and analysis of Ben Bernanke’s book, The Courage to Act: A Memoir of a Crisis and Its Aftermath
Douglas Goldstein, CFP®
As a financial advisor who worked with clients throughout the 2008 market meltdown, I was particularly interested in understanding the Chairman of Federal Reserve Bank’s perspective of that period. Ben Bernanke’s book The Courage to Act: A Memoir of a Crisis and Its Aftermath is an exceptionally well-written autobiography that explains the background of the banking crisis, the crisis itself, and its aftermath. The perspective that Bernanke shares, however, does more than put another page in the history textbook of the world economy; it raises a number of fundamental questions about how the mess began, why many innocent bystanders were injured, and whether we have made appropriate structural changes to avoid such catastrophes in the future.
Who’s in Charge?
By learning about the inner workings of the Fed’s decision-making system, I couldn’t help but wonder: Is it smart to have the largest and most influential economy in the free world dependent on one man? The Chairperson of the Fed wields incredible influence over money supply and employment levels that even if it’s run by the sharpest mind, it might be better to have the free market control the level of interest rates and employment. The central bank and other government offices should enforce transparency and encourage better financial education, but ultimately the combined interests and wisdom of the millions of market participants would ultimately dictate the rate at which money is lent as well as the regulations that could promote full employment. Why should the law of supply and demand that governs all other commerce be suspended for money supply?
Although Bernanke credits his Fed comrades and Treasury associates for their involvement, it’s clear that he, much like his predecessor Alan Greenspan, figured out the required policy and then usually succeeded in persuading others to join him.
Is the Fed a Giant Investment Company?
When describing the AIG bailout, which put $182 billion of taxpayer money at risk, Bernanke notes that the Fed demanded an 80% ownership stake in the insurance company’s core business “to ensure that taxpayers shared in the gains if the company recovered.” Though the Fed’s goal to protect the investment interests of those who had entrusted their tax money to the Federal Government may seem noble, I can’t understand what gives the government the right to act as a mutual fund. We, the people, don’t give our money to Washington so it can make investment decisions for us. Congress is a legislative body, not an investment company. If we want risky investments, we can pick our own funds and investment managers. Frankly, if I had to invest $182 billion, I would prefer to diversify it among several money managers rather than to politicians and their appointees. It’s not the government’s job to confiscate funds of private citizens, which are what taxes really are (“Give us your money or go to jail.”), and then select stocks to buy. Ultimately, the theme of the Fed’s conversation in dealing with the crisis was, “Let’s make a huge bet on AIG, even though the private markets are unwilling to make that bet because they think it’s a bad idea and don’t want to risk their own money. Luckily, we have taxpayer money to throw at this idea.”
Compare the amount of time that private investment companies spend researching and making investment decisions to the fast pace at which the Fed invested our money, and under great pressure to do so. Interestingly, Bernanke notes that when Congressman Barney Frank asked where the Fed would get the money, Bernanke said that the Fed had $800 billion, so this was only around 11% of its balance sheet. It’s incredible that anyone would put such a huge percentage of a portfolio into a deal with “little time for careful reflection.” It’s as if your investment advisor told you, “Look, I am really busy now and I don’t have time to research the details, but I’ve decided to take ten percent of your portfolio and invest it all in one company that is on the verge of bankruptcy. And even if you don’t make money on the deal, at least your investment will help the country... so it’s a patriotic investment if nothing else.” Would you still want to invest with him if he did?
Just Because it Worked, It Doesn’t Make it Right
Ultimately, it’s true that the bet paid off. But should we be happy? Even Bernanke himself wasn’t sure the deal would work, and he continues to question the wisdom of the move. But the worst part of the whole situation is that rather than saying, “Phew, we really dodged a bullet that time. Now we have to make fundamental changes in the way the government, the economy, and these banks are so intertwined,” it’s back to business as usual. The lack of transparency and inability to understand the depth of the financial complications that Wall Street players create under the permissive oversight of the regulators should frighten everyone. This risk cannot be solved by more regulation, since writing thousands of more pages of law will not contain the peril. Indeed, the crisis surfaced even though there already were thousands of pages of rules and regulations. Those with large profit incentives will always be more creative and wily than the government workers tasked with reining them in. Instead, the government should announce that it absolutely will not backstop the firms, and it should demand transparency of the financial tools that are created and traded. Then the risk will fall back where it belongs – on the owners of the companies (the shareholders) and anyone who lends them money. Complexity is the enemy of the consumer, and without better transparency, consumers are at a distinct disadvantage.
The Government Had Encouraged Toxic Loans
When describing the TARP program, wherein Congress authorized taxpayer money to be lent to banks and possibly other companies too, at the Fed’s discretion, Bernanke says, “...while we wanted banks to lend [to consumers and businesses], we didn’t want them to make bad loans. Bad loans had gotten us into this mess in the first place.” What he should have stressed was that the banks had made all of those bad loans at the behest of a Congress that made legislation that forced the banks to originate loans that had a poor chance of success, with the alleged goal of helping low-income families fulfill the American Dream of home ownership.
It is the government’s obligation to fund its citizens to build the white picket fence, or should it only create a favorable opportunity and environment?
The Truth about a Government for the People
Bernanke explains a great deal about the political machinations of Washington. He admits the depressing reality that he had to contort his ideas in order to fit into the political restrictions that stopped him from pursuing more responsible plans. For example, he talks about the importance of regulatory reform. He notes any significant reform would not make it through Congress because, “The congressional oversight committees jealously guarded their turf because the market players regulated by the two agencies could be counted on to provide lucrative campaign contributions.”
Could there be a more clear admission that good policy is trumped by campaign contributions? Regardless of whether Bernanke’s massive overhauls would make sense, the big money interests are the ones who come out winning. So much for free markets and protecting consumers!
More and More and More Government
In order to fend off future bubbles and crashes, Bernanke established yet another taxpayer-funded office, the Office of Financial Stability, Policy, and Research. This multi-disciplinary team unites great minds in an attempt to monitor and oversee financial institutions and create programs whenever it looks like trouble is brewing. Though I respect the brilliance of the team members of the new Office of Financial Stability, I wonder how the public can continue to put so much trust in more banking bureaucracy. What steps were taken to allow the public to clearly see the inner workings of their banks so that folks could make up their own minds about whether to trust the institutions?
Worse, however, was the backstopping by the FDIC that allowed, and continues to allow, banks to take inappropriate risks with their deposits since they know the FDIC will bail them out if necessary. I am all for having some insurance on bank deposits, but not if it means greater risk-taking by the banks themselves. Why not have the banks actually pay a market-level premium to buy FDIC coverage? Maybe allow other governments to sell bank deposit insurance to the banks, too?
During the 2008 crash, Main Streeters questioned the ongoing ability of the FDIC to deliver on its guarantees. When clients were running scared and I told them they could put their money into the FDIC-backed CDs, they said they weren’t sure that this was a safe option. Regardless of the fact that not a single penny of FDIC-insured money was ever lost, the fact of the matter is that the public didn’t have faith in the agency. That makes sense. The government’s coffers are limited and should not be used to bail out the excesses and unreasonable risks that banks take. If no private insurance company would cover those risks, then the government should realize that there is a problem with putting taxpayers’ money at risk.
The Fed’s and the Taxpayer’s Interests Aren’t Aligned
Bernanke helps financial advisors like me to realize an inherent conflict of interest between the Fed and the people. Many regular folks got a wake-up call in 2008 and decided to slow their borrowing and spending, and increase their savings. That was a responsible choice for them. The Fed, on the other hand, wanted them to pull out their credit cards and spend. Using debt to buy things allows people to spend more than they really have, which can supercharge the economy. But responsible advisors encouraged their clients not to spend what they don’t have. Bernanke notes that lack of consumer spending made the downturn “deeper and more protracted,” which caused the Fed a problem. However, the spending slowdown helped those individuals who chose to pay down their debt rather than dig themselves deeper into a hole. This was a particularly prudent move since no one knew what financial surprise was lurking in the shadows.
Retirees Took a Beating
During Bernanke’s battle to save the economy, he and his team leveraged their main tool, control of interest rates. They did this by lowering the Federal Funds rate and also by buying longer term bonds in order to push rates down further, a practice called “quantitative easing.” One of the goals of this strategy was to assist people to keep or buy homes by lowering mortgage rates. But a consequence of low rates is the income destruction of people living on fixed income, mainly the elderly. Ordinary folks who had saved responsibly for decades, and deposited their hard-earned money into savings accounts were not getting the 4% or more that they had expected. Instead, they found themselves praying to get half of that. Bernanke, in fact, points out even more extreme figures, noting that bank CDs paid only half a percent, one-tenth of what savers expected. Pensioners and others living on fixed income had to radically cut their lifestyle or else invest in riskier securities with the hope of higher returns.
In effect, the Fed’s policies injured the financial prospects of retirees in order to rescue people who had voluntarily chosen to take out mortgages that they could not maintain. Nothing like giving a slap in the face to those who loyally paid their taxes for decades! Though I feel sorry for the people who lost their homes, as a financial planner who has had to explain to retirees with battered returns and shattered dreams, I am not too sympathetic to the decisions of the Fed that led to the older generation’s suffering.
Bernanke justifies his decision by saying that low rates were necessary to stimulate the economy, and that this would help the retirees because it would “prevent their twenty- and thirty-something children from moving back home.” In my decades of advising retirees, I haven’t met any who feared their adult children would move back with them. What I did here, though, was their worry that they wouldn’t have enough to pay the cost of a retirement home and they could not count on their kids to help them. I’ve heard retirees worry about the cost of health care and finding competent help. I’ve heard retirees worry about low interest rates and having to adjust their lifestyle accordingly. But, the fear of adult children moving back in is not at the top of their concerns. Bernanke seems a little out of touch with the reality of the low interest rate environment.
Low Taxes and Buying Decisions in the Hands of the People
Several mentions throughout the book of encouraging lending to small businesses and lowering taxes reminded me of the importance of getting cash into the hands of the consumers and business owners so that they can make their own spending and savings decisions.
Having government puppeteers pull the strings of the economy requires god-like omniscience, which is impossible. Even the former Fed Chairman, Alan Greenspan, known as “The Maestro,” could not control all aspects of the economy to avoid every pitfall. After all, it was under his watch that the real estate market expanded until he passed the reins of the ready-to-pop bubble to his successor, Ben Bernanke. The reality is that no centralized government can take into account all aspects of the economy, nor make truly objective decisions. Rather than letting special interests dictate the government’s monetary and fiscal policies, the marketplace is a much more effective tool for stabilizing the economy than the government. Bernanke’s own comments about getting cash into the hands of the people seem to support this theory. This proposal doesn’t mean supporting a system of financial anarchy. The government certainly has a role to play in overseeing the economy. Specifically the regulators and lawmakers need to ensure a level playing field with a solid judiciary to back it up, extreme transparency, and quality education for people to make them capable to make their own decisions. In order to create a nation that can handle that level of self-responsibility, however, the education system needs reform so that high school graduates understand how the world of money works. Reforming the education system? That’s for a different essay (I recommend reading Seth Godin’s book, Stop Stealing Dreams: What is school for?, which you can download for free .)
Finally, although I am a financial advisor associated with a broker/dealer, the opinions in this piece are mine alone.
Take the time to read Bernanke’s book and judge for yourself if you think the system is better now than it was eight years ago.
How Non-Americans Can Benefit from American Brokerage Accounts
By Douglas Goldstein, CFP®, helping people in Israel with their U.S. IRA and investment accounts
This past week, my office phone rang several times with non-Americans inquiring about opening American brokerage accounts. Given the hassles of dealing in some of the more popular offshore jurisdictions, and given the many benefits of keeping investments in the United States, these people were happy to see how they could easily invest through a U.S. brokerage firm.
Why non-Americans have American investment accounts
There are two parts to having a brokerage account: the specific investments and the “custodian” of the funds. The specific investments include what stocks and shares you own, or which mutual funds or bank deposits you choose. The “custodian” of the assets is normally a major bank or brokerage firm that is responsible for safeguarding the securities, executing the trades, printing the statements, arranging for checkbooks and credit/debit cards for the clients, and other back-office services. Before investing money you must choose both a custodian of your account (the firm) and the individual investments (stocks, bonds, etc.)
Non-Americans frequently use a U.S. brokerage firm to custody their assets. Here’s why:
Send me an email (doug@profile-financial.com) for a detailed report on the additional benefits of non-Americans having American brokerage accounts.
Is it legal for non-Americans to open U.S. accounts?
Not only are NRAs (non-resident aliens) allowed to hold their assets in America, they are actively encouraged to do so. From the standpoint of the American government, having foreign investors maintain accounts in the United States helps to keep the U.S. markets as the top trading locations in the world. In fact, the United States doesn’t tax the interest and capital gains that foreigners make on their U.S. assets (This is a general discussion. Be sure to speak to your own tax advisor before investing.) If you would like to learn about the advantages of global investments through a U.S. investment firm, please call my office at 02-624-2788.
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. Accounts carried by Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
What Should You Do About the FBAR?
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
Whenever I mention the acronym FBAR, Americans often say one of two things: “F what??” or “I don’t need to do that.”
What’s an FBAR?
The “Report of Foreign Bank Accounts” (FBAR) is a required U.S. government form, which is important in the post-9/11 world. The purpose of the form is to alert the authorities about accounts held outside the United States with a total value of $10,000 or more at any time during the year.
Can I just skip it?
Bad idea. If you have reportable FBAR assets that you don’t disclose, the fines can be severe. If you neglect to file or file incorrectly, you can face fines that are greater than the value of the accounts that you didn’t include on the form.
The FBAR is due on June 30 for the preceding year. It provides a list of accounts that you have signature authority on, interest in, or are named as a holder, so the American government can track the path of money transfers in the hope of reducing money laundering.
Is there a legal workaround?
The only legal workaround is to have the sum of foreign assets below the reporting threshold. Since that is difficult if you have pension and/or savings accounts in Israel, another option is to minimize the number of accounts you must report. If you keep the majority of your assets in an American bank or brokerage account, you don’t need to list those funds on an FBAR. Why? Because the government only requires reports on foreign accounts.
If you want to review your investment accounts to see whether they’re considered to be in the U.S. or abroad, send me an email with the details (doug@profile-financial.com) or call (02-624-2788) and let’s begin a conversation.
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.
Is Your Brokerage Account in Danger of Being Sold Out?
By Douglas Goldstein, CFP®
Imagine if your brokerage firm called you up and told you that they were going to sell out all of the positions in your brokerage account within the next 60 days. “Why?” you ask them. They respond that due to increasing regulatory restrictions they will no longer service your account. They give you two options:
Believe it or not, many people in Israel are receiving such a call. This is because they are U.S. citizens, and due to tough regulations regarding Americans living abroad originally intended to prevent money laundering, many U.S. financial institutions no longer want to work with any non-resident Americans. Though it may be disconcerting to receive notification that a long-standing relationship with a brokerage firm is about to end, there is no need to panic. Americans living in Israel who have U.S. brokerage accounts have a solution to this issue.
If you know anyone in this situation, it is important that they speak with a financial advisor well-versed in cross-border financial issues before they sell out their accounts and transfer the funds to Israel. That is because, if securities are sold, people might inadvertently trigger an unwanted tax bill.
Don’t cash out your American account
Instead of cashing out your American account, find a cross-border-friendly firm that specializes in opening brokerage accounts for U.S. citizens who have a foreign address. Then you can transfer your assets “in kind” to the new account. This new account can even be an exact replica of the old one, unless you specifically want to change your investment structure. Best of all, by moving everything over in kind (without selling), there are no tax consequences or reporting requirements.
At the same time, take this opportunity to update and review your financial plan and investments with an investment advisor who is licensed in both the United States and Israel.
To find out more about opening a U.S. brokerage account from outside the United States, go to www.Profile-Financial.com/Account.
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.
Can Your Israeli Bank Provide Investment Services?
By Douglas Goldstein, CFP®
Have you found that your Israeli bank no longer provides investment services for Americans living in Israel?
Because if onerous reporting requirements to the American government, many Israeli banks have stopped opening investment accounts for U.S. citizens. While dual American-Israelis can continue with banking and checking services, they need to look elsewhere for their long-term investing.
Where can Americans open investment accounts?
If American firms turn away U.S. citizens with a foreign address and Israeli banks don’t open accounts for Americans, how can Americans living in Israel have investment accounts?
That’s where investment firms with relationships with U.S. brokerage houses and Israeli investment licenses come into play.
Profile Investment Services, Ltd. is one of a select few companies that is able to help, as we work with an American brokerage firm (Portfolio Resources Group, Inc.) that understands there are law-abiding Americans who live and work globally, but want to maintain U.S. brokerage accounts.
In many cases, people denied investing services by their Israeli banks can enjoy the same solution. In particular, if a person wants to buy stocks, bonds, or mutual funds, he can easily transfer funds from an Israeli bank to a U.S. brokerage account.
Can I open a U.S. brokerage account even though I live in Israel? YES!
One reason that investment firms turn away overseas clients is because they do not have the ability to get to know them well and give them appropriate advice. On the other hand, companies that have a presence in Israel can meet their clients face-to-face to help them handle their U.S. brokerage accounts. When I meet new clients, I ask a lot of questions in order to fulfill my obligations under the “know your client” rules so that I can give them the most appropriate advice. In doing so, I am then able to help them open and maintain their U.S. brokerage accounts. Transferring the money to the new account is usually as easy as filling out a form and asking the local bank to move the funds.
If you have assets in Israel that you would like to move to an American brokerage account, see if Profile Investment Services, Ltd. can help by calling 02-624-2788.
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. Accounts carried by Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.