According to the Central Bureau of Statistics, each year about 70,000 people reach retirement age (women at age 62 and men at age 67). The expected life expectancy for 65-year-olds is about 20 years, and although this is a long and significant life period, financial conduct is not always adapted to the retiree’s situation.
In a study conducted in 2014 by the Sarid Institute for the Ministry of Social Equality, the economic ability of senior citizens was mapped. According to the study’s findings, while half of the elderly manage financially “easily” or “quite easily,” 30% reported some financial difficulty, and 20% claimed that they manage “with great difficulty,” as they put it.
Indeed, the retirement period entails great complexity that affects all aspects of life, with the need to adapt the new lifestyle to economic possibilities and make optimal decisions that will enable maximizing economic potential.
Why is the financial complexity great when retiring?
Upon completion of work and retirement, retirees rely on income that includes: pensions, old-age pensions and profits from investments and assets. The retiree’s income is expected to drop by almost half compared to the salary he received at work, and sometimes the income will be so low that it will significantly harm the standard of living to which the retiree was accustomed. For example, those who retire in recent years, who have a veteran pension fund, receive a monthly pension of only NIS 5,000 on average.
Alongside the change in sources of income, there will usually also be changes in the structure of expenditures—expenditure items change, as does their weight in the budget pie. In another survey conducted for the Ministry for Social Equality, it emerged that about a quarter of those over 55 define their main expenditure as general support for children and families. This figure emphasizes the growing economic difficulty of the elderly population, whose income is small on the one hand and on the other hand is required to support adult children.
There have also been changes in other expenditures, with the elderly population noting that it also spends significant expenses on health (18% of respondents), non-food purchases (17%), and housing expenses (rent, mortgage or assisted living – 15%). 9% spend most of their money on travel, 6% on cultural events and 5% on food.
3 Things to Do When Preparing for Retirement
- Start acting, start planning – the issues and decisions that need to be made are many and complex, but there is no choice but to start and deal with it.
- Understand the current situation – it is necessary to check the existing financial situation and the expected financial capabilities for the day after retirement. After understanding the situation, assessing the expected income, assets and expected expenditure structure, it will be possible to carry out economic planning for the future.
- Make informed decisions – As you approach retirement age, decisions must be made on issues of a desirable retirement date, pensions and old-age pensions, utilization of rights, handling income and investments, understanding the expected expenditure structure, leisure management, managing financial affairs within the family, and more. Some decisions are made with the authorities and determine the course of financial life for the day after retirement. Due to the complexity of some of the issues, it is necessary to obtain the necessary information at assistance centers for the elderly, on the Internet and with appropriate professionals.
Retirement preparation workshops are a great way to start and get the necessary information. Retirement preparation workshops, which were developed and operated in partnership with the Ministry of Social Equality, the Capital Market Authority, the National Insurance Institute, JDC-ESHEL and Paamonim, provide knowledge and practical tools that help make informed decisions for retirement. The content of the workshop enables in-depth group learning about sources of income during retirement, expected expenses, National Insurance Institute allowances, tracks for receiving an occupational pension, and employment opportunities for those aged 60+. The workshops have a small number of participants (up to 20) – in order to enable open dialogue, sharing of information and sharing of personal thoughts and feelings that accompany the person about to retire.