TEL AVIV — Mazal Shachar's computer screen at First International Bank of Israel gives a dismal, up-to-the-minute picture of the country's financial markets. The bookkeeper can earn her salary and watch her nest egg shrink at the same time.
As the global financial crisis hits Israel, older workers such as Shachar, 64, a single mother who saved for four decades and thought she was a year away from a comfortable retirement, are feeling the pain.
"It's a slap in the face," she said, estimating that her pension savings had dwindled by 30% this year, to less than $250,000.
The math, she said, is "sad and depressing." Instead of an expected $2,450 a month in retirement, a sum similar to her current salary, she now figures to draw about $1,825, not enough to support herself. "I'm afraid of becoming a burden on my daughter or on the state."
For The Record
Los Angeles Times Tuesday, December 16, 2008 Home Edition Main News Part A Page 2 National Desk 1 inches; 44 words Type of Material: Correction
Israeli retirees: An article in Monday's Section A on efforts to shore up pensions in Israel said parliamentary elections are Feb. 3; they are Feb. 10. A caption identified Mazal Shachar as a bank accountant; she is a bank bookkeeper, as the article said.
Israel's economy has suddenly flattened after five years of enviable growth. Diamond exporters here are hurt by falling international demand. Credit has dried up, forcing smokestack industries and high-tech giants to shed jobs. With tourism income, car sales and charitable donations also plummeting, the country's two chief rabbis recently led a nationwide prayer for divine intervention.
Few Israelis have clamored louder for help than the 250,000 middle- and lower-income workers with corporate pension plans that resemble 401(k)s and who are close to the age at which they can draw full benefits -- 67 for men, 64 for women.
Those pension funds are tied to stocks and bonds and form the bulk of all retirement savings, which also include a modest equivalent of Social Security. The funds have lost one-fifth to one-third of their value as the global crisis has battered Israel's financial markets, economists say.
As Israel scrambles to revive those markets and ease the debt burdens of troubled conglomerates, its leaders have disagreed sharply over how to help the elder workers.
Prime Minister Ehud Olmert last week offered an unconventional solution: a government-financed "safety net" that would partly offset any further pension fund losses incurred by eligible workers after Nov. 30. His Cabinet approved the plan Sunday and gave government regulators six months to mandate a more conservative system for investing older workers' pension savings.
"This is the money they set aside for retirement, and we cannot abandon them," Olmert declared.
Any wage earner who is now 57 or older and has less than $375,000 stashed in a retirement account would qualify. Up to $187,500 of that savings would be guaranteed.
Among developed countries hit by the crisis, Israel is believed to be alone in offering such a direct bailout to retirement savers. But resistance from Finance Minister Roni Bar-On resulted in so many restrictions that the rescue fell short of what Shachar and other workers say they need.
For one thing, the safety net will not address the heavy losses incurred before Nov. 30. And no one covered by the plan can touch retirement savings until December 2011 at the earliest, a hardship for those like Shachar, who had expected to stop working before then.
"It's a hoax," she said bitterly after studying the plan's details last week. "The net is full of holes."
Now three options loom for Shachar when she turns 65 next year: Forfeit the plan's protection and start collecting her pension; wait two years and live on a national insurance stipend, Israel's Social Security; or keep working until age 67.
Predicting a long recession, she's unwilling to give up the safety net. But the insurance stipend is just $450 per month, about half the minimum wage, and her regular savings are not enough to stretch it much.
Her union has asked the bank to keep her on longer, but the outcome of those negotiations is uncertain.
Shachar is a trim woman who puts a premium on gym exercise, sound nutrition and outings to the theater. She had carefully budgeted such expenses from the pension she expected before the crisis hit and still cannot imagine doing without them.
Her family had immigrated from Egypt to the new and then-impoverished state of Israel when she was a child. She learned the value of financial self-reliance, supporting herself and her daughter after a divorce at age 19. Her bank job offered what seemed to be a lifetime of security.
Israel has not been as prudent with its workers' pensions. In 2003, the government seized a network of mismanaged, deficit-plagued pension funds from Histadrut, Israel's main labor federation.
Independent managers assigned to run the funds steered workers' money from low-yield government bonds into stocks and a newly emerging corporate-bond market. Although each employer chose a pension fund and each worker chose a mix of investment categories, few understood what was safe and what wasn't. The government was supposed to regulate the system.