If you’re like other olim who wonder how Israelis can afford to retire on the salaries they make today, here’s some good news. Israelis don’t work forever and there are a number of ways they manage in the years of retirement.
Pension plan
Pension contributions by employers and employees have been mandatory since 2008. Before this law was passed, pension plans were voluntary and only about half of Israeli workers had them. Pension plans include severance payments, which, if never withdrawn, are released during retirement. In 2007, it also became mandatory for business owners to contribute to a pension plan.
Many Israelis have multiple pension funds, since workplaces don’t all use the same pension companies. Although you can ask a new employer to continue using your existing fund, this was not always the case, and doesn’t always happen for various reasons. However, all pension companies are obligated to share account information with a website called Swiftness, so you can find all your pension funds and ensure they are all released to you at retirement.
Keren Hishtalmut
In certain industries, it is common for employers to contribute to a Keren Hishtalmut as part of the perks of the job. These funds become liquid every seven years and many people do spend them on large ticket items like a new car or a child’s bar mitzvah. However, this money can also be saved and used to help fund retirement.
Bituach Leumi
All employees, business owners and even many people who don’t work pay Bituach Leumi on a monthly basis. Bituach Leumi is paid from retirement age, based on income level, or from the age of 70, regardless of income. Bituach Leumi is not a very high payment and cannot be relied on exclusively, but it is another source of income.
Home ownership
Many Israelis own their own home and it is often their biggest financial asset. Once they reach retirement age, they have finished paying off the mortgage, so they have a rent-free home. They may also choose to sell it and downsize to a smaller apartment or retirement village, freeing up the difference in price for living expenses.
Investments
Savvy Israelis invest what they are able to save from income or inheritance and use their earnings to augment their retirement capital. If you’re a US citizen, it is important to get advice before investing, since certain types of funds are taxed heavily by the US government.
Foreign government old-age benefits
Olim are sometimes entitled to old-age benefits from the country they lived in formerly. Citizens of other countries should check their eligibility and whether they can enjoy these benefits while remaining in Israel.