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4 Minute Money

The “4 Minute Money Ideas” audio article is based on weekly articles that Douglas Goldstein, CFP® writes in “The Jerusalem Post.” In easy-to-understand language, Doug explains retirement planning, investment basics, how to invest an inheritance, and how to open a U.S. brokerage or IRA account when you live in Israel (or anywhere outside the United States). If you follow Doug’s investment advice in the newspaper, or whether you learn about financial planning and investing from his many books, you’ll enjoy these very short podcasts.
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Now displaying: January, 2016
Jan 20, 2016

When Should You Give Trading Authority to Your Children?

By Douglas Goldstein, CFP®

Recently, one of my clients had a serious fall at home, breaking his hip, and ended up in the hospital. As a result of his injuries, it was clear that he could not deal with his finances for the foreseeable future and had to hand over trading authority to his daughter.  As this all happened suddenly, decisions had to be made in a hurry, leading to mediocre results. If my client, who is over 80, had agreed to hand over trading authority earlier, he and his daughter would have been better prepared for a scenario where he could no longer make financial decisions.

What is trading authority?

A trading authority form is a legal document that allows someone else to act as your agent over your account. Your agent can have limited trading authority, which means that he can make transactions on your behalf but not withdraw any money, or full trading authority, which means he can make withdrawals from your account.

A trading authority is similar to power of attorney. However, whereas power of attorney can be applied to all of your assets or to different aspects of your life, such as health care, trading authority only relates to your investment account.

Why should I give anyone trading authority?

Advanced age is not the only reason for granting someone else trading authority. What if you were going away on a sabbatical or a long vacation? Handling your account on a day-to-day basis may not be practical, so you would ask someone trustworthy to do it for you.

As you get older, even if you are in perfect health, it may be wise to give trading to someone you trust to keep your best interests in mind. Then you can work together with him, handing over the reins gradually, before the time comes when you may no longer be able to be in full control. At the same time, if you are thinking of handing trading authority over to a friend or relative, make sure that it is only someone whom you can trust implicitly because a wrong decision can put your finances at serious risk.

For more information about trading authority or power of attorney, watch a 3-minute video that I made called, “Should I give someone power of attorney?” at: http://profile-financial.com/poa.

 

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.comHe 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.

Jan 20, 2016

What You Need to Do After You Inherit an IRA

By Douglas Goldstein, CFP®

If you receive an inheritance, it might come in the form of property, a bank account, or brokerage account. But what if you receive an inheritance from someone’s individual retirement account (often called an “IRA”)?

IRAs are different from regular brokerage accounts

A regular brokerage account is normally structured as either an “individual” or a “joint” account, and a person’s will determines how the assets will be distributed upon his death. An IRA, on the other hand, is normally distributed via a “beneficiary designation.” That’s actually much easier because when a person sets up his IRA, he instructs the brokerage firm or bank to list the names of primary beneficiaries (and contingent beneficiaries if one of the original ones has died). It’s a comparatively easy procedure to move the money from an IRA to the proper beneficiary.

Make sure you read this before receiving an inheritance from an IRA

One of the great benefits that the United States gives the recipients of an IRA is that the assets inside the account may continue to grow tax deferred if they are transferred in a certain way. The recipient can transfer the money from the deceased’s IRA to a “beneficiary IRA” and continue to have it grow tax-deferred. The inherited assets in an IRA can be sold (in the IRA) and other securities (like stocks, bonds, and mutual funds) can be bought in accordance with the new owner’s wishes. There is no need to maintain the inheritance in the exact positions as you received it. Except for mandatory distributions, the assets themselves aren’t subject to U.S. tax as long as they remain in the beneficiary IRA.

The mistake many people make is that they:

  • Withdraw the money from the IRA immediately upon receipt of the inheritance
  • Pay a large tax, and then
  • Reinvest the money in something else.

Wouldn’t you rather skip step #2?

If you are designated as a beneficiary of someone else’s IRA, or if you have an IRA account that you plan to leave your kids one day, make sure everyone understands the importance of maintaining the tax-deferred status as long as possible. If you’re not sure how this affects you, send an e-mail to info@profile-financial.com and type “IRA” in the subject line.

 

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. He is a licensed financial professional both in the U.S. and Israel. His best-selling book, Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing, is available at online, at bookstores, and at www.RichAsAKing.com. 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.

Jan 20, 2016

By Douglas Goldstein, CFP®

Regardless of the more modern way people look at gender, there are significant differences in how men and women should invest their money.

Here’s why:

Women’s pensions tend to be smaller

Women’s pension payouts tend to be lower than men’s payouts, because most women work fewer hours and have lower salaries than their male counterparts. Even though “paternity leave” is becoming more common, most women still take additional non-paid time after having a baby. And, when they return to work, they may return to a part-time position. All this means a lower salary, and a proportionately lower contribution to a pension fund.

Women live longer than men

In Israel, the average lifespan of a man is 81 years, while a woman’s life expectancy is 84. In the United States, average life expectancy for a man is 76 and for a woman 81. As women generally retire earlier than men and live longer, this means a lengthier retirement and more bills. Furthermore, if a pension doesn’t increase with inflation, then the real value of the pension may not be the same towards the end of retirement as during the beginning of retirement.

Essentially, this means that women have fewer resources to cover a longer time period. Since women tend to outlive their spouses, they need to master enough financial skills so they can take care of themselves, and need to be even more careful than men about financial planning. If nothing else, women need to be sure that regular savings are an integral part of their monthly budget during their working years.

Start planning for retirement now

If you have not yet started planning for retirement, call your financial advisor today and start working on a plan. If you are a woman and have any questions about personal finance, send me an email at: doug@profile-financial.com. If you are a man, give this article to the women (spouse, mother, daughter) in your life to read.

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.

Jan 15, 2016

Non-Americans who want to invest internationally often use U.S. brokerage accounts. While it may seem counter-intuitive for a non-American to open an American brokerage account from overseas, there are several reasons why this is a good move.

2 reasons why non-U.S. folks use American accounts

  • Efficiency – U.S. securities markets may be the most efficient and individual-investor friendly in the world. American regulations place customer protection and transparency at the top of their concerns. You can have a diversified basket of global assets within a “regular” U.S. brokerage account, and do it cost effectively.
  • Diversification – A U.S. brokerage account can host a variety of investment vehicles, such as stocks, bonds, mutual funds, and bank deposits (CDs). American brokerage portfolios can hold investments in both American and global companies.

Do non-American heirs need to pay U.S. Inheritance Tax?

One of the issues that non-Americans face by opening an American brokerage account is the possibility of their estate having to pay an inheritance tax to the United States when they die. There are a few solutions to this problem; the most common of which is to buy “offshore” mutual funds in an American brokerage account. Those mutual funds are not considered “U.S. assets” when determining U.S. estate tax, even if the funds themselves invest in U.S. stocks. So if a non-American buys an offshore mutual fund with a name like, “ABC Offshore U.S. Equity Fund,” or the “XYZ Offshore European Bond Fund,” and then passes away, that fund will not be subject to U.S. estate tax.

In order to prevent tax bills, the account needs to be set up and handled properly. There are many details related to opening a U.S. brokerage account, so make sure you work with a company that is experienced in handling cross-border investments for both American and non-American citizens. To learn more watch the ten-minute video that over 3,000 people have viewed, “U.S. Brokerage Accounts for Non U.S. Residents” at www.Profile-Financial.com/videos. If you have other questions, call 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. His best-selling book, Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing, is available at online, at bookstores, and at www.RichAsAKing.com. 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.

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