How to Help Your Children Become Financially Independent
By Douglas Goldstein, CFP®
A client told me about her married daughter who is in a financially dysfunctional marriage.
The young couple finds it hard to make ends meet, and often applies for help from charitable organizations. Yet despite their lack of funds, they still live a fairly extravagant lifestyle. Occasionally, the daughter asks her mother for money, but the mother refuses. My client realizes that she doesn’t have the means to bail them out – and even if she did, they would never learn to stand on their own two feet. Teaching financial responsibility is one of the toughest lessons a parent faces.
Close the Parental Bank
Saying no to a child in fiscal trouble is difficult. I know many parents who support an adult child still living at home, or married children who can’t quite make the month. These parents tell me, “What can I do? They’ll starve without my help!”
Sadly, these well-intentioned parents don’t realize that rather than helping their children become financially independent, they are perpetuating the situation. Acting as the Parental Bank on a regular basis doesn’t give children any incentive to become financially independent. Why should they live within a budget, if they know their parents will bail them out?
Let go of your child’s hand
When a toddler learns to walk, you have to let go of his hand, even though you know there’s a high chance that he’ll fall and skin his knee.
Similarly, when adult children ask you for help after they’ve failed financially, don’t automatically write a check. Offer them your sympathy and explain to them the necessity of budgeting and planning their finances. Give them the number of a budget counselor or financial advisor and let them know you are interested in encouraging them to become financially stable.
Never help my children?
This article is not meant to say never help out. Rather, make sure you understand the difference between helping your kids get a start in life with a gift for education or buying a home versus enabling them live beyond their means.
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
How To Break Your Bad Habits And Get Rich
By Douglas Goldstein, CFP®
Money woes are generally not due to a market gone awry or a low salary. The number one cause of most money problems is bad financial habits.
Do you spend without tracking what is leaving your wallet, neglect to make regular deposits in savings, and overlook regular financial reviews and discussion of financial goals with your partner? If so, you may be guilty of harboring negative financial habits. Bad financial habits can be as deadly as smoking.
Some habits are so ingrained that it seems impossible to break them… but it can be done! I spoke with James Clear, an expert in habit creation, on The Goldstein on Gelt Show about how people could improve their finances by replacing negative habits with positive ones.
Why stopping cold turkey doesn’t work
Stopping a bad habit by simply not doing it anymore doesn’t tend to work since nature hates a void. Instead of just stopping your bad habit, find a good habit to substitute for the negative one. For example, instead of “retail therapy” to improve your spirits by going out shopping try exercise or chatting with a friend. Or replace your credit card in your wallet with a picture of your saving goal to provide a constant reminder of what you are working towards.
Join forces with a friend
One of the best ways to improve your financial habits is to team up with a partner. Read self-help books together, or attend an online financial education class (ask me for recommendations). When two people work together, you can both support each other through the inevitable ups-and-downs of creating a positive habit.
The key to success
When you launch a new habit, start with a positive attitude. If you believe you can succeed, you are more likely to do so than if you set yourself up for a negative outcome.
For more concrete tips on improving financial habits, listen to my discussion with James Clear at: http://www.goldsteinongelt.com/james-clear.
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.
Are Bonds a Good Investment for You?
By Douglas Goldstein, CFP®
Bonds are a very popular investment, but before you buy any, let me tell you what I share with my clients about them.
Think of a bond as a loan between you and a company or government. Assuming all goes normally, here’s how it looks:
Why buy bonds?
Investors looking for steady current income (perhaps to supplement a pension) and wanting to diversify their portfolios often purchase “fixed income” securities (as bonds are often called). Owning bonds may give the investor a sense of security because the issuer guarantees to pay back the principal of the bond. However, bear in mind that the “guarantee” is only as solid as the guarantor, so if the issuer defaults you could lose money.
Government bonds are generally considered to be safe investments, since the government has the ability to raise taxes and print money in order to generate enough revenue to repay bondholders. But nothing is guaranteed. Even governments occasionally default on bond payments. Indeed, in August 2015 Puerto Rico defaulted on some of its bond payments. Nonetheless, government bonds are still considered relatively secure, with American treasury bonds at the top of the list.
What bond is right for you?
There are many types of bonds and bond funds, each meeting different investor needs. While U.S. Treasury bonds and some municipal bonds may be tax free in certain circumstances, they are still subject to Israeli taxes.
Corporate bonds can provide dependable income, as well as a somewhat liquid market if you want to sell a bond you own. A more risky sector is high-yield, or “junk bonds.” While these bonds can provide a higher potential return, they also carry a higher risk of default. In addition to buying a specific bond, there are bond funds that mitigate the risk of owning specifics by creating a broadly diversified portfolio. These funds, though, have their own risks, so be sure to read the prospectus before investing.
To learn which bonds may be appropriate investments for you, watch this 15-minute video I made: www.Profile-Financial.com/Bonds. Then, call my office to review or to consider adding to your bond holdings.
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.
Problems With Your U.S. Brokerage Account?
By Douglas Goldstein, CFP®
Many readers have recently contacted me because they received a letter from their U.S. brokerage firm informing them that either “You can no longer purchase additional shares of mutual funds in your account,” or “We will no longer provide investment advisory services to you and/or you may only enter liquidating orders or non-solicited orders in your account.”
This letter is not a result of new American legislation; rather it means the brokerage firm handling your portfolio is no longer interested in working with clients living outside the United States. Don’t despair. There are solutions that can possibly even improve your situation.
What action step you should take
Even if you can’t continue to work with your existing brokerage firm, you do not need to cash out your American account. Rather, work with a firm that specializes in opening brokerage accounts for clients who have an Israeli address (see www.profile-financial.com/faq for details). Then, transfer over assets “in kind” to the new account. The new account (whether a joint account, individual account, IRA, or other type) can be an exact replica of the old account, unless you wish to change your investment structure. By moving everything over in kind (without selling) there are no tax consequences or reporting requirements.
Basically, after signing new account paperwork, a client’s assets are easily transferred over to the “cross-border-friendly” U.S. brokerage firm. Within one month, clients get a brokerage statement from their old brokerage firm, and the next month they get the statements from the new firm (which they could also choose to get online for free).
If you receive a letter inviting you to leave your existing company, look at this as an opportunity to review your financial plan as well as your investments with an investment advisor who is licensed both in the United States and in Israel.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, SIFMA. Accounts carried by Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. His newest book, The Retirement Planning Book, is available at www.profile-financial.com. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. The opinions expressed are those of the author and not necessarily those of Portfolio Resources Group, Inc. or its affiliates.
How Quickly Should You Invest The Money You Inherit?
By Douglas Goldstein, CFP®
Though I often advise people to wait before investing an inheritance, sometimes you must take quick action.
When do you need to act quickly?
If you inherited a risky position, you should consider liquidating it. For example, the grandfather who always managed the stock portfolio passes away, leaving large amounts of money invested in a few individual stocks. Unable to live on her own, the grandmother who now owns the stock portfolio needs to move to a nursing facility. What would happen if she waited 12 - 18 months to deal with the account and then, just before she sold in order to pay her bills, the stock market crashed?
How much money do you need now?
If you inherit a portfolio of stocks, ask yourself if you are in a position to wait (possibly for years) to use the money. A fancy car or a luxurious vacation is not an emergency expense. On the other hand, paying for home health care or other medical procedures may very well be a question of life and death and cannot be delayed. Any money needed for the near future, regardless of the type of investment it was in when you inherited it, should be converted to liquid assets like short-term bank deposits, money market funds, and savings accounts. If that means selling Grandpa’s stocks, it’s the right choice. After all, wealth should first and foremost be used for your family’s health and well-being.
How to get the money quickly
Depending on the account’s structure, you may or may not have easy access to the funds. Even if an account is titled “joint account” or “transfer on death,” there may be a drawn out procedure to follow before the money is fully available. Your investment advisor should be able to walk you through the process. Nonetheless, make sure money is available to each spouse separately so that the survivor does not face undue financial pressure caused by bad planning.
Not sure how to structure your accounts?
If you have assets, especially money in different countries, contact a cross-border investment advisor who can help you determine the best way to structure your portfolio. Learn more at www.Profile-Financial.com.
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.
Are You Getting The Social Security You Deserve?
By Douglas Goldstein, CFP®
The “Greenberg Settlement,” the resolution of a class-action lawsuit brought against the Social Security Administration (SSA), changes the way American olim receive their American Social Security payments.
Under the SSA’s Windfall Elimination Provision, if you receive a foreign earnings-based pension, your American benefits are reduced. Until now, claimants of Social Security living in Israel who also received Bituach Leumi old age pension had their payments from Social Security reduced under the Windfall Elimination Provision (WEP). This was because Bituach Leumi was considered as an extra pension and counted as a “windfall.” In 2013, Ephraim Greenberg, a U.S. citizen living in Israel, brought a class action to change this situation because Bituach Leumi pensions are not dependent on earnings and therefore don’t fall within the criteria of the WEP.
Now you can claim your money back
In July 2015, U.S. District Judge Rosemary Collyer determined that the Social Security Administration was wrong in reducing payments to U.S. citizens who receive Bituach Leumi. This is because Bituach Leumi payments aren’t considered earnings-based in the same way as a private work-related pension is. Bituach Leumi payments are considered more of a social benefit for the elderly than a “windfall,” and therefore do not affect Social Security payments. (However, if you receive a work-related pension in addition to Bituach Leumi, your work pension would trigger the WEP reduction in Social Security benefits.)
If your Social Security payments were reduced under the previous erroneous application of WEP, you can claim back the funds that are owed to you from September 2004. Furthermore, if someone who was unfairly penalized under the WEP has passed away, his heirs can apply for the funds retroactively. This is good news for the many American olim eligible for Social Security payments.
Here’s how
I discussed the Greenberg Decision with the lawyers involved in the case, Ira Kasdan and Beth Johnson. We discussed the specifics of how to claim money that may be owed to you. To learn the specific steps involved in claiming withheld WEP as well as learning more about the provisions concerning with private pensions, listen to our 15-minute discussion at www.GoldsteinOnGelt.com/Kasdan.
(The opinions expressed on The Goldstein on Gelt Show are those of the guest, and not necessarily my opinion or the opinion of Portfolio Resources Groups, Inc.)
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.
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.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 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:
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.
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.
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
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.
Are bonds safe as an investment? Explore how they can provide safety and increase diversification in an investment portfolio.