Israel Retirement Income (Drawdown) Calculator 2025
Calculate monthly retirement income from your Israeli pension pot. Uses annuity formula and 4% rule. Shows annual withdrawal, pot depletion timeline, and real purchasing power after inflation.
Enter your pension pot, expected return, and withdrawal years to estimate your monthly retirement income and how long the pot will last.
Monthly income (4% rule)
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Annual withdrawal (4% rule)
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Portfolio in 20 years (annuity)
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Real monthly (after 2% inflation)
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Years before depletion
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Your breakdown
Updates live as you type
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Amount
The annuity formula vs the 4 percent rule
The annuity formula calculates the monthly payment that exactly depletes a pot over a specific number of years, accounting for the ongoing return earned by the remaining balance. The formula is: pot multiplied by (monthly rate multiplied by (1 plus monthly rate) to the power of months) divided by ((1 plus monthly rate) to the power of months minus 1). For a 2-million ILS pot at 5% over 25 years, this gives approximately 11,700 ILS per month. The 4% rule is simpler: withdraw 4% of the pot per year (167,000 ILS for a 2M pot), or 13,888 ILS per month. The 4% rule is more generous because it assumes the pot continues to grow and historically the portfolio does not get fully depleted.
How to estimate your real purchasing power in retirement
Nominal monthly income erodes over time due to inflation. At 2% annual inflation (a conservative assumption for Israel, which has experienced higher inflation in recent years), the real purchasing power of a fixed monthly income halves approximately every 35 years. The real monthly figure shown here is the nominal monthly income deflated by 20 years of 2% inflation (a factor of 1.02 to the power of 20, approximately 1.486). This gives a sense of what the same nominal income will buy in 20 years. Israeli retirees who receive a CPI-linked pension annuity do not face this erosion, but those drawing from a fixed-nominal pot should budget for inflation erosion.
What this calculator does not model
This calculator uses deterministic inputs and does not model sequence-of-returns risk, where a market downturn early in retirement can permanently damage withdrawal sustainability even if long-run average returns are as expected. It does not model tax on pension income, which varies by individual circumstances in Israel. It does not include the Old Age Allowance from Bituach Leumi, which provides a base income to all eligible Israeli residents and effectively reduces the pot withdrawal needed to meet minimum expenses. For comprehensive retirement planning, consult an Israeli pension advisor (Yoetz Pensiya) licensed by the Capital Markets, Insurance and Savings Authority.
Frequently asked questions
How much monthly income can I draw from my Israeli pension pot?
Monthly income depends on the pot size, the withdrawal rate, and how long it needs to last. Three common approaches are: (1) the 4 percent rule, which suggests withdrawing 4% of the pot annually; (2) a fixed-period annuity, which divides the pot by an annuity factor for the expected drawdown years; and (3) a lifelong annuity from the pension fund, which uses actuarial tables. For a 2-million ILS pot over 20 years at 5% return, the monthly income using the annuity formula is approximately 13,200 ILS. Using the 4% rule, it is 6,667 ILS per month (2,000,000 multiplied by 0.04 divided by 12).
What happens to my Israeli pension pot if I live longer than expected?
This is the longevity risk. Israeli compulsory pension funds (Keren Pensia) offer a lifelong annuity that continues for the retiree’s entire life regardless of how long they live, funded by pooling across all fund members. If you draw from a personal investment pot (provident fund, savings, Keren Hishtalmut proceeds), you bear the risk yourself. For a pot with a fixed 20-year depletion plan, living beyond 20 years means running out of money. This is why Israeli policy emphasizes converting pension savings into lifelong annuities rather than lump-sum withdrawals, and why the Mandatory Pension Law requires annuitization of most pension savings above a minimum threshold.
Is Israeli pension income taxable at retirement?
Pension income from an approved pension fund (Keren Pensia) is generally taxable as ordinary income in Israel at the retiree’s marginal income tax rate. However, significant exemptions exist for retirees. Israelis over 67 (men) or 65 (women) receive an age credit that reduces their effective tax rate substantially. Additionally, a portion of pension income is tax-exempt based on the number of years of contributions. In practice, most Israeli retirees with a moderate pension pay very little or no income tax due to the combination of the age credit, the exemption rules, and the relatively lower brackets at typical pension income levels.
What is a safe withdrawal rate for an Israeli retiree?
The 4% rule originated from US historical data and may require adjustment for Israeli conditions. Key differences include: higher Israeli inflation historically than US, smaller local equity market (TASE), different bond yields relative to inflation, and the specific characteristics of Israeli pension fund investment tracks. A more conservative 3% to 3.5% withdrawal rate is sometimes recommended for Israeli retirees who are concerned about sequence-of-returns risk or high inflation periods. Conversely, retirees with substantial compulsory pension annuity income in addition to personal savings can afford a higher withdrawal rate from the personal savings component since the annuity covers baseline expenses.