Retirement planning and rights fixation

Have you reached retirement age? Congratulations! Just before you start enjoying your pension allowance, there is one critical procedure you must know โ€“ Rights Fixation (Kibua Zchuyot).

Rights Fixation is a one-time procedure conducted with the Assessing Officer after reaching retirement age and receiving a pension annuity. As part of this process, the Assessing Officer determines your lifetime tax exemption rate up to age 120 on your monthly pension income.

Why Should You Perform Rights Fixation?

Completing this process with the tax authorities provides you with three significant advantages:

  • Guaranteeing Tax Exemption: Rights Fixation ensures that you receive the tax exemption you are entitled to on your monthly pension.
  • Optimal Utilization of Exemption: The tax exemption can be used to withdraw a tax-free lump sum, withdraw tax-exempt severance pay, or receive an exemption on monthly pension income.
  • Financial Planning: Rights Fixation allows you to plan your financial future much better.

Who Is Eligible and How Is It Done?

Anyone who has reached retirement age (67 for men and 62 and eight months for women) and receives a pension annuity is eligible for Rights Fixation.

To perform Rights Fixation, you must fill out Form 161D ("Application for Rights Fixation") and submit it to the Assessing Officer. For the application to be properly approved, all required documents must be attached to Form 161D, such as payslips, pension confirmation statements, Bituach Leumi approvals, and more.

When Should the Application Be Submitted?

It is recommended to perform Rights Fixation immediately after reaching retirement age and receiving a pension allowance. Although Rights Fixation can be performed after retirement age, it is important to know that the tax exemption may be smaller if you delay handling it.

Warning: A Mistake Will Cost You Dearly!

The most important part you must remember is that Rights Fixation is an irreversible procedure. Once Rights Fixation is completed, the tax exemption rate cannot be altered.

Precisely for this reason and because of the dramatic implications for your financial future, it is essential to undergo professional financial planning before performing Rights Fixation. To avoid fatal mistakes, you can obtain assistance in filling out Form 161D and obtaining approvals from a CPA specializing in the field.