If you’re an employee, saving for retirement is simply something that happens in the background without your involvement. Your employer sends the money beyond the dark mountains, and every so often an email lands in your inbox with a report that looks like a logic puzzle in a foreign language. So you don’t touch the report. It sounds reasonable, until you realize that your pension is the largest savings you’ll have in your life, and the difference between someone who manages their pension and someone who doesn’t can amount to hundreds of thousands of shekels at retirement. <\/p>\n
This is your money! Not the government’s, not some external entity’s, but truly an asset that belongs to you. <\/strong><\/p>\n A pension is long-term savings designed to provide you with a monthly income the day you stop working. Every month, part of your salary (and part of your employer’s budget) is deposited into a pension fund, which is a kind of large pool that invests your money over the years, so that it doesn’t just accumulate but also grows. <\/p>\n When you reach retirement age, this fund will pay you a monthly allowance, like a salary, only without having to show up for work.<\/p>\n How much will you receive in pension? It depends on how much you saved, how many years, and under what conditions. And this is exactly where your control comes in. <\/strong><\/p>\n It’s important to know that besides saving for the future, your pension also includes an insurance layer for the present: insurance in case you lose the ability to work (disability or “disability pension”), and insurance that protects your family if something happens to you (“survivors insurance”). In other words, a pension is not just money for old age but a financial safety net starting now. <\/p>\n Wait, what do you want from me? Can you even “manage” your pension? Yes. And it’s not complicated. Whether you’re an employee or self-employed, you have much more control over your pension than insurance companies and agents want you to know. <\/p>\n <\/p>\n Pension savings is the largest savings you’ll have throughout your life.<\/p>\n Your pension is an asset that belongs to you, and proper, active management on your part can add hundreds of thousands of shekels to your pension savings!<\/p>\n How will you manage your pension so you earn more from it? – Keep reading <\/p>\n <\/p>\n The first step is to locate your money. Most people don’t even know which company manages their pension, or if they have several different funds, some of which are old and quiet and continue to charge outrageous management fees. Where do you find this information? Get a report from the Pension Clearinghouse<\/a>, an action that takes about ten minutes online, and see all your savings in one place. This is the most important step in managing your pension. Once you have it, everything else is simple.<\/strong> <\/p>\n Employees deposit into their pension through work. But you can influence how much goes in there. The default is 6% of gross salary, but you can request to increase the pension deposit to 7%. This may sound negligible, but over the years it can add hundreds of shekels to the monthly allowance you’ll receive in the future. In fact, the fact that you’ll barely notice this money not coming out of your salary is the main reason to take advantage of this option. A tiny change that won’t affect your life today is expected to lead to a much more noticeable change in your pension. <\/p>\n For example: For someone earning 10,000 NIS gross, the net difference will be an additional 100 NIS per month invested. Over 30 years, this money is expected to accumulate to 100,000 NIS, and the money deposited and invested by the employee is only 36,000 NIS out of the 100. <\/p>\n Self-employed? The law also requires you to save for retirement, but the responsibility is yours. To decide how much to save each month, you’ll need to consider the minimum you’re required to deposit by law, and the maximum on which you’ll receive a tax benefit from the government (in the form of a recognized expense). I highly recommend consulting with your accountant and only then setting up a standing order, so that the savings happen automatically. <\/p>\n Important point for the self-employed: It’s better to make the pension deposit as a standing order, otherwise the insurance parts of the pension (survivors insurance and disability insurance) are not valid!<\/p>\n And here’s the surprising news: management fees in pensions are completely negotiable. Pension companies charge a certain percentage from your monthly deposit (“management fees from deposits”) and another percentage from the money you’ve accumulated (“management fees from accumulation\/savings”). The gaps between the management fees of different people can be enormous, just because some negotiated and some didn’t. <\/p>\n Remember – the service you’ll receive is completely identical, even if you pay less.<\/strong><\/p>\n If you’re paying more than 0.22% from accumulation and 1% from deposits<\/a>, you’re being too generous with the pension companies. Check the report you receive, see how much you’re paying (there’s even a comic bubble there that compares your payment to the average payment), and call to request a reduction if you’re above average. If the representative says “no” – call again in another week. Or threaten to leave. It works. A few such calls can be worth hundreds of thousands of shekels to you by retirement. <\/p>\n The money in your pension belongs to you, so you decide what type of investment to put it in. Every pension fund invests your money in different tracks: some with a tendency to increase in value faster (with the risk of sudden value drops) and some more stable (but with less potential to grow). If you didn’t choose yourself, you’re probably in an age-dependent track, which is a reasonable solution, but not necessarily the most suitable for you. <\/p>\n On sites like My Gemel Net<\/a>, you can compare the performance of different tracks and see what suits you (always compare at least five years back!). You can easily switch tracks through the pension fund’s website or with the help of an insurance agent. <\/p>\n Your pension also includes survivors insurance in case of your death (which provides monthly payments to spouses and children) and disability insurance (the insurance will replace your salary). But if you’re single without children or dependent parents, your survivors insurance may be insuring\u2026 air. In such a case, you can request to temporarily cancel the survivors insurance and save the cost, so the money goes into the pension savings itself. When you get married or when your family expands, don’t forget to reactivate the insurance! <\/p>\n If you have several pension funds, consider consolidating them. This can reduce management fees, and mainly increase your bargaining power with the insurance company. Along the way, management and tracking in one place will be easier. In the Clearinghouse report<\/a>, you’ll see exactly where all the funds are located, and then you can contact your active company and request to transfer all the rest to it. <\/p>\n Important clarification – if you have pension funds of different types, you must consult with an agent before making such a move!<\/strong><\/p>\n <\/p>\n
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What’s the principle here?<\/strong><\/h2>\n
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Here are a few steps that will help you manage your pension:<\/strong><\/h2>\n
Find out what you have and where<\/strong><\/h2>\n
Check how much you’re saving<\/strong><\/h2>\n
Pay less – and get exactly the same thing (negotiate management fees)<\/strong><\/h2>\n
Choose where to invest your money<\/strong><\/h2>\n
Cancel unnecessary insurance<\/strong><\/h2>\n
Consolidate what’s scattered<\/strong><\/h2>\n
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Step by step<\/strong><\/h2>\n