Judaism and financial planning

Back in the spring of 2016 when I announced my transition from Pittsburgh NCSY director to financial adviser with Hefren-Tillotson (now Baird), I was encouraged by the number of fond wishes for success I received as I embarked on my new endeavor.

Of course, this was accompanied by several people wondering how I was leaving a role where I served as rabbi and led an organization focused on Jewish education to one filled with graphs and charts about stock portfolios and bond yields.

My response was that I was pivoting from advising people about their spiritual portfolio to directing their financial portfolios. In truth, there are similarities between the two roles, and I have been blessed that many of the same individuals and families who trusted my counsel in spiritual matters have also turned to me for their financial planning needs.

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The Talmud teaches that one can get a glimpse into the essence of a person (Bikeeso) through their wallet. How a person views money, uses money and talks about money tells you a lot about who they are. When advising clients, I try to blend values that are found in Judaism into a financial planning perspective. Judaism and financial advising both place great emphasis on the future.

The value of “li dor vi dor,” passing from one generation to the next, is one that resonates in both worlds, as does charitable giving. Finally, consistency and small steps that build to something profound are a powerful element at the core of Judaism and form the bedrock of a sound financial plan.

I can share a few examples of this confluence. One of the strongest small steps one can use to achieve financial success is funding a Roth IRA. While many are aware of and already funding Roth IRAs, did you know that you could open one for your child?

If you have a teen who is earning a legitimate wage, for example, from a part-time job, money can be put away that will grow tax-free for the rest of their lives. If they earn $1,000 a year during the four years of high school and you put that money away for them into a Roth IRA during that time, at retirement they could have nearly $300,000 of tax-free money! (This assumes $4,000 invested from age 18 to age 68 grows at an average annual rate of 9%, and all dividends are reinvested.)

Of course, this is not limited to teenagers; funding Roth IRAs for young adult children or grandchildren could yield similar results and is a great tool to teach that small steps taken today can have a profound impact on the future. Think about that the next time you are getting ready to distribute Chanukah gelt!

Tzedakah (charity) is a core tenet of Judaism and one that also fits into a financial plan. As a result of recent changes to our tax laws and the increased standard deduction on tax returns, many argue that the tax benefit of charitable giving has largely disappeared. This can be true, but there are still ways that your charitable gifts could benefit both the organization of your choosing and your bottom line.

Many are at the stage in life when they are taking required minimum distributions (RMD) from retirement plans that have been sheltered from the IRS, resulting in an additional tax burden. Sometimes, these distributions are not needed to support their lifestyle and are only taken because they are mandated, causing more frustration with paying taxes on these funds. Instead, you can make a qualified charitable distribution (QCD) directly from your retirement account to many charitable organizations that will satisfy the RMD and reduce your tax burden, all while still taking the standard deduction.

Planning for those who will come after you is a conversation I often have with clients. We only get three choices regarding where our money goes after we are gone: loved ones, charity or the government, and most people would rather increase the amount given to the first two and reduce the amount going to the third. Failing to plan rarely results in the desired outcome.

High net-worth individuals benefit now from increased limits to the federal inheritance tax exemption, but this elevated exemption is set to reduce at the end of 2025. There are mechanisms that should be put in place today that will allow you to increase the impact your money has on future generations and continue to fulfill your values after you are gone.

These are just a few examples of where I still get to put my rabbi hat back on even while sitting in the financial adviser chair. They are important topics, and I encourage you to consider not just the projections on spreadsheets and graphs but also how your money will help you fulfill the values you hold dear and impact those you love.

Please discuss with your financial/tax adviser before implementing any of the items discussed above. PJC

Ari Goldberg is a financial adviser in the Baird Pittsburgh office.