Israelis Urged to Plan Ahead for 10,000 Shekel Monthly Pension
Translated & summarized from Globes by baba
Many Israelis are concerned about their retirement savings, with experts advising a target of 10,000 shekels monthly for a comfortable retirement. Simulations suggest individuals should aim for hundreds of thousands of shekels saved by their mid-40s and over a million by their mid-50s. Starting savings early is crucial due to compound interest, and minimizing management fees can significantly boost future returns. Supplementary savings vehicles like investment pension funds are recommended to bridge potential shortfalls.
The story in 5 lines · by baba
- Israelis are increasingly worried about having enough saved for a 10,000 shekel monthly pension.
- Financial experts recommend saving hundreds of thousands of shekels by age 45 and over a million by age 55.
- Starting retirement savings early is crucial for maximizing compound interest benefits.
- High management fees can significantly reduce long-term pension fund growth.
- Supplementary savings accounts and aggressive investment strategies are advised to meet retirement goals.
Many Israelis are concerned about whether they are saving enough for retirement, with social media discussions highlighting anxieties about reaching a sufficient pension fund. While pension companies provide projections, these often rely on assumptions of constant real returns and, notably, no further savings, due to regulatory limitations. These simulations can therefore underestimate future pension amounts.
Financial experts emphasize the need for concrete savings goals, rather than vague targets. To address this, "Globes" has compiled a guide for the average Israeli, aiming for a monthly pension of 10,000 shekels, a sum considered sufficient to maintain a reasonable standard of living post-retirement. This amount is comparable to the median salary in Israel.
Simulations from fintech company FINQ and the "Agam Leaders" agency of The Phoenix Group suggest that an individual starting work at age 25 with a 10,000 shekel monthly salary should aim for approximately 297,000 shekels in their pension fund by age 35, 736,000 shekels by age 45, and 1.38 million shekels by age 55. These projections assume no salary increases, continued employment, and a goal of a 10,000 shekel monthly pension, plus an estimated 1,800 shekels from National Insurance.
Financial planners like Oren Barsky and Yisrael Atiya offer slightly different benchmarks, with Barsky suggesting a range of 700,000 to 1 million shekels by age 45 and approaching 2 million by age 55 for a 10,000 shekel monthly salary. Atiya, however, presents a more lenient view, stating a 35-year-old earning 10,000 shekels needs about 120,000 shekels for a pension equal to their current salary, while a 55-year-old needs over 1 million shekels. Maor Eliasi of Orient Insurance suggests targets of 120,000-180,000 shekels by age 35 and 350,000-500,000 shekels by age 45 for a 12,500 shekel salary.
Experts stress the critical importance of starting savings early due to the power of compound interest, where money earns money over time. They also warn about the significant impact of management fees, which can substantially reduce long-term returns. For instance, paying maximum fees could require saving 84,000 shekels more by age 35 compared to paying lower, default fund fees. Additionally, women may face lower pensions due to factors like lower average salaries, part-time work, and career breaks for childbirth.
To bridge potential savings gaps, individuals are advised to check employer contributions, negotiate management fees, consider increasing their own contributions, and potentially waive survivor benefits if they have no dependents. Opening a "Gmul Le'Hiskaym" (investment pension fund) is recommended as a supplementary savings tool, potentially providing an additional 500-1,000 shekels monthly. Aggressive investment strategies in stocks, particularly in study funds (Keren Hishtalmut), are also suggested for younger savers to maximize long-term returns, especially given their tax-exempt status.