Experts Warn 75% Pension Income May Not Sustain Current Retirees' Lifestyle in Israel

Ela Elkaly, chairperson of IBI Mutual Funds, emphasizes that the key pension question is not whether money will be available but if it will suffice to maintain the desired retirement lifestyle. She highlights the unpredictability of future living costs and stresses the importance of early and continuous saving, especially warning self-employed individuals about the risk of retiring without adequate savings or assets.

Elkaly explains that Israel's pension system is stable due to regulatory reforms since 2004, including mandatory pension laws and oversight by the Capital Market Authority. Large institutional managers handle pension funds, and transparency is ensured through platforms like "Gamal Net." Despite this, she cautions against relying on the common rule of thumb that 75% of pre-retirement income will cover retirement expenses, noting that modern retirees often seek a more active lifestyle and may live well beyond 80 years.

The article also discusses the recent Slices scandal, where about 900 million shekels of pension savings disappeared, mostly affecting vulnerable populations. Elkaly states this incident has eroded trust in regulators and financial agents, underscoring the need for vigilance and personal responsibility in pension management.

Regarding self-employed workers, despite a mandatory pension law since 2017, less than a third actively save for retirement, with many preferring to pay a small annual penalty rather than contribute regularly. Financial planner Moran Levy notes that many self-employed face cash flow challenges and underestimate the importance of steady pension contributions, often delaying saving with hopes of future investments.

Elkaly advocates for owning a home as a financial anchor in retirement, especially for those without sufficient pension savings, given the uncertainty around future living costs and healthcare. She suggests that younger people consider building investment portfolios aimed at eventually securing housing, while also calling for improved long-term rental options in Israel.

The article is part of a series on pension planning, including upcoming discussions on pension misconceptions and career planning for longevity.