Israelis at 60: How Much to Save for Retirement

As Israelis approach age 60, the crucial question of retirement savings becomes urgent, with the next seven years significantly shaping their post-work financial well-being. A common guideline suggests having saved between seven to eight times one's gross annual income across all pension funds, excluding primary residence equity. For someone earning the average Israeli salary of approximately 170,000 shekels annually, this translates to a target of 1.2 to 1.4 million shekels. For higher earners, the target increases proportionally, while lower earners aim for 850,000 to 1 million shekels.

Achieving these savings often depends on consistent contributions since mandatory pension savings began in 2008. Those who have consistently saved and benefited from average annual returns of around 6% may have accumulated 1 to 1.2 million shekels in their pension funds alone. Conversely, individuals who withdrew severance pay, joined mandatory savings late, or worked for low wages may have less. The article emphasizes that consistency in contributions, rather than investment acumen, is typically the primary driver of savings levels at this age.

A more personalized approach involves calculating expected retirement expenses. By estimating monthly needs after age 67, subtracting expected national insurance and pension payouts, and multiplying the remainder by approximately 300 (based on a 4% annual withdrawal rate), one can determine the required supplementary savings. For instance, a shortfall of 4,000 shekels per month necessitates a portfolio of about 1.2 million shekels.

The article warns against the temptation of early retirement, highlighting that stopping work at 62 instead of 67 incurs significant financial penalties. These include losing five years of contributions and investment growth, extending the period of living expenses, and facing less favorable conversion rates for pensions, potentially leading to decades of significantly reduced income. It stresses that every additional year worked after 60 can be more financially impactful than earlier years.

Key steps for those at age 60 include consolidating all pension accounts, assessing current expenses, and strategically adjusting investment risk. This involves gradually shifting assets towards more stable options for the first few years of retirement while keeping longer-term funds invested for growth. Continued contributions, even modest ones, can significantly boost savings by age 67, especially through tax-advantaged vehicles like investment provident funds, which offer tax-free pension conversion. Additionally, reviewing insurance policies and considering mortgage repayment strategies are crucial for optimizing financial health before retirement.