Using Your IRA to Invest in Israel

Wise Money Israel is often asked if U.S. IRA funds can be used to invest in Israel without taking them out early and incurring a penalty to do so.  The answer is yes, this can be done, using a self-directed IRA (Individual Retirement Account), with or without an LLC (Limited Liability Company) structure. The IRA (or IRA-LLC) then opens and invests (funds) the Israeli investment account in Israel in shekels. The U.S. IRA administrator takes care of rolling over your IRA(s) from Traditional, Roth IRA, 401k, 403b, etc. to a self-directed IRA, and does the paperwork for the IRS to keep your tax-deferred status (though the funds are actually outside the U.S. and in the Israeli currency).

Steps to investing your IRA funds in Israel

1. Contact us to learn more about our partner self-directed IRA custodian firm that works with Israeli brokerages to invest in Israel. Their forms can be filled in online.
2. Wise Money Israel will pre-populate the Israeli brokerage forms for your signature based on our online form.
3. Wise Money Israel will direct you how to have your passport/driver's license certified, allowing you to open the Israeli brokerage firm from anywhere in the world via mail.
4. Direct the IRA custodian firm to wire transfer your funds to the Israeli brokerage's bank.

Do I need an LLC?

No. A simple, self-directed IRA can invest in foreign securities directly, without the need for an LLC. Having an LLC in the middle allows to you allocate your self-directed IRA to more than just an Israeli brokerage ("check writing privileges"). This method is more costly and complicated, as the LLC opening the Israeli account must itself be certified via mailed documentation, maintain a separate bank account, and pay yearly state registration fees to keep the LLC open.

Therefore, if you want to have your self-directed IRA directly invest in your individual Israeli investment account, that can be accomplished directly and simply with only a self-directed IRA.

Will I be taxed?

No. A self-directed IRA can invest in foreign securities while retaining the U.S. tax-deferred status of an IRA.

As a non-Israel entity, your IRA funds will not be taxed in Israel on stock gains, corporate bond interest or corporate bond capital gains.

Also, just as your IRA is today exempt from paying taxes on gains immediately upon their sale, so too your Israeli gains in your self-directed IRA will not be taxed upon the sale of your Israeli securities. So your tax consequences are the same in the IRA whether you hold U.S. securities or Israeli securities. This allow the tax-deferred compounding effect on your gains enjoyed by retirement accounts, which typically greatly enhances your final return.

How do I invest the funds?

The self-directed IRA designates you as both the beneficiary and the power of attorney for the Israeli brokerage account. You may then direct which investments to make yourself, with hourly consulting, or with the help of a licensed account manager such as Wise Money Israel or others.

WMI assists clients in opening IRA, individual, joint, partnership, or corporate/organizational investments accounts, and to invest wisely in Israeli stocks, bonds, mutual funds, ETFs, etc. For more information, please contact us.