Israeli Financial Guide: How Much to Save by Age 55 for Retirement

Financial planning experts in Israel are emphasizing the critical juncture of age 55 for individuals looking to secure their retirement. With approximately 10-12 years remaining until the official retirement age, this period offers a significant window to address any financial shortfalls.

The recommended savings target by age 55 is generally 6 to 7 times one's annual gross income. For someone earning the average Israeli salary of around 170,000 shekels annually (approximately 14,000-14,400 shekels per month), this translates to a savings goal of 1 to 1.2 million shekels. Higher earners should aim for proportionally more, with the rationale being that greater wealth is needed to maintain a higher standard of living without a salary. This benchmark is part of a broader guideline where savings should ideally be 4-5 times income at age 45 and 7-8 times at age 60.

An alternative calculation focuses on desired retirement income. Using a 4% annual withdrawal rate as a guideline, every 1,000 shekels of monthly income needed from savings requires approximately 300,000 shekels in capital. Therefore, needing an extra 5,000 shekels per month beyond state pensions and social security would necessitate around 1.5 million shekels in savings.

The article highlights that pension funds have significantly contributed to savings for many, especially those who consistently contributed since mandatory pension savings began in 2008. However, significant disparities exist, with individuals who had career breaks, were self-employed without consistent contributions, or cashed out severance pay potentially having much less saved. The key drivers for closing savings gaps over the next decade are identified as increasing savings rates, minimizing management fees, adjusting risk exposure, considering later retirement, and eliminating mortgage payments.

For women, the article notes the need to save more due to longer life expectancies, even with a slightly earlier official retirement age. It also warns against cashing out severance pay upon changing jobs at this age, as it can drastically reduce future pension income. Maintaining an emergency fund equivalent to six months of expenses is also advised to prevent job loss from derailing long-term financial plans.