What Should You Do With Money in the Bank?
By Douglas Goldstein, CFP®, - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
Recently, a couple asked me what they should do with their money in the bank. I hear this question quite often. However, as every individual investor’s situation and circumstances are different, there is no standard response that fits everyone. To figure out an answer for this particular couple, I asked:
What’s the intended purpose of this money?
The couple answered that it was the sum of their retirement savings that they had accumulated over the past 18 years. They had over $650,000 in bank deposits, carefully spread out among several U.S. banks so that they were fully insured by the FDIC (Federal Depository Insurance Corporation). However, they also admitted that they were earning next to nothing in terms of interest.
“So for almost two decades you’ve been keeping money in the bank, and you’re thinking of leaving it there for another fifteen years until you retire?” I asked.
When the husband and wife understood that they were not even beating inflation, and the money wasn’t going to be needed in the short term, we spoke about designing a well-balanced portfolio that balanced their risk tolerance against potential growth.
Is there a chance you’d need the money sooner?
If the couple needed the money in the short term to buy a house or pay for a wedding, I would advise keeping it in the bank. For a short-term goal, the money should be liquid, since there might not be time to make up losses if the market dropped.
Are you wondering whether the bank is the best place to keep your assets? To find out more about how to decide to invest for the long or short term, read: www.profile-financial.com/short-term-investing.
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 Overcome the Challenges of Receiving an Inheritance
By Douglas Goldstein, CFP®, - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
What would be your first reaction if you received an inheritance?
When a client received an inheritance from her elderly aunt, she told me:
“I thought she was going to leave everything to my cousin. I never imagined in my wildest dreams that any of it would come to me. Although the extra money will come in useful, I don’t know what to do with it! I spend my nights worrying about whether I should invest it or if I can spend any of it.”
You are not alone
This client’s anxiety about what to do with an inheritance is not unusual. Strange as it may sound, many people who receive an inheritance or windfall worry about losing their new assets, and this fear paralyzes them. Other people go to the opposite extreme and spend it all without a second thought.
Another common problem that inheritors face is when other people somehow find out about their new wealth and want some of it. In the same conversation, my client told me:
“When a distant cousin heard that I’d been included in my aunt’s will, he called me up for the first time in over 20 years and begged me for a sizable loan to start a new business. What do I tell him? It’s hard to say no to family.”
Get some answers
Since people often ask me questions on what they should do after they receive an inheritance, I created a 20-minute online webinar called, “How to Invest an Inheritance.” The webinar addresses the following points:
Register for the webinar at: Profile-Financial.com/webinar so you’ll know what to do if you receive an inheritance.
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 This Portfolio Management Mistake
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
At an initial meeting, a new retiree told me, “I’m not really sure what stocks I own.” When I asked how he had put together his portfolio, he explained that some of the positions came from an inheritance, while others… “Well, I’m not really sure,” and a couple of stocks were recommendations from “this guy who sits next to me in shul.” When I asked him if that guy still thinks they’re good stocks, the gentleman admitted, “I don't know. I don't go to that shul anymore!”
This conversation is a superb illustration of a huge mistake that people often make with their investments: following a “hands-off approach to investing” – in other words, not having a clear strategy and buying/selling stocks without oversight. They don’t give much thought to important issues, such as setting goals, diversification, and risk management. I understand that not everyone wants to be involved in the details of their portfolio management, but that is not an excuse for your money to go unsupervised.
A great solution to handling money if you don’t like to deal with it
There is a way to have a properly managed account without having to do all the work yourself: using money managers and a Separately Managed Account (SMA). You can hire a professional money manager to make the day-to day buy/sell decisions on your account so you can sit back and watch from on high.
No matter how removed you want to be about the details of your finances, you (and your spouse) must be able to answer these basic questions:
Answering these questions will help you keep your financial focus.
How a money manager may help you
If your savings is meant to grow and be used in the long term, and market volatility makes you nervous, consider using an SMA to provide some oversight to your account. To learn more about money managers, watch a 12-minute video at: www.Profile-Financial.com/sma.
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 to Your Retirement Plans When You Make Aliya?
By Douglas Goldstein, CFP®, - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
As a Certified Financial PlannerTM sitting in Jerusalem, I work mostly with American immigrants who keep the majority of their assets in American investment accounts. When a recent oleh listed the various retirement plans that he held in the United States, he mentioned:
Although he had some upcoming financial obligations, most of the money was intended for long-term investment.
He told me that his biggest financial problem was that his investments and money “were all over the place,” and with his busy schedule he was unable to keep track of what was going on.
Although each of the accounts came from different sources, now that this oleh was no longer working in America and contributing to the retirement plans, he could roll the 401(k) and 403(b) plans to an IRA. This would give him flexibility to choose the types of investments that he wanted and still maintain the tax-deferred status of the retirement plans, as well as avoiding the penalties for early withdrawal.
When I suggested this option of rolling over his accounts into IRAs, the oleh asked if he could still do this, even though he is now living in Israel. This is a question that many dual citizens ask, often thinking that if they inherit or have an existing IRA in the United States they must cash it out. Cashing out an IRA and moving the money overseas is a taxable event, and often a bad idea.
The good news for this oleh, and also for all Americans living in Israel, is that you can maintain your existing tax-efficient IRAs in American brokerage accounts while living in Israel. To find out more about managing your American assets from overseas, download the “Toolkit for Opening U.S. Accounts from Overseas” for free 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.