Israeli Pension Guide: How Much Should You Have at Every Age?

A new guide provides a comprehensive overview of expected pension savings in Israel, broken down by age decade, to help individuals assess their financial standing for retirement. The guide emphasizes that these figures are benchmarks for self-assessment and planning, not definitive targets.

The accumulation of pension funds is driven by three main factors: deposits, investment returns, and management fees. Deposits typically range from 18.5% to 20.8% of gross salary for employees, with a rough estimate of 190-210 shekels per 1,000 shekels of gross income. Investment returns, particularly from equity-heavy funds, have historically averaged around 7% annually over decades, with compound interest significantly boosting overall savings. Management fees, while seemingly small, can amount to tens or hundreds of thousands of shekels over a 40-year career; for example, a 0.3% difference on a 500,000 shekel balance translates to 1,500 shekels annually, accumulating substantially over time.

Continuity in savings is crucial. Gaps in deposits due to unemployment, career breaks, or self-employment without contributions create significant holes. A major pitfall is withdrawing severance pay upon changing jobs, which not only incurs immediate taxes but also eliminates future tax benefits and growth potential. Even seemingly small breaks can amount to substantial lost savings over a career.

The guide outlines expected savings ranges as multiples of monthly gross salary, adjusted for age. For instance, by age 30, individuals are advised to have 8 to 15 months' worth of gross salary saved. By age 40, this range increases to 35 to 50 months' worth, and by age 50, it rises to 75 to 100 months' worth. These ranges assume consistent deposits, average market returns, and moderate management fees, with adjustments for those who started their careers later or had significant breaks.

As retirement approaches, the focus shifts. By age 55, individuals should have 100 to 130 months' worth of salary saved and should carefully review their investment allocation, potentially shifting from aggressive to more moderate funds to mitigate risk. By age 60, the target is 130 to 165 months' worth, with an emphasis on planning for retirement timing, as delaying retirement can significantly increase pension payouts. At age 67, the expected range is 170 to 220 months' worth of salary, which translates to a monthly pension of approximately 5,000 shekels per million shekels saved, before taxes.