Increase in life expectancy and its consequences

Life expectancy continues to rise in the world and of course also here in Israel. In the future there will be more elderly people among our population, retirees who will want to continue to maintain their standard of living as it was during their working years.

How do you calculate life expectancy?

In the various religions there are two dates that are clearly referenced, birth and death. Since ancient times, the synagogues and churches have been engaged in the registration of the children who were born, and the registration of all the deceased who were brought for burial. This record was the first demographic information for calculating life expectancy. The definition of life expectancy determines how many years people born in a certain year have left to live on average. Today, of course, the statistical information is much better than before and is updated from time to time. In Israel, which is located in a high place in the world, the life expectancy of a man is over 80 years, and over 84 years for a woman.

How will the pension industry be affected over her life expectancy?

In the past, the average person would enter the workforce at the beginning of their twenties, would work for about 40+ years, and upon retirement, would leave with an accumulated amount of money that should actuarially be enough for them for 12 years. That is, the contributions from the salary were for 40 years and were supposed to be enough for 12 years of living. Today, young people are in no hurry to enter the workforce, and start saving for retirement only towards the end of their twenties. They may also work for 40 years, but should live in retirement on average much longer than before, 20 or even 30 years. That is, the total pension contributions will need to be much higher than before in order for a person to be able to maintain the standard of living.

What to do?

First of all, we understand that the pension provisions are an important and main asset for us, we make sure to manage them correctly, together with a professional over the years in order to maximize them at retirement age. We also understand that there is a need for additional savings that will join the pension savings in the future and will be able to supplement the income for the many years we will live. For example: also see the training fund as a long-term savings tool and not a short-term one.

In conclusion

We all want and hope to live many years in good health and peace, and we would also like to make sure that after retirement age we can continue to fulfill our dreams and maintain the standard of living to which we have become accustomed. For this purpose we need to plan our savings better, especially as life expectancy continues to increase.

Written by Ariel Monin. Published in the Jerusalem News newspaper on December 4, 2019