The Longevity and Money Revolution: How to Prepare Your Wallet for a Long Life | Shlomo Maoz
Israeli seniors are living longer, but are also suffering more from diseases such as dementia and Alzheimer's. The sharp rise in life expectancy requires financial resources that are not always available. Pension savings can be the difference between welfare and need.
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The life expectancy revolution in Israel continues: the life expectancy of 67-year-old men, the retirement age reached by most, has reached 18.4 years, while the life expectancy of 62-year-old women stands at 25.2 years according to the latest CBS data.
Old age is 65 and over, and advanced old age is 85 and over. The life expectancy of 85-year-old Jewish men reaches 6.9 years and for 85-year-old Jewish women 7.6 years. These figures can be attributed to Israel's excellent healthcare system, among the best in the world; the decline in smoking; the rise in education levels; and the new norm developing to prevent loneliness through "second-chapter relationships," as some claim that loneliness shortens life expectancy just like smoking cigarettes.
Life expectancy for the entire population has risen over the last 50 years by between 10 and 12 years. In every generation, there is an increase in life expectancy of about six years — six years more than the parents and another 12 years more than the grandparents. This addition requires more and more financial resources for old age. Careful financial planning is required. And while science manages to deal well with some diseases, we encounter simultaneously, due to the rise in life expectancy, diseases that most of the public did not suffer from before, such as dementia.
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Between 1996 and 2022, the rate of deaths from cancer dropped from 248.6 to 164.9 per hundred thousand people; deaths from heart disease dropped from 197.4 to 49.4; deaths due to diabetes from 52.3 to 35.7; deaths from cerebrovascular diseases from 119.6 to 29.8. These data are a commendation to Israeli medicine. Only in infectious diseases was there an increase from 20.2 to 36.5 per hundred thousand, mainly due to antibiotic resistance and hospital bed density.
Longevity brings an encounter with dementia, which was previously considered rare. Deaths from dementia rose in 2022 to a rate of 8.3 per 100,000 compared to only 2.3 in 1998 — a jump of 263%. The rise in life expectancy also brings an increase in deaths from Alzheimer's disease (an increase of 65%).
These diseases place a heavy burden on families. At age 65, women are expected to live 11 years in a partially poor health condition, and men 7.6 years in a partially poor functional condition. A frail elderly person will require the family to set aside an average monthly sum of 35,000 shekels to maintain their dignity.
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Families may go bankrupt in their attempts to maintain the dignity of the elderly. The Ministry of Finance, lacking resources due to the war, is looking for ways to save on expenses, and the next plan is to reduce benefits for those saving for retirement. The Treasury hopes to save 3 billion shekels a year through a complete reform in pension savings.
The Treasury is considering reducing the mandatory pension contribution from 18.5% of the salary to 14%. Net income will rise immediately, but the future pension will drop. There is also an intention to reduce tax exemptions on capital gains in pensions and cancel benefits under Amendment 190. What should the public do? Starting from your 50s, increase private savings, insist on the right to a training fund ("keren hishtalmut"), and delay retirement as much as possible.
Learning and professional training relevant to the dynamic Israeli economy is essential. If the employer retires you, look in advance for an alternative workplace or become self-employed. In Israel, there are about 487,000 self-employed, and if you are your own employer, no one can fire you — but persistence and self-discipline are needed.
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Investing savings in the capital market is essential for increasing the family's equity. The fearful prefer overly solid channels with low returns, which do not cover the needs of a population whose life expectancy is rising non-stop. Everyone must learn as much as they can about the capital market, consult with licensed advisors, and take a risk to increase the capital you will need. Do not waste the money you have accumulated on show-off decorations. It is better to invest in preserving the brain by learning languages and dealing with technological challenges.
About 34% of those 65 and over feel loneliness. The dilemma will be between staying within the family you have helped throughout your life, or moving to protected housing at a cost of hundreds of thousands of shekels a year. Have you deepened your digital literacy? Have you invested correctly? Isn't it time to delve into the secrets of the capital market before, God forbid, you get dementia?
