Is Early Retirement A Feasible Dream For Parents Today?

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Is Early Retirement A Feasible Dream For Parents Today?

Failing to prepare is preparing to fail. This common quote by Benjamin Franklin is used in many contexts from succeeding in your academic life to keeping your finances as a family in check and it often rings true. For many families in Israel and in fact, around the world, the juggling act of keeping their family afloat financially is a full-time act and revolves around staying up to date with bills and keeping abreast with rising costs of living including costs of raising children. Although the country is viewed as a very promising place to raise kids, there are still costs attached to it. For those parents, when early retirement is thrown into the mix it can all go a bit awry. Is there space in a family’s budget to allow busy parents to prepare for leaving the workforce earlier? More importantly, what are the steps they can take to carve out retirement savings, even with a full financial calendar?

Unraveling The Barriers For Israeli Families When Saving For Early Retirement

The popularity of Israel as a retirement location has soared in recent years among expats and those looking to experience adventures abroad. Yet, local residents still earn about one-third of their US counterparts when it comes to salary and end up spending more than their earnings. In June 2018 the average monthly salary was estimated at NIS10,884, according to the Central Bureau Of Statistics. However, two-thirds of those in the working force were earning less than the general average which further highlights the increasing importance for parents to look for ways to get finances aligned with retiring early.

Dating back as early as 2014, families were documented to be spending more than they earn by an average of NIS864 each month with the exception of Arabic households who exceed their income by NIS1,919. This was attributed to a steady increase in both housing and food prices. The country saw a whopping 0.9 percent rise in real estate prices for May-June 2018; the steepest since 2016. Meanwhile, oil prices rose 4.5 percent and food prices remain high, even with some recent respite in 2018. All of these factors combined have placed increased pressure on the incomes of parents and as a result, led to minimal savings not just for retirement but for emergencies and unexpected events. With a typical retirement becoming more difficult, leaving the workforce before the allotted age and living comfortably in your retirement takes consistent planning and saving habits, spanning years and throughout your child’s life.

How Can Parents Get Started? Get Smart When Shopping Early On

For parents looking to save for early retirement, they must first identify places they can carve out these savings and do so early enough for it to make a difference. One of the very first places they can do so is in their household spending, particularly their food budget. In every household, the proportion of the budget sent on food is significant, coming after rent and utility bills. Adopting savvy food shopping and storage habits can save you a good amount which can then be stored away for your later years. Consider heading out to your local market (Shuk) later on in the day such as Friday afternoons. Around this time, vendors will be reducing their produce as it approaches closing time and you can save as much as 50 percent on the sticker price but still feed your family fresh, wholesome fruit and vegetables.

When you do decide to head out shopping, always make sure to head out armed with a list. This reduces impulse buys and if you correlate it to what you have at home, you can reduce wastage and plan your meals for the week ahead. Finally, take a trip to outlet stores once a month to stock up on household essentials. They are heavily discounted here while convenience and neighborhood stores tend to mark up their products a bit more. Non-perishables such as beans, rice, and tinned produce can be a great buy in bulk while fresh produce can last longer when prepped and freezer stored.

Explore Supplementary Retirement Options

If you are between ages 62 and the set retirement age (67 for men and 62 for women), then you will be limited to 45 hours of work each month in addition to your social benefits. Therefore your access to benefits can be a bit limited by retiring early. However, there are ways around this and they include investing in a private individual retirement plan in addition to what is offered by your employer. Some people choose to invest their savings into long term opportunities such as treasury bonds when planning ahead while others opt to build their portfolio in other ways such as real estate or savings accounts.

Above all, the key is to begin these habits earlier rather than later. Achieving early retirement takes decades to achieve and stems from a commitment to financial habits that will carve out additional savings you need to put away each month even if it is 500 shekels each month. Finally, your retirement fund should remain untouched and only be built upon. To address this, an emergency fund should be an important part of every family’s financial plan throughout their lives.