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