As a Certified Financial PlannerTM sitting in Jerusalem, I work mostly with immigrants who keep the majority of their assets in American investment accounts. When a recent oleh listed the various retirement plans that he held in the United States, he mentioned:
- Individual Retirement Account (IRA),
- 401(k) retirement plan from an old employer,
- 403(b) plan from when he taught in a school.
Although he had some upcoming financial obligations, most of the money was intended for long-term investment.
He told me that his biggest financial problem was that his investments and money “were all over the place,” and with his busy schedule, he was unable to keep track of what was going on.
Although each of the accounts came from different sources, now that this oleh was no longer working in America and contributing to the retirement plans, he could roll the 401(k) and 403(b) plans into an IRA. This would give him flexibility to choose the types of investments that he wanted and still maintain the U.S. tax-deferred status of the retirement plans, as well as avoid the penalties for early withdrawal.
Keeping American accounts when living in Israel
When I suggested this option of rolling over his accounts into IRAs, the oleh asked if he could still do this, even though he is now living in Israel. This is a question that many dual citizens ask, often thinking that if they inherit or have an existing IRA in the United States they must cash it out. Cashing out an IRA and moving the money overseas is a taxable event, and often a bad idea.
The good news for this oleh, and also for all Americans living in Israel, is that you can maintain your existing tax-efficient IRAs in American brokerage accounts while living in Israel. To find out more about managing your American assets from overseas, download the “Toolkit for Opening U.S. Accounts from Overseas” at Profile-Financial.com/toolkit.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published April 12, 2017. Updated April 2020