How to become a successful pensioner

The first step in smart retirement planning is examining your current and future sources of income, and your rights, including eligibility for certain tax breaks.

July 24, 2019 21:16
4 minute read.
Senior Israelis play table tennis as they take part in games for people over 65 years old, organized

Senior Israelis play table tennis as they take part in games for people over 65 years old, organized by a nursing home in Tel Aviv. (photo credit: BAZ RATNER/REUTERS)

More than 70,000 people in Israel retire every year, according to the Central Bureau of Statistics.
Ending one’s working career can be complex, and requires careful attention in order to successfully adapt to this new reality.
Further, as people live longer, they incur greater medical expenses. It is an unfortunate understanding, that while the expenses of retirees continue to rise, their pension income remains the same.
There is a reason for this increasing gap: Many benefits previously paid to a person within the context of work, such as a car, telephone and meal expenses, are no longer provided after retirement, and alternate means of funding must be found. Many retirees are full-time grandparents, with all the financial expenses involved. Additionally, retired people stay at home more, and there is a corresponding increase in heating and air conditioning costs, and other daily expenses.
On the other hand, retirees have more free time for leisure activities that require additional financial expenditures, such as touring, both in Israel and abroad, attending plays, and eating in restaurants.
But that’s just the beginning. Retirees see a significant increase in medical and related expenditures.  This applies whether they continue to live at home with the assistance of caregivers and expensive assistive equipment, or whether they move to a private nursing home.
Medical and basic living support expenses can quickly turn into a major financial burden for most people who are living off a standard pension.
What can be done?
In order not to be caught unprepared, the first step is to prepare in advance for your retirement – understand your pension status, your rights and to what you are entitled from your workplace and other funds.
Consider that the structure of your family’s expenses is expected to change. Therefore, you need to be prepared to reevaluate your economic needs in order to maintain a reasonable standard of living for the years ahead.  It is important to set goals in advance, and to determine the sources of income you can tap into in order to achieve these goals.
Most important, choose a professional, independent financial advisor who will accompany you throughout the retirement period.
You can meet with retirement consultants at Bank HaPoalim’s pension consulting centers throughout the country, and at the National Pension Consulting Center, which is opening this month at the Sasson Hugi Tower in the Diamond Exchange complex in Ramat Gan.
As you work to recalculate your new financial track, there is a is the need to plan for both recurring  and one-time expenses using existing financial sources and with the understanding of your future sources of income. Over the years, you deposited money, together with your employer, or independently in a variety of channels. Now, it is critical to understand the location of these funds and how much money is available from each source, bearing in mind the issue of taxes and tax benefits to which you are entitled, in order to create proper tax planning that can be expressed in significant financial savings.
Remember — only by providing a full and complete picture of of your financial resources will you be able to make the proper decisions regarding the use of these funds over time.
Retirement planning in stages
Intelligent retirement planning requires three critical steps, the first of which is meeting with an unbiased, objective pension consultant. In preparation for the meeting, the advisor will gather information from the pension clearinghouse of the Ministry of Finance pension regarding the financial resources at your disposal.
In the second phase, to be carried out three months before retirement, ask your employer for a retirement simulation, including reference to redemption of sick days, vacation and severance pay. This simulation will provide you with an estimate of the amounts that you can receive when you stop working.
The third phase of retirement planning will begin about a month after you have finished working, when your employer will give you Form 161 for the assessing officer, which details your grants and compensation, as well as a letter of release for your long-term savings plan. At this point, you need to decide what to do with the funds listed on this form. Based on the decisions you have made, you need to fill out the forms, bring it to the assessing officer, and receive approvals for tax coordination and deductions.
This process is very complex and requires considerable understanding. As such,  it is recommended and important to go through this process with the assistance of an independent pension consultant, who is expert in retirement issues. Doing so will not only save large sums of money but will make things much easier as you deal with all the new ‘actors’ in your retirement life.
The Jerusalem Post  in cooperation with Bank Hapoalim, is sponsoring a special section in the newspaper that will focus on the challenges and important decisions that must be made before retirement and offers tips for proper management of pension planning before retirement.
Clarification: The bank is not a tax adviser. The above constitutes information and general explanation only, which does not constitute pension advice, investment advice or tax advice, nor is it a substitute for personal advice provided subject to the provisions of the law.

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