digest
Short Summary
Main recommendation: New olim (immigrants to Israel) should generally keep their existing US-based money, especially retirement accounts and investments with large capital gains, in the United States rather than bringing it to Israel, and should rent before buying property. Aaron Katsman says moving these assets often triggers high taxes and leaves investors with limited options, while real estate and bank deposits remain the simplest local choices. He also advises working only with advisers licensed by Israeli and/or US regulators to reduce fraud risk.
Key Points
- US citizens, including dual citizens, find investing in Israel very difficult, and investing locally outside real estate can trigger high US taxes through PFIC rules, which Katsman says most accountants think apply to most ETFs.
- Withdrawing retirement funds such as a 401(k) or traditional IRA to buy property in Israel is treated as income, so large withdrawals can produce a large tax bill.
- Many major US brokerages stop serving Americans living abroad, and accounts may be locked when logging in from Israel due to IP address detection.
- Katsman says there are many unlicensed people calling themselves advisers, and he advises working only with people licensed by the Israeli Securities Authority, US regulators, or both.
- Transferring investments with large capital gains to Israel can cost a lot of money and leave investors with fewer options.
Details Worth Noting
- Concrete instructions:
- Rent in the target community for a while before buying an apartment or house, so you can confirm you like the area and that children can adjust to their schools.
- Do not buy property right away; decide to buy only after confirming you are happy there.
- Before investing locally, learn how US tax rules treat the investment, since PFIC classification can cause very high taxation for US citizens.
- Keep retirement accounts (401(k), IRA) in the United States; do not withdraw them to buy an apartment or bring them to Israel.
- Choose a firm that maintains US accounts for people living abroad and provides local Israeli service, and confirm the advisers are licensed in both jurisdictions.
- Before bringing money over, review whether transferring investments would force you to realize large capital gains.
- Keep money that you need to live on in Israel, and bring over enough to get started.
- Katsman mentions that the Tel Aviv Stock Exchange is a good place to invest, but says newcomers often do not know how to navigate it.
- Katsman says that when you move to Israel, a US brokerage may send a "move-your-account" letter, and that account lockouts are common and not a sign of a scam.
- Katsman mentions that an investment in banks in the country of Georgia with guaranteed returns didn't end well, as an example of guaranteed-investment schemes gone bad.
- He says the lockouts and brokerage refusals are due to compliance and licensing issues, not antisemitism.
- He notes that ETFs are called "udot" locally in Israel.
Bottom Line
For most new immigrants, the safer path is to settle, rent first, and leave retirement and US investments where they are, moving only what is needed for living expenses and a future home purchase after careful planning.
