Israelis at 60 Face Pension Shortfall, But Working Longer Offers Hope

Many Israelis turning 60 find themselves with significantly less saved for retirement than recommended, with a common savings amount of around 700,000 shekels falling far short of the 1.2 to 1.35 million shekels suggested for those earning the average salary. This shortfall is largely a generational issue, stemming from mandatory pension contributions only becoming widespread in 2008, meaning many older workers have only about 15 years of consistent contributions.

With a conversion rate of approximately 200, 700,000 shekels translates to a monthly pension of about 3,500 shekels, supplemented by national insurance benefits. This highlights the importance of assessing retirement readiness based on actual monthly expenses rather than just savings tables.

However, working until age 67 can substantially improve this outlook. Continued employment for seven years can grow the initial 700,000 shekels to approximately 1.12 million shekels through an average annual return of 7%, with an additional 285,000 shekels from contributions during those years. This results in about 1.4 million shekels at age 67, yielding a monthly pension of roughly 7,000 shekels, nearly doubling the earlier projection.

Working even longer, until age 70, can further boost retirement funds to around 1.85 million shekels, providing a monthly pension of approximately 9,250 shekels. These extra years represent the most powerful and controllable lever individuals have to increase their retirement income.

Individuals are advised to take several steps this year: search for forgotten funds from previous employment using the Treasury's 'Har HaKesef' system, review investment track allocation to ensure it balances risk and growth, negotiate lower management fees, and consider downsizing their homes to release equity. Additionally, active provident funds can continue to grow tax-free if left invested.

Retirement planning should also consider household finances, as two smaller pensions can create a different financial picture than two separate ones. While closing a 500,000 shekel gap by age 60 might be unrealistic, significant reduction and adjusted expectations can lead to a more manageable retirement.