Early retirement is the decision to retire prior to the age of retirement prescribed by law: 67 for men and 65 for women. You can retire as early as at age 60, but there are a lot of parameters that you have to take into account so as not to lose money.
Retirement planning is a financial “super-strategy” preparing you for retirement age and allowing you to optimally utilize all your financial assets: pension savings, provident and study funds, various funds, investment money, et cetera. The first and paramount stage of planning your retirement, which deeply affects the effectiveness of planning your retirement, is knowing when to retire.
To deal with early retirement, one has to have extensive knowledge and familiarity with factors that are constantly changing: taxation of pension savings and tax reforms, laws and regulations, bureaucratic procedures and forms, market fluctuations, tedious bureaucracies and form-filling, and many other factors directly affecting your finances.
Our team of experts at Kali will conduct strategic brainstorming, which on the one hand has an understanding of all the minutiae and on the other perceives all the complexities: we will meticulously consider the smallest of details to create a strong and well-reasoned early retirement plan with minimal losses.
Your primary source of income in early retirement will usually be your pension. Therefore, it’s imperative that you gain an in-depth understanding of your arrangement with your employer, of taxation issues, of specific agreements in your labor contract, et cetera.
It’s important that you check your entitlement to additional bonuses from your employer, beyond the pension rights you accrued over the course of your work. You should read your labor contract or your collective bargaining agreement to review the terms of your end of work and/or retirement.
Thus, for example, the types of possible bonuses to be paid on retiring, which you can easily overlook if you don’t pay attention, include pay in lieu of sick days, supplementation to the compensation you accrued under your plans, adjustment bonus, early notice bonus, special retirement bonus, et cetera.
These bonuses have to be included in the summary of the rights available to you on retiring so as to maximize the tax benefits you are due. You should remember that there are sometimes special cases in which the employer grants unique benefits upon early retirement, including payment of a monthly pension for a limited period.
Concurrently, we will discover and investigate the entirety of the rights related to your retirement model and all types of pension savings: provident funds, study funds, investment portfolio, pensions from National Insurance, future inheritances, a rental apartment, et cetera.
Another source is an old-age pension of approximately NIS 2000 in average. The old-age pension can be received only upon reaching the age of retirement prescribed by law and according to an income criterion.
Early retirement affects the amount of the pension, especially when your retirement arrangement provides that payments to your pension fund will no longer be made. At a rough estimate, for each year by which receipt of the pension has been accelerated, the pension decreases by a rate of 6%-7%.
If, for example, you have selected a monthly pension track, you have to decide the best exact time to start receiving the pension. On the one hand, postponing the receipt of the pension can lead to an increase of the monthly pension, but on the other it can lead to the loss of the pension’s payment as from today – a loss which could sometimes be higher than the increment obtained by postponing the pension.
There are also many important decisions that need to be made: Which plans will the monthly pension come out of so the money does the most for you? Which amounts would you prefer to receive as lump sums? Should certain amounts be redeemed now? Should the money be kept in the current plan or perhaps moved to another plan?
Early retirement has financial implications related to taxation: payments to Income Tax, National Insurance, health fees with benefits becoming effective only at retirement age. National insurance fees and health fees must be paid, with a certain reduction up to a limit.
Additionally, the pension is taxed with income tax according to the tax brackets. This is significant taxation which you have to know in order to understand the entirety of your sources of income. On the other hand, there are also the tax benefits you are due thanks to credit points, a recognized pension, exemptions that can be utilized, et cetera.
It may feel like your expenses will decrease once you retire. But that is not always the case. Freedom and this new stage in life brings with it new expenses: classes and activities, gifts for your grandchildren, trips abroad, new expenses resulting from more free time, health-related expenses, as well as high expenses such as helping your children purchase an apartment, employing a foreign caregiver, renovating your home, et cetera.
To calculate the amount of the monthly pension required for financing your post-retirement life, you have to calculate your expected expenses, taking heed of your aspirations in the aspects of your quality of life, your children’s status, the state of your health, et cetera. You have to consider whether there is a gap between your expectations and your reality and accordingly pinpoint the best time to retire and how to use your money in the way that’s right for you.
Kali’s experts will make an early retirement plan for you based on a personalized strategy tailored to your personal goals and to your present and future financial snapshot.