4-minute Money Ideas

Secrets to a Financially Strong Marriage By Douglas Goldstein, CFP® - helping you handle your American investments Displayed prominently in our living room is a list titled, “Abba’s Secrets to Success” Now, as my oldest daughter is about to get married, I’ve compiled “Abba’s Secrets to a Financially Secure Marriage” for her and her groom. With their permission, I’d like to share it with you: 1. Be completely honest – Open communication is better than financial infidelity. Hidden spending not only damages your future goals but erodes trust. Discuss money regularly, not just when you have a big bill to pay. 2. Work on joint financial goals – Don’t fall into roles of good cop/bad cop where one of you wants to spend and the other wants to save. You’re merging your lives; now merge your money. There is no such thing as “my” money – no matter who brings home the paycheck, consider it “ours.” 3. Live below your means – Accumulating “stuff” is expensive. Create a budget and stick to it. Review your spending/saving g

Do You Have to Stop Working When You Reach Retirement Age? By Douglas Goldstein CFP® - helping olim handle their U.S. investments from Israel Does reaching retirement age mean you have to stop working? In Israel, the official retirement age for a man is 67. For women, it fluctuates between 60 and 62, depending on date of birth. Retirees until the age of 70 (or 69 for a woman born before 1950), are eligible for a state pension, but entitlement is affected by additional sources of income. From 70 onwards, a state pension is given regardless of other income. So what is the best age to retire? Before making a decision, ask yourself the following questions: Are you physically able? As you age, your regular routine may become tiring. You may also develop health issues that make working full time difficult. So before you decide to keep on working, make sure that it’s realistic. In your retirement plan, make provisions for the possibility that future health problems may affect how long you can work. Why do you

How to Prepare for the Next Stock Market Crash By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel Over the past several years, the market has climbed to historic highs, prompting analysts to sound the alarm over the next stock market crash. While I can’t say when the next crash will occur, I can say it’s reasonable to assume that there will be another stock market drop at some point. How can you prepare for it? Market crashes are inevitable Crashes are more about the speed of decline than its depth or duration. The Flash Crash of 2010 saw the market plunge 1,000 points in minutes. In the 2008 crash, the market fell more than 20% within days. The good news is that each time the market crashed, it fully recovered and went on to greater gains. In 2010, it took a couple of days to recover, while in 2008 it took about 17 months. Past performance is no guarantee of future returns. Every bull market (market rally) leads to some sort of correction. Corrections are defined as declines o

Debunking 3 Myths About Not Needing an Emergency Fund By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel One of the most fundamental principles of financial planning is to prepare for the unexpected by keeping three to six months’ worth of living expenses in an emergency fund. The trouble is many people succumb to the myth that emergency funds aren’t necessary because you can always withdraw from savings. Here are 3 myths about emergency funds and why they are wrong: The best place to keep an emergency fund is in your investment portfolio Yes, an investment account is technically marketable; and it can provide you with access to cash should you need it. However, you can lose real money if you are forced to sell assets at the wrong time. Imagine selling off $5,000 of your equities to cover an emergency expense after the market has declined 25%. It could take you years to gain that back. Better to have that money sitting in a low-yielding money market fund. Read this blog post to

Short on Retirement Savings? Here’s What You Need to Do By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel More than 10,000 baby boomers cross the retirement threshold every day, and nearly one in four of them of haven’t saved enough to retire comfortably. If you’ve reached that point and realize your retirement savings won’t last your lifetime, it’s time to have an uncomfortable conversation with a financial advisor because there are several things that need to be done. But it all starts with having a plan. Create a realistic plan Establish realistic goals based on what you expect to happen. That should include a new time line for critical milestones, such as when you expect to stop working, when to start Social Security and Bituach Leumi, and when (or if) you will need to begin digging into your capital. Crunch the numbers to come up with a pre- and post-retirement spending plan as well as an investment strategy to maximize your income and capital growth. Start living like a r

How to Keep Financial Harmony in Your Marriage By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel What’s the best way to achieve financial harmony in a marriage? When two people get married, they don’t only join their lives together, but also their money. If differences in money attitudes and practices are not addressed early on, people can become set in their ways, making it more difficult to overcome any disagreements. However, where there is love, there are also ways to heal the financial divide. Find shared values and purpose Couples need to come together with a shared vision of their future based on joint values. If they share a mission and purpose, their decisions will have greater clarity and conviction and it should be easier to maintain financial harmony. Shared goals can provide the motivation to spend/save according to an agreed-upon plan. Create a plan At the core of any successful enterprise – be it a business or marriage – is a spending plan or budget. With shared

What You Should Know About Low-Risk Investments By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel Recently, a new client told me that his portfolio mostly contained low-risk investments. When I saw that the majority of his investments were mutual funds, I asked him why he believed mutual funds were “low-risk,” as his funds contained stocks. What he was missing was the mutual funds contained stocks which are risky, so even though the funds were diversified, he was exposed to a lot of risk. What is a low-risk investment? An example of a low-risk investment is a bank deposit, or CD (certificate of deposit). A CD pays a fixed interest rate and matures on a specific date. It is “safer” than a stock, the value of which can fluctuate dramatically, since if the CD investor holds the CD until maturity, he knows he’ll get his principal and interest paid in full. Investors looking for a low-risk investment that produces income choose CDs because they pay interest on the original deposi

Can I Safely Withdraw My Principal in Retirement? By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel As a cross-border financial advisor, one question I hear nearly every day is, “Can I afford to withdraw my principal in retirement?” For most of my clients, the short answer is, yes, but it is important to know how much and from which accounts you can dip into your principal. When withdrawal is part of a strategy The financial planning industry’s “4 Percent Rule” is commonly applied in determining how much principal you can draw down annually without risking outliving your money. Based on historical worst-case scenarios for a portfolio allocation of 60% stocks and 40% bonds over the last 100 years, 4% is considered a safe withdrawal rate in most situations. However, since each person’s situation is different, don’t rely on a rule of thumb as customized financial plan. A simple calculation to determine how much capital would be needed to generate a desired level of income using th

How to Invest When You Can’t Predict Market Direction By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel If you’re thinking of investing in stocks but you’re concerned about which direction the stock market will move, here’s what you need to know: If you are a new investor with a long-term perspective, it shouldn’t matter which direction the stock market moves in the short term. What you should know is that a bull market (up market) generally follows a bear (down) market. On average, bear markets in the United States last about 11 months, while bull markets average 32 months. In the past, the average bear market decline was 27%, while the average bull market gain was 119%, though past performance is no guarantee of future returns. Remember that historically down markets were temporary. More importantly, not only does a bull market erase declines, but in the past, the gains of the previous bull market were extended significantly. Will it always be that way? Unfortunately, no one

Why You Need to Talk to Your Adult Children about Your Finances By Douglas Goldstein CFP® - helping olim handle their U.S. investments from Israel Do you find it difficult to discuss with your adult children what should happen with your finances towards the end of your life? If so, you’re not alone. People don’t like thinking about their own mortality or losing control. Moreover, as family relationships aren’t always easy, discussing issues such as power of attorney, healthcare proxies, and estate planning can get very complicated. For these reasons, many families push off this conversation for as long as possible. If you don’t speak with your adult children about your finances, they may have difficulty picking up the pieces and taking care of you and your affairs if you become too infirm to take care of yourself. The emotional and monetary effects of taking care of an elderly parent without any direction can be very hard, especially if your adult children are raising families of their own at the same tim

Steps You Need to Take 5 Years before Retirement By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel Will you have “enough” money to live comfortably? The months and years before retirement may be filled with trepidation and financial worries. In order to minimize financial concerns before retirement, here are some steps you should take in the five years leading up to it: Organize your assets for tax efficiency Most retirees underestimate the impact taxes will have on their retirement income. If you have an idea of what your retirement tax bracket will be, work with your advisor to arrange your assets in a way to create the greatest tax efficiency when you start withdrawing. Selling assets might trigger large capital gains taxes, and there may be additional taxes on pension payments. Know your pension options For some people, delaying taking Social Security or other pensions until as late as possible might make sense. Learn more about timing claiming benefits at: Profileperspecti

How to Choose the Right Financial Advisor for You By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel Choosing the right financial advisor can be like seeking the right life partner. Your financial advisor needs to be the perfect match for you and your situation. Your advisor must be knowledgeable, honest, reliable, and, most importantly, have your best interests in mind. There are many financial professionals, who all offer a range of services and expertise. How should you choose? When considering whether to work with a prospective advisor, ask yourself these questions: Is this financial advisor qualified? Before you set foot inside a financial advisor’s office, make sure that he is licensed and has expertise with the types of investments that interest you. You can check out his qualifications, background, and experience through the online checking facilities provided by FINRA (Financial Industry Regulatory Authority) in the United States and ISA (Israel Securities Authorit

What You Need to Know About Rolling Your 401(k) to an IRA By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel When you change jobs, everything you need to take with you can be neatly packed into a box – except your retirement plan. When you leave your job, you need to think about rolling your 401(k) into an IRA (Individual Retirement Account). If you left your job to make aliya, this question becomes even more crucial, as cross-border financial regulations come into play with keeping the tax-beneficial status of American retirement accounts. What are your options? If you leave your American job to move to Israel, you have four options for your 401(k): • Keep the money with your former employer’s 401(k) plan, • Roll your funds into an IRA, • Roll your money into your new employer’s plan if it’s allowed, • Cash out your 401(k) plan by withdrawing all your money (not recommended). The best course of action depends on your financial situation, your attitude about managing your own

How to Make a Good Investment Decision By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel Since one person’s good investment choice may be a huge mistake for someone else, what factors should you consider when deciding upon a potential investment? In investing, the only hard and fast rule is that past performance never guarantees future returns. Though you should try to understand why a security acted in a specific way in the past, the most important thing you can do is make sound decisions based upon your personal situation. To help you make an even clearer decision, use an investment evaluation tool like the one available at Profile-Financial.com/investment-evaluation All too often, folks lose money as a result of not asking the right questions. So, when deciding what to invest in, ask yourself: What is your net worth? Why is knowing your net worth important? Before you invest your money, you need to know how much you really have. This doesn’t only refer to savings, but

Was Miguel Cervantes’ Don Quixote fighting imaginary windmills or market volatility when he said, “Don’t put all of your eggs in one basket?” Putting all of your assets in one basket doesn’t keep them as safe as you might think because there is always a risk that you might lose them all at once. The way to counter this is the investment strategy of asset allocation. Asset allocation, or diversification, may be even more important than picking the “right” stocks. The idea is to diversify your money among different types of assets, such as equities, fixed income, and cash and its equivalents, rather than putting all your money into one single asset class. Minimize potential losses The main reason for practicing asset allocation and having a diversified portfolio is to minimize potential losses. If you invest in a single asset class, and it does badly, you could sustain a heavy loss. However, if you spread your investments among different asset classes, if one class performs poorly, your losses could be mitigate

Why You Need to Build an Emergency Fund By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel What would happen if you had an emergency – like a huge dental bill or unexpected car repair? And even worse, what if you had lost your job a month before and couldn’t even get an interview for a new one? To top it off, you get a call that a close relative in the States is sick and you desperately want to fly in to help. Do you have cash available to pay, or would you need to withdraw from your long-term retirement account or sell investments (possibly incurring a large tax bill)? How to build an effective emergency fund Generally, folks should have three to six months’ worth of essential living expenses as the benchmark, and sometimes as much as twelve months or more, depending on their other assets and job prospects. Your emergency fund money should be in a liquid investment so it can be accessed instantly, when needed, without penalties. It’s true that you won’t earn a lot on it, bu

The Things Not to Do With an Inheritance By Douglas Goldstein, CFP® - helping olim handle their U.S. investments from Israel When you get an inheritance, your first question may be, “What should I do now?” But perhaps a better question is “What shouldn’t I do now?” An emotional rollercoaster Getting an inheritance arouses many emotions. Sometimes, people get too excited and they spend all the money without thinking about the best uses for it. Others feel uncertain that they know how to manage the wealth they just received. Their fear paralyzes them, preventing them from making good investment decisions. What are the mistakes to avoid? When you get an inheritance, try not to let the tangle of emotions interfere with making the right choices. Avoid the following: Impulse spending. While you may have always wanted a luxury car, designer jewelry, or the latest technological gadget, step back and ask yourself if these are really the best uses for your new wealth. Sometimes there is an additional cost to an i

How Can You Increase Your Retirement Income? By Douglas Goldstein, CFP® - helping olim handle their U.S. investments from Israel How can you increase your retirement income and avoid risk? That’s tricky, and a lot of folks simply opt to put their money in the bank. But the good news is that there are other options, aside from the bank, for reducing risk and generating more retirement income. While banks present a lower risk than the markets, bank deposits historically have low yields. This is very significant in retirement because you need sufficient income from your investments to replace your paycheck. Your bank savings may not grow if interest rates are low, and may even lose value over time due to inflation. Income-producing investments These two income-producing investments, while more risky than bank deposits, may be appropriate for some investors, and it’s worth asking a professional, licensed investment advisor if they’re right for you: Bonds – A bond is a loan to a government or company over a set ti

What Happens to Your U.S. Brokerage Account When You Leave America? By Douglas Goldstein, CFP® - helping olim handle their U.S. investments from Israel The good news is that if you are an American expat, or you are not a U.S. citizen at all, you can still benefit from having a U.S. brokerage account. (For more information about managing your American brokerage account from abroad, download the Profile Toolkit.) Why have an American brokerage account? There are many reasons to keep your investments inside a U.S. brokerage account. These include: transparency and efficiency, lower transaction fees, and an opportunity to profit from worldwide markets in both dollars and foreign currencies. You can diversify your holdings inside a U.S. brokerage account, with CDs (certificates of deposit in a bank), mutual bunds, stocks, bonds, and much more. Additionally, if you are an American expat, keeping your investments inside a U.S. brokerage account will make it easier for you to file your U.S. taxes and fill out the FBA

Are Foreign Investments Good for Your Retirement Plan? By Douglas Goldstein, CFP® - helping olim handle their U.S. investments from Israel Do you want to minimize risk in your retirement accounts? If so, consider diversifying your holdings to include foreign investments. Investing internationally may boost your returns and minimize risk, as you’re “geographically diversified” and not relying on any single country’s economic performance. Geographic diversification can be achieved by buying foreign stocks, ETFs, mutual funds, REITs, and foreign corporate and/governmental bonds. Saving your pension in one country and keeping your assets in another country is another form of geographic diversification. If you want to know more about minimizing risk in retirement planning, download The Retirement Planning Book, at: Profile-Financial.com/rpb Examples of global investment opportunities: Owning Foreign Stocks: Most major stockbrokers can help you buy individual foreign stocks, taking care of any currency conversions