Many of our Wise Money Israel community members ask us about combining their retirement planning with their heart for Israel.
Today, we'll explore how you can both keep your IRA tax preferred and fulfill your calling to support the Holy Land through wise investment choices.
The Biblical Principle of Diversification
The Bible offers wisdom on diversification, particularly in financial and life decisions.
“But divide your investments among many places, for you do not know what risks might lie ahead." (Ecclesiastes 11:2 NLT).
The “home bias” in investing is the tendency for investors to favor domestic stocks, bonds, or other assets over foreign investments, even when diversification abroad may provide better risk-adjusted returns. Investors feel more comfortable investing in companies and markets closer to home. But this familiarity may lead to a lack of diversification. If the home economy struggles, a heavily domestic portfolio may suffer.
Having all of your investments in your home currency can also lead to a loss in buying power as inflation and government debt grow. Strong foreign currencies such as the Israeli shekel have provided many clients foreign currency exchange gains over the past two decades in addition to capital gains and interest. The Israeli currency has appreciated over 35% against the USD over the past 23 years.
Why Your IRA Investment Decisions Matters
The U.S. government provides a very meaningful tax benefit across the various retirement investment account types (Traditional IRA, Roth IRA, 401(k), etc.). The compounding effect of this tax deduction/exemption/deferral is economically significant considering the amount of years retirement accounts compound.
But often IRA providers do not offer investors many international options, nor a way to target your investments to specific countries or currencies you wish to invest in.
Some investors forget about their IRA investments as they may not see the funds released for a decade or more in the future. But Proverbs 21:5 says, "The plans of the diligent lead surely to abundance." Make sure your IRA investments are diversified and invested in what you believe in.
Of course investing in Israel allows you to take immediate advantage of investment opportunities in Israel's dynamic and innovative economy. As we've witnessed throughout history, God's timing often requires us to be prepared and positioned before major movements occur. As we may be seeing the war in Israel coming to an end, this may be one of those timing opportunities as the Israeli economy grows through rebuilding. Historically the Israeli stock market has grown significantly following war.
Combining IRA Tax Benefits with Israel Investment Opportunities
At Wise Money Israel, we understand the dual calling many of our investors feel – to prepare wisely for their future while supporting God's purposes in Israel. The Israeli market offers unique opportunities that align with both these goals.
Through your IRA, you can invest in Israeli stocks in the TA-125 index (that outperform the S&P 500 by over 5% in 2024), which provides exposure to Israel's most significant companies. These investments often include firms at the forefront of Israel's national restoration and technological advancement.
The companies we invest in aren't just numbers on a spreadsheet – they represent Israel's miraculous transformation from a desert land to a global innovation leader. Consider the agricultural technology companies working to make the desert bloom, fulfilling Isaiah 27:6's prophecy about Israel filling the world with fruit.
Or think about the water technology firms developing solutions that echo Ezekiel 36:35's vision of a transformed land. These aren't just investments; they're partnerships in prophecy fulfillment.
Strategic Approach to Year-End Planning
When considering investing your IRA (or part thereof) in Israel, also consider your year-end IRA strategy to maximize your opportunities. Take time to calculate your available contribution availability, considering the annual contribution of $7,000, or $8,000 if you're 50 or older. The IRS even allows you to contribute for last year until April 15 of the following year. This isn't just about maximizing your tax deductibility – it's about maximizing your potential impact in Israel's economy while building your retirement security.
When evaluating Israeli investment options, look beyond simple returns to understand the prophetic significance of various market sectors. Israel's technology sector, for instance, is fulfilling the biblical promise that Israel would be a light to the nations. Medical innovations from Israeli companies continue to bless people worldwide, fulfilling Genesis 12:3's promise that through Israel, all nations would be blessed.
The Blessing of Investing in Israel Through Your IRA
When you direct your IRA investments toward Israel, you're participating in a divine cycle of blessing. Your investment supports Israel's economic growth while potentially benefiting from the remarkable innovation and resilience of the Start-Up Nation.
This isn't just financial and currency diversification – it is spiritual alignment with God's purposes for Israel.
Israeli companies and the Israeli economy have demonstrated remarkable resilience through various challenges, emerging stronger and more innovative. This resilience reflects the biblical narrative of Israel's persistence and God's faithfulness to His chosen people.
By investing in these companies through your IRA, you're not just wisely planning for retirement; you're participating in Israel's modern-day restoration story.
A Balanced Approach to Spiritual and Financial Wisdom
Making wise investment decisions requires both spiritual and practical wisdom. Take time to inquire of God regarding your investment choices, seeking His guidance in how to best support Israel while managing your retirement resources.
Consider consulting with Registered Investment Advisors who understand IRA regulations, the unique aspects of investing in Israeli markets, and how to gain access to shekel-based Israeli investments through your IRA.
The tax implications of IRA contributions and international investments require careful consideration. Traditional IRA contributions may offer immediate tax benefits, while Roth IRAs provide tax-free growth potential.
Understanding these distinctions helps you optimize both your tax situation and your ability to support Israel's economy effectively.
Your Next Steps Forward
As you consider your IRA strategy, remember that this decision goes beyond numbers and deadlines. It's an opportunity to align your financial stewardship with God's purposes for Israel.
Ready to maximize your IRA while blessing Israel?
Our team at Wise Money Israel specializes in helping those interested in investing in Israel, like you, navigate these important decisions. We understand both IRAs and the spiritual significance of investing in Israel. Wise Money Israel is also one of the only investment firms registered both in the U.S. and Israel that invests in Israeli stocks and bonds through an IRA.