New Olim: A new financial reality

By AARON KATSMAN
Two new Olim taking an excited selfie upon landing in Israel (photo credit: SHAHAR AZRAN)
Two new Olim taking an excited selfie upon landing in Israel
(photo credit: SHAHAR AZRAN)
Just before I sat down to write this column, I was walking up the Ben-Yehuda pedestrian mall in Jerusalem and a lady stopped me to ask for directions, in English. I started to play Jewish geography and it turns out that she had just come on aliyah with Nefesh B’Nefesh, a few days ago with her family. After spending the last two weeks in the US, and getting frustrated sitting in synagogue and hearing certain prayers sung to “Yerushalaim Shel Zahav” and wondering to myself if this is the extent of their connection to Israel, meeting this family of freshly-minted olim was inspiring and helped calm my frustration.
While much focus goes to the two Nefesh B’Nefesh summer charter flights, the fact is that they are bringing olim year-round. Twenty-six years ago I came to Israel straight out of university with nothing, other than two suitcases and a thousand dollars in the bank. To give up the good life to “live the dream,” with the best economy the US has seen in decades, is amazing and on a personal level reminds me of the reasons that I chose to live in Israel, something that we all lose sight of from time to time.
Reality bites
Along with a new culture and language comes a new financial reality. From my experience as a financial advisor, the one issue that gets lost in the immigration process is how to deal with finances. Getting acclimated to a new community, finding employment and helping children get settled in school are top priorities. That being said, working with immigrants regularly, I cangive a tip and that’s to not neglect your finances. Here are a few tips that will make your financial aliyah a bit easier.
Deals
There are many good resources available online, especially Facebook groups that have great information about cheapest cell phone packages, advantages and disadvantages with various healthcare providers, and host of other personal finance issues that come up. I strongly urge you to search those pages and use the power of the “crowd.” In most cases, your situation will be common and you can save tremendous amounts of time, and benefit from the research done by others.
Diversify Currency
This is very important for retirees living off their investments in the US, and those being paid in US dollars. It’s very important to have money in New Israeli Shekel as well, as a hedge. Israeli Shekel strengthening can adversely impact your revenue stream and even put your aliyah in jeopardy. Over the last year and a half we have experienced just that. Those getting paid in dollars have watched the value of their money drop by more than 12%. While we have seen a recovery in the exchange rate as of late, it underscores the need to plan accordingly to preserve the purchasing power of your money in shekels.
I have written numerous times about a retired couple with whom I sat, who made aliyah with a million dollars thinking they needed to generate $40,000 a year to supplement their pension and social security. Keep in mind, this goes back a few years. Locally, they had NIS 4m., and it wasn’t a problem to generate the money needed. Then, in the span of six months, the shekel strengthened by 20% and all of the sudden there were issues. Why? Because in local terms that million dollars was now worth $800,000, and to generate the money needed became more difficult. A millionaire can weather the storm, but the new immigrant, with $300,000-$500,000 and suddenly lost 20% of her net worth in a few months because of currency movement, is stuck.
Retirement accounts
One of the most common issues I see when I meet with prospective clients is that they haven’t looked at their IRAs (Individual Retirement Account) or 401k in years. The thought process is usually that since this money is for retirement, there is no sense in worrying about the money now. Then, as retirement approaches and they start planning, they notice the account value is the same as when they made aliyah. Ignoring investments can be costly.
Also make sure the firm you have been working with in the US will still service your account in Israel. This has become a huge issue, as many people have received letters that say they are no longer welcome to do business due to their foreign (non-US) address.
I know it’s tough, but take some time to get your financial aliyah in order as well. It will save you a lot of money down the road.
Good luck and welcome to Israel!
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 Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit www.gpsinvestor.com or email aaron@lighthousecapital.co.il.