Retirement Planning in Israel - Is it really necessary?

Most people know they should plan for retirement. Very few really understand what happens if they don’t. And even fewer understand what proper planning can unlock—not only financially, but emotionally, in terms of security and confidence.

Retirement planning isn’t about predicting the future. It’s about controlling the parts of the future you actually can. And for most families, the difference between “we’ll be fine” and “we should have planned ten years earlier” is measured in hundreds of thousands of shekels.

Let’s break it down.

1. You will probably live longer than you think

When I sit with clients, almost everyone underestimates life expectancy.

In Israel today:

• A 45-year-old man has a life expectancy of roughly 83–84.

• A 45-year-old woman has a life expectancy of 87–88.

• But that’s not the real number.If you’re healthy and already in your mid-40s, your conditional life expectancy is higher—because you already passed many earlier-life risk periods.

Practically?Many couples need to plan for 30–40 years of retirement income.

That means your retirement money has to last longer than your entire working career.

When people ask me, “How much should I have for retirement?” the honest answer is: enough to fund three to four decades of living. That’s why simply “hoping it will work out” isn’t a strategy.

2. Inflation is quiet… until it isn’t

Everyone remembers the dramatic spikes, but few appreciate how damaging normal inflation is.

Let’s use very conservative numbers.

If inflation averages 2.5% a year, then:

• Your cost of living doubles every 28 years.

• 10,000 NIS of monthly expenses today equals 20,000 NIS in retirement.

This means:

• If you retire at 67 and live to 90, your monthly expenses could easily increase by 50–70% over your retirement period without your lifestyle changing at all.

Now add rising health costs, long-term care, and supporting children or grandchildren—and suddenly the gap between savings and needs becomes very real.

Without planning, inflation quietly eats away your pension until it’s too late to correct course.

3. The earlier you start, the less you need to save

This is where numbers become powerful.

If you save 1,500 NIS per month starting at age 30 and earn a modest 4% net annual return, you’ll reach age 67 with:

👉 ~1.5 million NIS

If you start the same plan at age 45?

👉 You end up with ~600,000 NIS

Same deposit. Same return. 900,000 NIS difference—just because one person started earlier.

And if you wait until 55?

👉 Only ~285,000 NIS

People often tell me, “I’ll start when things calm down financially.”But life rarely “calms down.” Kids, housing, mortgages, tuition, weddings… the list grows, not shrinks.

Retirement planning rewards consistency, not perfection.

4. Relying on Bituach Leumi is not a plan

Let’s be honest: Bituach Leumi is not designed to fund a full retirement.

As of 2025:

• A single retiree receives ~1,700–2,500 NIS per month.

• A couple receives ~3,400– 4,500 NIS per month.

Even with supplements, it will not cover a mortgage, rent, medical needs, or basic living.

I tell clients: treat Bituach Leumi as a bonus, not a foundation.

If your retirement plan collapses without it, then you don’t have a plan.

5. People underestimate how expensive retirement really is

Most clients assume they’ll spend less in retirement. Sometimes that’s true. Often it’s not.

Here’s what typically increases:

• Travel – many couples travel 2–3 times per year in their early retirement.

• Medical expenses – medications, treatments, specialists, private insurance upgrades.

• Support for children – helping with education, housing, or grandchildren.

• Home help – cleaning, carers, renovations to make the home accessible.

Even if your mortgage is paid off, the natural increase in expenses—from both lifestyle and inflation—typically means retirees spend around 85–100% of their pre-retirement income.

When you add healthcare and longevity, it’s often more.

6. Not organising your pensions can cost you tens of thousands

Many people have:

• Old pension accounts they forgot about

• Keren Hishtalmut funds sitting in default tracks

• Gemel or Menahalim with high fees

• Disability or life insurance that is outdated

• Investments that no longer reflect their age or goals

Real example (common situation):

A 40-year-old with multiple small pension accounts pays an average fee of 0.2–0.3% extra simply because accounts were never merged and optimized.

On a future pension balance of 1,500,000 NIS, that’s 3,000–4,500 NIS per year… every year… for 30–40 years.

Total loss?Somewhere between 100,000–150,000 NIS.

And it’s extremely common.

This is why retirement planning is not just about “saving more.” It’s about tightening the system—removing waste, reducing fees, consolidating accounts, and choosing investment tracks that make sense.

7. Your investment track matters more than almost anything else

People spend more time choosing a new phone than choosing their pension’s investment track. But the track can change everything.

Consider two 35-year-olds until retirement at 67:

Medium track (net 5% return):

• Monthly savings: 2,000 NIS

• Final balance: ~1.5 million NIS

Growth/Stocks track (net 8% return):

• Monthly savings: 2,000 NIS

• Final balance: ~3.1 million NIS

Difference: 1.6 million NIS Same person. Same contribution. Only the investment track changed.

Yes, higher-growth tracks fluctuate. But retirement is a 40-year journey. Volatility matters far less than long-term return.

This is why younger clients—who have decades ahead of them—benefit tremendously from growth-based tracks.

8. Retirement planning reduces stress—today, not just later

Most people think retirement planning is about the future. In reality, it brings peace of mind now.

Clients tell me all the time:

• “I finally know we’re on track.”

• “I know what I need to save.”

• “We have clarity.”

• “I feel responsible. I feel confident.”

Money stress doesn’t come from not having enough—it comes from not knowing.

Once you understand where you stand, what you need, and how to get there, financial anxiety drops dramatically.

9. The best time to start was yesterday. The second best time is today.

Retirement planning doesn’t require perfection.

It requires:

• A clear view of all your accounts

• A realistic projection of future needs

• A smart balance between investment growth and risk

• Low fees

• A plan for tax-efficient withdrawals

• Protection for your family (life + disability)

• Discipline over many years

You don’t have to do it alone.You just have to start.

The cost of waiting is enormous. The benefit of planning is life-changing.

Final Thought

Retirement is not the end of your financial life—it’s the longest, most expensive stage of it. The earlier you take control, the more freedom you create for yourself and your family.

A good plan removes uncertainty. A great plan creates options.

And the best time to build it is right now.