Your Investments: Do you have enough income to retire?

With proper planning, you can enjoy your retirement in Israel and help out your children at the same time.

By AARON KATSMAN
I recently met with an older couple who wanted to know if they could have a comfortable retirement without eating into their savings. They wanted to live off the interest of their savings while helping out some of their children who were struggling financially.
The relevance of this issue is increasing as more people retire to Israel to be closer to their children. Very often, these children have large families of their own. As we know, in Israel, it’s very difficult for families to put away money for savings, even if they have good paying jobs. The parents would like to help their children, but they aren’t sure if they are financially able to do so.
Your assets
The first step that a retired couple in this situation needs to take is to review their investment portfolio. The aforementioned couple had plenty of assets, but these assets were not working efficiently for them. More than a third of their sizable portfolio was in cash, earning less than one percent a year. This couple had quite a few large-cap stocks that were shooting off dividends, and they had real estate that was not being rented out.
In terms of income, this couple lived off their social security and the dividends they received from the stocks. After looking into their assets thoroughly, it emerged that if they could just get a better interest rate on their cash, they would have plenty of money left over to help out their children. It goes without saying that they needed to rent out or sell their property rather than leave it empty.
Welcome to Israel
When a couple retires to Israel, they will often find that their expenses are different. It is therefore important to sit down and make a realistic new plan based on these changes. While many financial planners estimate that expenses drop by about 20% once a person retires, couples who have lived abroad their entire lives often find that their expenses rise when they move to another country.
Upon retiring, people find themselves with more free time, and they may want to use it for travel, eating out and other leisure activities. In fact, the more time a person has available, the greater the chances that he will spend more money. And let’s not forget the trips back to their country of origin to see their grandchildren and other family members.
Your income
Once the couple has worked out their possible expenses, a similar calculation of future income should be made. This should include any retirement and pension plans, income from investments and other sources of revenue. At this point it would be a good idea to find out the exact amount your children might need to supplement their income.
It is important to get a specific number. Leaving such sums open-ended doesn’t help either side. It’s no good for the retirees because they need to know how much money they need to generate for living, and it’s bad for the children because they have no responsibility.
Taking stock
Once you have an idea of how much money you need, take a look at your investment portfolio. Try and figure out if you can generate enough income from it to live on and help out your children. If not, any changes necessary to increase income should be made.
It may be worthwhile consulting with a financial adviser at this stage to help make your portfolio more efficient and generate the income needed to achieve your goals. An adviser may be aware of certain products available to help you squeeze out more income without eating into your principal.
With proper planning, you can enjoy your retirement in Israel and help out your children at the same time.
aaron@lighthousecapital.co.il
Aaron Katsman, a licensed financial adviser in Israel and the United States, helps people with US investment accounts.