Your Investments: Financial aliya

The most common question I receive from olim centers on what should be done with the excess money left over from selling their house.

By AARON KATSMAN
Houses for sale in California, real estate 370 (photo credit: REUTERS)
Houses for sale in California, real estate 370
(photo credit: REUTERS)
Talk about inspiration. Tuesday’s arrival of the first Nefesh B’Nefesh flight of the summer, with hundreds of North American olim coming here in the midst of a war, was certainly the definition of Zionism. I want to personally wish all of you freshly minted olim a big mazel tov and wish you success in your new lives in the holy land. In these trying times, you have definitely helped raise the nation’s morale, and being that you are all making aliya by choice proves that Israel must be something right.
After you come down from this week’s emotional high, it will be time to start facing reality. When it comes to making the big move to Israel, a common dilemma is whether your assets should accompany you as well. Whether you have been managing your own investment portfolio or using a financial adviser, you should now consider the best approach to managing your money. It’s a topic that I like to call financial aliya.
Local options
Israel has developed a very sophisticated banking system, and while there are only a few banks that control the lion’s share of the market, they are all very competitive and offer a full range of banking products, focusing on the Israeli financial markets. Using a local bank or private brokerage in your specific case may not be the most efficient way to invest.
The local firms are very experienced investing in the Israeli market, and while they have made great strides, most local investment advisers have no real experience investing globally. It’s also important to note that due to regulations such as the Foreign Account Tax Compliance Act (FACTA), many local banks will refuse to deal with American citizens’ investments. Even if they do allow you to invest, you need to know which products to invest in, as the US may tax capital gains at a 50 percent rate on certain assets.
Plan ahead
The most common question I receive from olim centers on what should be done with the excess money left over from selling their house. For many olim, they put all their savings into a home and watched – even with the housing crisis of a few years ago – their property values escalate. They have already bought a house or apartment in Israel, and suddenly they find themselves with a substantial amount of money liquid, with no idea what to do with it.
Before you meet with a financial professional, map out your financial goals. Going to the experts will help you decide how to invest your savings, but you should first have a firm grasp of your short- and long-term goals and needs. How much income will you need to meet fixed expenses apart from any pension, Bituach Leumi or Social Security income? Do you have children or grandchildren to educate? Are your elderly parents in need of care? How is your own health? You need to determine your own budget needs and your ability to tolerate risk first, and then ask your adviser what kinds of investments would best fulfill these goals. Keep in mind that you are used to a certain standard of living, and you are not going to give up everything you have been accustomed to over the years. Just because your cousin says they live on a certain amount of money monthly, doesn’t mean that you will be able to. I can’t stress enough the need to be realistic when creating a budget.
Understand your investment
Determine whether an investment is worth taking with you or leaving it in the US. Chances are that your goals have changed now that you have made aliya. You will need to focus on the whole range of the investment’s characteristics in your decision-making process, not simply on promises of a high return. What once may have seemed to make sense living in Woodmere may not be appropriate for your new life in Modi’in!
Stay in touch
Continued cooperation with your financial adviser will ensure that your investments remain consistent with your new goals and new life in Israel. Be sure to evaluate your portfolio with your adviser periodically, and make sure that it is still consistent with your needs. On the same note, make sure that your investment strategy remains current. With smart planning and continued monitoring of your investments’ progress, you and your financial adviser – whether in Israel or back in the US – should have a valuable, long-lasting relationship.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc., or its affiliates.
aaron@lighthousecapital.co.il
Aaron Katsman is a licensed financial professional in Israel and the United States who helps people with US investment accounts. He is the author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing