Calculate your Keren Hishtalmut (study fund) accumulation in Israel 2025. Employee contributes 2.5% and employer contributes 7.5% of salary. Tax-free withdrawal after 6 years.
Enter your monthly salary, employer contribution rate, and years to see your projected Keren Hishtalmut fund value at tax-free withdrawal after 6 years.
Total fund value
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Employee contributions
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Employer contributions
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Investment growth
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Tax saved on withdrawal
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Your breakdown
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How the Keren Hishtalmut works in practice
Each month, the employee contributes 2.5% of their salary and the employer contributes a negotiated rate, commonly 7.5%, into a managed investment fund (usually a mutual fund or insurance-company fund). The combined 10% monthly contribution grows with market returns. After 6 years, the entire accumulated balance including gains can be withdrawn free of any capital gains or income tax. This makes the effective after-tax return substantially higher than a comparable taxable savings account. Many Israeli employees treat the 6-year cycle as a recurring savings mechanism, withdrawing at the 6-year mark and restarting.
Worked example: 15,000 ILS salary for 6 years at 6 percent return
Monthly salary: 15,000 ILS. Employee contribution: 2.5% = 375 ILS per month. Employer contribution: 7.5% = 1,125 ILS per month. Combined: 1,500 ILS per month. Over 72 months at 6% annual return (0.5% per month), the fund grows to approximately 125,000 ILS. Total contributions are 108,000 ILS (72 multiplied by 1,500). Investment growth accounts for roughly 17,000 ILS. If this gain had been taxed at 25%, the tax saving is approximately 4,250 ILS. The entire 125,000 ILS is withdrawn tax-free after 6 years.
Limitations and what is not modeled here
This calculator uses simplified monthly compounding and does not model the salary ceiling (approximately 15,712 ILS per month in 2025) above which the employer tax benefit is capped. It does not account for salary growth over time, changes in contribution rates, fund management fees (typically 0.5% to 1.5% annually), or early withdrawal penalties. The tax saved on withdrawal is estimated as 25% of the investment gain portion only, since contributions themselves are from after-tax salary and are not taxed again on withdrawal. For a precise figure, consult the fund manager or an Israeli pension advisor (Yoetz Pensiya).
Frequently asked questions
What is a Keren Hishtalmut and how does it work in Israel?
A Keren Hishtalmut (study fund) is a savings vehicle unique to Israel that combines employer and employee contributions into a managed fund. Employees contribute 2.5% of their monthly salary and employers contribute 7.5%, making a combined 10% monthly contribution. After 6 years, the accumulated fund can be withdrawn completely tax-free, including all investment gains. Before 6 years, withdrawals are taxable. Because of the tax-free growth and withdrawal, the Keren Hishtalmut is one of the most tax-efficient savings instruments available to Israeli employees.
Is there a salary ceiling for Keren Hishtalmut contributions in Israel?
Yes. The tax exemption on Keren Hishtalmut contributions only applies up to a defined salary ceiling. For 2025, the ceiling is approximately 15,712 ILS per month. Employer contributions above this ceiling are treated as taxable employment income. Employee contributions above the ceiling are made from after-tax salary and the corresponding withdrawal amount may be partially taxable. For high earners above the ceiling, the excess portion still grows in the fund but loses the tax-free treatment on the employer-side excess.
What happens if I withdraw from Keren Hishtalmut before 6 years?
Early withdrawal before 6 years triggers taxation on the investment gains at 25% capital gains tax. The principal (your own contributions) is returned tax-free since it was contributed from after-tax salary. Employer contributions that benefited from tax exemption at the time of contribution may also face tax treatment on withdrawal. After the 6-year mark, all withdrawals including gains are completely tax-free regardless of the reason for withdrawal.
How does the Keren Hishtalmut compare to pension savings in Israel?
Keren Hishtalmut and compulsory pension (Keren Pensia) serve different purposes. Pension contributions are mandatory (employer 6.5% plus employee 6% under the Mandatory Pension Law 2008, with an additional 8.33% severance component) and are locked until retirement. Keren Hishtalmut is voluntary (though often part of employment agreements) and can be accessed tax-free after just 6 years for any purpose, not just retirement. For liquidity, the Keren Hishtalmut is more flexible. For retirement income security, pension savings are more important.