Keren Hishtalmut

What is a Keren Hishtalmut?

Keren Hishtalmut is a six year tax free (almost) savings plan. The returns on these plans are generally good, but past performance does not guarantee future performance.

You can take a percentage up to 10% off your income, it’s non-taxable when deposited, and the interest/capital gains are tax-free as well (I.e. it’s non-taxable when withdrawn as well).
It is “Financially Smarter” to try to maximize your contribution each year, based on your income figures (speak to your accountant or tax adviser). It may even be worth taking a loan to put into the Keren Hishtalmut – the interest will be low, and the more than covered by the immediate tax benefit.

You can withdraw from the Keren Hishtalmut after 3 years,for an educational purpose – professional conference fees, or similar, and after 6 years for any purpose.

Why would I open a Keren Hishtalmut?

If you are employed this may be a benefit your employer offers you. You therefore open it as an “employee” or Sachir in Hebrew.
This is a work benefit as the employee generally pays in 2.5% of their salary and the other 7.5 % is an “extra” from your employer above the gross salary you agreed upon.

If you are self employed you can deposit up to 7% ( the first 2.5% are not tax deductible)

Who does this for you?

Normally this is done via an insurance agent.

Which Fund?

You get to choose any fund you’d like. An licensed agent can help

You can look up and compare all the funds on this Ministry of FInance web site.press here to link to site

Where can I find a licensed agent?

Most insurance agents are able to advise or just “sell” you these funds.
There are also independent advisers who don’t sell any specific fund, not too many of those around….but they do exist.

Why this is financially smarter?

1 If you are employed its free money from your employer
2. You don’t pay tax on every NIS you put in (depending on your tax rate and if you are self employed or not)
3. Exempt from capital gains tax
4. Its a savings plan that historically grows well, last year these funds averaged 5 %
With those 4 reasons – how could that not be financially smart?

Please check for up to date details with your agent or accountant before investing.