Harvard Economist Dr. Yael Hadas Debunks Common Pension Myths in Israel

Dr. Yael Hadas, a Harvard-educated economist and head of international economics programs at Reichman University, has revealed widespread misconceptions about pensions in Israel. Despite her advanced education and experience advising banks, she initially struggled to understand her own payslip, prompting her to deeply study pension systems and financial literacy. She found that many Israelis mistakenly believe that starting to save early guarantees sufficient retirement funds, that their business or inheritance will secure their pension, or that employers contribute pension payments on all earnings.

Dr. Hadas highlights research from Ben-Gurion University showing that the average Israeli pension amounts to about 30% of their final salary, often less than expected. She warns that wages typically peak between ages 45 and 55 and then decline, and that job security is increasingly uncertain due to technological changes like AI. She advises building emergency savings equivalent to six months’ salary and maintaining diverse investment channels beyond pensions.

Addressing common myths, Dr. Hadas stresses that self-employed individuals cannot rely solely on their business for retirement security and should contribute to pension funds, which offer unique benefits such as government-guaranteed minimum returns. She also cautions against counting on inheritance due to its unpredictability. Furthermore, she explains that employers are only legally required to contribute pension payments up to the average wage, excluding bonuses or overtime, so employees should verify their payslips.

Dr. Hadas criticizes the lack of accessible, unbiased financial education in Israel, noting that many financial influencers and insurance companies provide partial or self-serving advice. She advocates for academic-based courses that offer research-backed information without financial conflicts of interest. She also emphasizes the importance of understanding financial terminology accurately, such as recognizing that loans have costs that compound over time.

In conclusion, Dr. Hadas encourages Israelis to educate themselves thoroughly about saving and investing options to secure their financial future, highlighting the need for reliable, free financial guidance akin to public services in health or law.