Let’s start with the most important statement about a Keren Hishtalmut, in my opinion it’s the best investment channel that exists in the State of Israel, which unfortunately is limited to a relatively low annual amount. To understand what I mean, we have to start at the beginning.
What is a Keren Hishtalmut
A Keren Hishtalmut is a savings and investment fund for the self-employed and employees that serves as a general and not necessarily long-term savings and investment channel.
through the fund, it is possible to actually invest in various tracks according to risk, such as the stock market, government bonds and even an investment that simply follows the S&P 500 index.
The total provisions for Keren Hishtalmut are recognized as a full tax expense! Therefore, a Keren Hishtalmut fund for the self-employed is very worthwhile. Also, when you withdraw the amount plus the profits in the Keren Hishtalmut, there is no need to pay any tax and all the money goes into the bank account.
When can Keren Hishtalmut be opened and used
Perhaps here is the most significant advantage because if we look for example at what the difference is between a Keren Hishtalmut and a pension fund then a pension fund is an amount saved for retirement age (67) by law and therefore it is being saved for decades. Even if we compare a Keren Hishtalmut to a Kupat Gemel Lehashkaah that is also a good investment product that is liquid at any given time, the disadvantage of differentiating from a Keren Hishtalmut is that in order to take advantage of the tax benefit and exemption from tax, you have to wait until age 60.
Compared to both and in general any other investment channel. A Keren Hishtalmut can be chosen from many financial companies with different tracks (an advantage that also exists in a Kupat Gemel Lehashkaah) and it will be possible to withdraw the money without fines or taxation after 6 years.
The total provisions for the Keren Hishtalmut are recognized as a full tax expense! That is why the Keren Hishtalmut for the self-employed is very profitable.
When you withdraw the amount plus the profits in Keren Hishtalmut, there is no need to pay any tax and all the money goes into the bank account.
Main benefits of the Keren Hishtalmut
Advantage 1
The annual return of Keren Hishtalmut can range from 5% and even 15% on average between the various and leading funds in the market, so in addition to the tax benefit, you can also make money instead of letting your money sit in the bank without earning anything from it.
Advantage 2
The money is relatively available, as explained, Keren Hishtalmut is closed for a period of a total of 6 years and not periods of decades which make it very difficult to predict what will happen and even lose control of the investment.
Advantage 3
The effect of investing in compound interest together with the exemption from taxation makes the Keren Hishtalmut fund the most amazing investment in Israel. Imagine that you have a liquid Keren Hishtalmut fund with NIS 500,000 and that fund makes a 10% return that year. I will help with the calculation, you made 50,000 NIS that year tax-free! Imagine that you have reached a million and so on.
Advantage 4
It’s always possible to switch between the various companies that offer Keren Hishtalmut without having to open the fund and apply a tax on profits or lose seniority. This advantage is critical because every company has its good times and bad times and the idea of managing a good Keren Hishtalmut fund is to move every time to companies that are at the top of the yield and service table.
A loan from a Keren Hishtalmut
So okay, you can make a lot of money with a Keren Hishtalmut fund but if we do not attract it, how do we enjoy or take advantage of it? One of the most popular questions I get and before I explain it is important to understand, by no means, never open your Keren Hishtalmut fund! It will simply hurt the growth and capital accumulation process of the continuing Keren Hishtalmut fund which is critical to really get to these amazing tax-free returns.
So what do we do if we need the money? Quite simply, it is possible to take a loan from a Keren Hishtalmut fund with an interest rate of Prime minus half in most companies. This basically means a loan with an interest rate (correct for january 2022) of 1.1 (prime as of the day of writing was 1.6) so this is a very attractive loan on excellent terms. By the way the reason is that basically the company that gives the loan has no risk at all. Think about it for a moment, if you bring me NIS 100,000 and I give you a NIS 70,000 loan, what risk do I have? In the worst case I will keep the 100.
The amount of the loan varies from company to company but usually with a non-liquid Keren Hishtalmut fund you can take 40 percent loan from the amount and if the Keren Hishtalmut fund is liquid then you can take even 70-80 percent of the amount.
How to find a Keren Hishtalmut fund? which Keren Hishtalmut fund is the most profitable? where should you open a Keren Hishtalmut fund
There are lots of Keren Hishtalmut funds in Israel and what should guide the average person is to choose is the credibility and reputation of the fund (Familiar to the public of course), the cost of management fees, and the return the fund has managed to produce and to measure it by year, 3 years and 5 years. On sites like my Gemel. According to the test, its possible to see that the companies change their positions all the time so you can simply take advantage of the momentum of the successful companies and move to them.
How much money can and should be deposite In Keren Hishtalmut
In order to enjoy the tax benefits on expenses and income that exist in the Keren Hishtalmut fund, the ceiling height and the limit that exists for an employee or self-employed person must be deposited. For the self-employed as of the day of writing this content, the amount was NIS 18,480 and for the employee it is a little different because these are wage deductions when the standard is that for every 2.5% the employee put then the employer put another 7.5% but the percentages are limited from a salary of NIS 15,700 to Enjoy the tax benefit (this is in the region of NIS 18,800 per year of deposits in the fund. If you deposit more and that is possible, you simply do not enjoy the relative share above the tax benefits of recognizing an expense or are exempt from capital gains tax (25% of profits).
Other things that are important to know about the Keren Hishtalmut fund
- Not every employee is eligible for a Keren Hishtalmut fund but it is usually a lucrative employment condition because it is actually getting more money from the employer without paying tax on it.
- A Keren Hishtalmut fund is a great option for self-employed because they also enjoy the tax benefit and also this money will be relatively available in the short term.
- Because of the corona! You can withdraw up to NIS 7,500 each month from the Keren Hishtalmut fund and it will still be tax-free.
- Anyone who does not know if he has a Keren Hishtalmut fund or how much money he have in the Keren Hishtalmut, can easily check this through the Money Mountain (Har ha-kesef הר הכסף) website.
It is recommended to check at least once a year with a professional in the field of financial check-up and check the condition of your Keren Hishtalmut fund in terms of management fees, maximizing returns and tracks.
Comparison between a savings policy in a Keren Hishtalmut fund and a Kupat Gemel Lehashkaah to a direct investment in the stock market
Direct investment | Keren Hishtalmut | Savings policy | Gemel Lehashkaah | Criterion |
---|---|---|---|---|
Always liquid | Only after 6 years | Always liquid | Always liquid | Liquidity of money |
25% | 25% (before the 6 years period) | 25% | 25% (Before the age of 60) | Capital gains tax with Withdrawal |
no limit | about 18,000 sekel a yaer | no limit | About 70,000 sakel a year per parson | Limit on Deposit Amount |
None | Exemption from capital gains tax after 6 years | None | Exemption from capital gains tax from the age of 60 | Tax Benefits |
Depends on the body but in most cases $ 4 per transaction (at the bank much more. | 0.5%-1% | 0.8%-1.2% | 0.5%-1% | Average management fee |
Not relevent | Possible at any time | Possible at any time | Possible at any time | Possibility to switch between investment option |
Not relevent | Possible at any time | Only way is Withdraw the money, pay tax and then move on | Possible at any time | Possibility of transfer between companies |
Keren Hishtalmut - Q/A
A-A Keren Hishtalmut is a savings and investment fund for the self-employed and employees that serves as a general and not necessarily long-term savings and investment channel.
through the fund, it is possible to actually invest in various tracks according to risk, such as the stock market, government bonds and even an investment that simply follows the S&P 500 index.
A- Good yield, up to a certain ceiling – recognized tax expense and income gains are tax-exempt, fast liquidity – a total of 6 years and then always available. It is possible to switch between companies and tracks without having to pay a fine or any tax and seniority is maintained.
A-In order to enjoy the tax benefits on expenses and income that exist in the Keren histalmut fund, the ceiling height and the limit that exists for an employee or self-employed person must be deposited. For the self-employed as of the day of writing this content, the amount was NIS 18,480 and for the employee it is a little different because these are wage deductions when the standard is that for every 2.5% the employee retires then the employer retires 7.5% but the percentages are limited from a salary of NIS 15,700 to Enjoy the tax benefit. This employee earns around NIS 18,800 a year in deposits to the fund
Loan from a Keren histalmut fund with an interest rate of Prime minus half in most companies. This basically means a loan with an interest rate of 1.1 (the prime as of the day of writing was 1.6). The amount of the loan varies from company to company but usually with a non-liquid Keren histalmut fund you can take 40 percent loan from the amount and if the study fund is liquid then you can take even 70-80 percent of the amount.
A-Employees need their employer to open a Keren histalmut fund for them but self-employed people can do it themselves and it is highly recommended that they do so because of the tax benefits.
A- This is not a recommendation! But there are many bodies – Altshuler Shaham Keren histalmut, Harel Keren histalmut, Psagot Keren histalmut, Yellin Lapidot Keren histalmut, Clal Keren histalmut, Rom Keren histalmut, Analyst Keren histalmut, Excellence Keren histalmut, Migdal Keren histalmut, Moore Keren histalmut and more…