Your Investments: Financial aliya tips from an experienced oleh

I can’t tell you how often I have met Americans who relocated, neglected their finances and are now paying the price.

By AARON KATSMAN
House and calculator [Illustrative]. (photo credit: INGIMAGE)
House and calculator [Illustrative].
(photo credit: INGIMAGE)
 “I see Israel as one of the great outposts of democracy in the world and a marvelous example of what can be done, how desert land can be transformed into an oasis of brotherhood and democracy.”            – Martin Luther King
Next week I celebrate the 22nd anniversary of my arrival in Israel, which means that I will have lived exactly one half of my life in the Holy Land. I came straight out of university and landed here with no job, no wife and no real idea of what it was like to live in Israel.
Twenty-two years later I am happy to report that I have a job, a beautiful wife and five great kids and no real idea of what it’s like to live in Israel. Just kidding. While my kids all make fun of my Hebrew, I have managed to get by and establish my roots here.
This week also marks the culmination of another incredible summer of immigration to Israel brought to us by Nefesh B’Nefesh. Despite the war with Hamas, nearly 1,000 olim became Israeli citizens.
From my experience as a financial adviser, the one issue that gets lost in the immigration process is how to deal with investments. No question that getting kids acclimated to a new school and learning a new language is more time-sensitive than whether to buy of sell shares of Facebook. That being said, if I can give a tip based on my 22 years living here and professionally working with immigrants, it’s to take care of your finances.
I can’t tell you how often I have met Americans who relocated, neglected their finances and are now paying the price. Here are a few tips that will make your financial relocation a bit easier.
Diversify currency
For immigrants living off their investments in the US, it’s very important to have some non-US dollar exposure. Strengthening of the shekel can adversely impact your revenue stream and even put your relocation in jeopardy. Let’s look at a real-life example. A few years ago a retired couple came with $1 million thinking that they needed to generate $40,000 a year to supplement their pension and Social Security checks. In local terms they had NIS 4m., and it was little problem to generate the money needed.
Then in the span of six months the shekel strengthened by 20 percent, and all of a sudden there were issues. Why? Because in local terms that $1m. was now worth $800,000 – and to generate the money they needed became more difficult. The millionaire was able to weather the storm, but the new immigrant with $300,000 to $500,000 who suddenly lost 20% of his net worth in a few months because of currency movement was stuck. Speak to a financial adviser with experience in these issues to make sure you are protected.
Keep your IRA current
One of the most common issues I see when I meet with prospective clients is that they haven’t looked at their IRA (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. Immigrants tend to forget about these accounts altogether, only to wake up in a decade or so to realize that the value of their account is the same as it was pre-relocation.
I recently had a meeting with an oleh who made this error. He said he moved to Israel about 14 years ago. He came with a couple hundred thousand dollars, which he liquidated to buy an apartment. He told me the biggest mistake he made was with his IRAs. He had one worth about $75,000, and his wife had about $40,000. He said he basically left them alone and never made any changes.
Well, 14 years later and they are still worth the same amount of money.
Also make sure that 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 relocation 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@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.