How Much Money Do Israelis Need by Age 70?

By age 70, most Israelis have retired and are receiving pensions and social security benefits. The key financial question shifts from accumulation to sustainability: ensuring remaining savings, combined with regular income, are sufficient for ongoing expenses, leisure, and potential healthcare needs. The required savings amount is lower than at younger ages because the planning horizon shortens, allowing for a higher annual withdrawal rate from savings, approximately 4.5% to 5% instead of the traditional 4%. This means each saved shekel is worth more in terms of monthly income.

It is advisable at this age to draw from the principal savings, not just rely on investment returns. The money was saved precisely for this stage of life. A common formula to estimate required liquid assets involves measuring actual monthly expenses over three months, subtracting fixed income (like state pensions and rental income), and multiplying the difference by 250. This figure represents the liquid portfolio needed, to which a separate health reserve should be added.

For example, a couple with monthly expenses of 14,000 shekels and fixed income of 11,000 shekels has a monthly shortfall of 3,000 shekels. Applying the formula, they would need a liquid portfolio of approximately 750,000 shekels, plus a health reserve, bringing the total to around 1.1 million shekels. A widow aged 70 with 10,000 shekels in monthly expenses and 7,000 shekels in fixed income would need a portfolio of about 750,000 shekels, plus a health reserve, totaling close to 1 million shekels.

The health reserve is crucial, especially for individuals, to cover potential long-term care costs, which can range from thousands of shekels monthly for home assistance to 8,000-11,000 shekels for a foreign caregiver or 12,000-25,000 shekels for private nursing care. This reserve should be kept separate from the main investment portfolio in highly liquid assets.

Individuals facing a shortfall have several options. Reducing monthly expenses, particularly housing costs by downsizing, can significantly decrease the required savings. Maximizing government benefits and entitlements, such as elder citizen allowances and tax refunds, can also provide substantial monthly income. Additionally, part-time work or consulting can supplement income and reduce reliance on savings. The article also advises against aggressive investment strategies at this age and suggests careful consideration of options like reverse mortgages.