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Keren Hishtalmut, Kupat Gemel and Other Investments

Keren Hishtalmut

Years ago, a keren hishtalmut was given as a benefit to an employee so that he or she could accumulate money in order to undergo training in his or her respective field (hishtalmut means “further study”).  Somehow, the learning part got thrown out and it became a benefit that helps Israelis save for the short term.  This is not a mandatory benefit, like a pension, but a optional one.  Usually, for those who receive it, the employee pays 2.5% of his base salary and the employer pays in 7.5% of the base salary, all of which is put into a fund which opens after 6 years.  Once it opens, you can either take the money or continue to let it grow tax free.

(Note: For teachers, the amounts to pay for the employer and employee are 4.2% and 8.4% respectively.  In most cases, the teachers have to use some of the money for an actual training course and only then they can pocket the rest).

First things first – if your employer offers you a keren hishtalmut, take it!  Your employer is generously matching your input 3:1; that means you’re already seeing a 300% return before anything is invested.  Even if you need to borrow in order to forgo the 2.5% of your salary, it is almost always worth it.

How to choose a Keren Hishtalmut:

Choosing a hishtalmut isn’t so different from choosing any other type of investment.  You have to consider four things:

1 – Your needs:  When do you need the money and what for?  Can you afford the additional risk of an aggressive investment or should you stick to a conservative one?

2 – Your feeling about risk:  How do you feel about risk?  Do you have a strong opinion about the current state and future of the market?

Based on these you can answer:

3 – Type of investment:  What kind of fund do you want?  Like pensions, there are general funds, aggressive funds (more stocks), conservative funds (more bonds) and funds based on Haredi Halacha.

4 – Fees:  Pensions can charge up to 2% annually for managing your assets.  If you’re part of a union or big business, odds are you may have a significant discount if you go with a specific fund.  It goes without saying that anyone who signs up with me should expect to pay significantly below this amount.

You can check the status of any Keren Hishtalmut via the government website that overlooks them, gemel net.  Click here to go to gemel net (note: it only work in Internet Explorer)Click here for an explanation of how gemel net works.

Kuppot Gemel

Until pensions became the norm, kuppot gemel were offered as a mutual fund held until retirement.  if you don’t have one, you’re probably never going to.  If you have one, I’d be glad to help you review it and bring down the fees.