How much money do I need to retire in Japan?

28 Responses

1. This is a very helpful piece on the “how much?” question for Japan.
   I have read a number of Japanese articles which suggested that Mr & Mrs Average Retired Japanese Couple with their own home now requires about 230,000yen per month for a very basic lifestyle. Given that the total retired household pension currently averages at a very modest 160,000 yen monthly (I assume because there is quite a gap between couples on kokumin nenkin only and others with both kosei and kokumin nenkin) it is suggested that they need 85,000,000 yen in savings to cover the shortfall assuming they live to 90.
   Additionally, because people have different retirement expectations, it is suggested that 360,000per month is needed for a “slightly privileged” retirement.
   My experience of retirement here suggests the above figures seem right. So the problem is how to generate the income you require to support your future life. Ganbare!

   1. “… it is suggested that they need 85,000,000 yen in savings to cover the shortfall assuming they live to 90.”
      Is that 85M in a post office account (cash), or 85M that will be in a 60/40 stock/bond account along the way?

      1. Given the state of retirement planning and advice here, it is almost definitely 85m in a post office account, getting depleted by the annual spending and inflation.

      2. I do not think it was specified how that 85M was invested but since we are talking about Mr & Mrs Average Japanese Retiree, you can definitely assume they meant money in the bank/PO.

2. I didn’t really have any financial plan for retirement, I just tried to save as much as I could for as long as I could. I figured more, saved earlier (if possible), would be better. And that I would then adjust my budget & lifestyle to that final number, as needed. There were various factors involved that are too varied to make sense of to anyone else, but I ended up with ~10x my last year’s income (pre-tax). Add severance and that goes up several more digits. I’ve been a saver in US$, and rates have made things fluctuate along the way. Six (or eight?) years ago when the yen hit 77 made my $ look different than they did at retirement, or now.
   Because of those savings, I still don’t have a plan or budget, and I think that’s a good thing–I don’t have to stress over checking my spending and meeting a “budget”–this month, this year, or over the next 2-5 years. And I’m less at the mercy of “the market”–I think I can wait out a correction, perhaps even another 2009. My wife and I do track our monthly expenses, and we have a real good feel for that–and I think my pension payments would cover my share if I sat around home and did nothing.
   Note that phrase: “my share.” One of the huge tailwinds in my life is having had a partner who has always worked. My wife and I share most general expenses, and spend on other things separately. Above, I’m talking about me–she has her own savings, will get her own pension, and so on. (BTW, there’s a title somewhere that goes “Are you a stock or a bond,”–well, I’m a stock, my wife is a bond.)
   Ben’s question, “If you have already retired, was there anything that surprised you about the process?”: While we know our monthly expenses in a general way quite well, some things have popped up since I retired. Not disasters, but I’m not sure how I could have prepped for or predicted these expenses. We’ve replaced our kerosene boiler (hot water), a washing machine, and bought a new stovetop and oven since I retired. Also replaced four down lights in our kitchen with LED. We’re on city gas and one pipe leading into the house had blistered and needed replacing–probably a once-in-a-generation thing. Our drier needed a new drive belt a while back, and the buttons on the panel aren’t working at all well–it might be the next thing to ‘die’. Or the heater that we use in our living room.
   There’s probably some retirement life stage out there that I haven’t yet become aware of, or that will suddenly come out of left field.
   Fingers crossed!
   ***
   Blah, blah, blah.
   tl;dnr — oversaving might make your retirement less stressful.

   1. That’s very encouraging.
      I can imagine the ‘random one-off expenses’ being annoying 🙂

      1. Major appliances might have an 8-10 year life cycle, maybe longer if you’re lucky. I guess to budget for this you’d have to total the cost of all these things, pick a given replacement cycle, and do some math.
         This is probably something that is overlooked when considering expenses on a monthly, or even yearly, basis.

3. It’s 25 times your expenses that you need, not 25 times your income. Once you’re living off your savings, you don’t need the portion you were previously saving. Makes a huge difference, especially if you’re saving 50% or more of your income.

   1. Good point. That was ambiguous. I added a word to make it better 🙂

4. How much health insurance (健康保険) do we pay in Japan during retirement? I noticed this is over 900,000 yen/year now while I am employed.

   1. You have to work it out, so you won’t know the exact number until your local office has sent you the invoices…
      I found this walkthrough though which should give you a rough idea: https://yakunitatta.info/65sai-kokuho-28209.html

5. Sorry, slightly off topic (a Japanese version would be very interesting):
   https://www.theguardian.com/money/series/how-i-spend-it

6. I found a fun and useful read on the general topic, how much do I need to retire. It elaborates on the FIRE principle (Financial Independence, Retire Early). I has practical advice on simplifying your life and setting savings targets for middle-aged people who realized they have saved enough, yet. It is UK centred, but applicable everywhere.
   RESET: How to Restart Your Life and Get FU money
   David Sawyer
   Available from AmazonUK

   1. That’s funny, I’m reading that book now 🙂

7. Howdi folks !
   Afraid I am going to rain on the retirement parade here. At least the expectation that government backed pensions will be available by the time we need them. Personally I am planning for zero govt cash from any source. I find it to be a prudent decision that allows me to focus on creating income for myself and my loved ones, with the assumption that anything coming from a pension/insurance payout is gravy.
   Gravy is good and the added bonus of its upside makes it easy to tolerate the grind of making a go of old age without government programs. So in the case of a global reset my plans are essentially unaffected from the financial side, and if those programs still exist I can take advantage of the money I was taxed out of to begin with. No I am not a libertarian, more of a realist methinks.
   For starters we can look at the woeful state of government social security programs, the vast sums of expenditures and the level of debt in the G20. Add to it the history and initial merit of social security and how that system is no longer in effect. I won’t belabor the point other that to suggest anyone interested google up the ratio of working folks to retired ones whent he US program began and those ratios now. Its not a pretty chart.
   I also want to throw some water on the idea that Japan is a good place to retire. The cost of living here is simply unsustainable. WIth upwards of 70% of the food consumed here being imported should be the first warning sign of any decision making model. Factor in the value of the yen and the growth of SE Asia I just don’t see Japan being able to afford foodstuffs over the coming decades.
   Before someone suggests ocean calories as an alternative I will point to two very disturbing facts. The first is the govt decision to not only dump radioactive water from the Daichi reactor into the ocean, but the incinerators being built around the country to burn the radioactive solid waste. Then I humbly suggest a google of ocean acidification. At what ph level are fish eggs no longer capable of hatching ? How many Salmon still live in the ocean and what % of farmed ones end up on our table. Google up salmon faming but be prepared for some very disturbing images. I think we are going to find out relatively soon just how much carrying capacity the ocean has left, not much is my guess.
   Perhaps if the world shifts to a vegetarian diet and every Tom, Dick, Harry, Chin and Singh stop eating meat and driving there is some hope….
   Anyway I don’t enjoy being a Cassandra and I find Ben’s site of interest, but I feel strongly enough that the current state of denial and willfull acceptance of the state of our planet to be very disturbing. The assumption that autopilot on the current state of affairs is good because it worked for our parents is probably going to cause alot of vexation.
   I won’t be retiring here on the archipelago, and wish all those who will only the best. We will be taking our portable wealth and moving down the food chain. I also plan to own/operate a business until I can no longer change my diapers. I find the daily challenge of business to be envigorating and woudln’t know what to do with all the free time of a true “retirement”.
   If I am wrong and we all find ourselves living the golden years of retirement with AI servants, remote surgery and creating our own foods from some sort of voodoo vat of amino acids then I will eat my hat, admit my foolishness and accept the sweet embrace of a life of ease. But I am betting against it.
   All the best to use all
   sincerely
   Cassandra

   1. Heh, enjoyed the rant. Agree with some points, not sure about others.
      I highly doubt we will see nenkin disappear, but like you I am expecting to have more than enough investments to live comfortably. Any pension income will just be extra pocket money at that point.
      70% of Japan’s *calories* are imported, but this includes animal feed and things like olive oil. If necessary I am pretty sure the country could produce its own food quite easily (we won’t be eating the same diet, of course).
      And I think Japan is quite resilient to climate change. We have lots of water and as an island Japan is going to be relatively easy to defend/quarantine. It is also one of the best prepared countries in the world for natural disasters.
      Of course you may be right and this is one of the main reasons I haven’t naturalized and given up my UK passport -want to keep an out just in case.
      We’ll see. I’m 41 and expect to live into my 80s or so. Hope I will ‘miss out’ on the really unpleasant consequences of our current insane disregard for the climate.

      1. I am certainly NOT hoping for the worst, only assuming it and preparing for its arrival at some point down the road. The imported food will stop coming for the most part if the Yen is devalued, or when the developing SE asian countries consume their own surplus which is an economic argument for another time.
         I don’t wish to be right. I hope I am wrong. Dead wrong.
         The nenkin system only maintains itself with higher taxes, lower domestic spending and younger workers paying into the system. They have the higher taxes, but the current levels do not balance the expenditures (I’ve read 13% doesn’t manage it either)
         Of course if you earn yen, spend yen and purchase domestic “calories” with yen you should be in good standing assuming property taxes aren’t set too high. A quick refresh of the Roman land taxation system is probably on the reading list as a result. Hint, it didn’t end well.
         I agree with the sentiment that we can do MUCH worse than weathering the storm here. On the flip side of that statement is that perhaps there are better places than here.
         I know that the way Japanese women are marginalized makes my skin crawl and if I had daughters they would not live here much past junior high school at the latest, but this is strictly my opinion which I would not impose upon another.
         The financial situation however, is an entirely different kettle of fish.

   2. A lot of food for thought there Paul. I tend to agree with RetireJapan on the nenkin likely being around. The system being unsustainable economically (which I agree with) is a separate issue from whether it is sustainable politically, and I find it extremely unlikely that any politician will have the cojones to kill it anytime soon. If anything will rouse the voting public out of their silent apathy, that would likely be it. What politician would risk that?
      While it sounds prudent to not depend on the nenkin, for those seriously looking to FIRE (or even just FI), let’s not forget the significant cost that incurs, that is, adding years to your working years to save up the extra money to cover that potential shortfall. You’ve stated you don’t intend to retire at all, so perhaps this isn’t as important to you, but for those of us looking to get out of the rat race, achieving the FI part must be measurable in some sort of meaningful way (which I suppose is the point of this entire blog post on “how much do I need?”). Including nenkin, even if as a partial amount, seems like a reasonable approach to me. Of course, not needing it at all is the best solution, but precisely because most of the population is even close to being that prudent, the odds are that the system itself will remain.
      Personally, I am not leaning towards retiring here either, but social, cultural, and educational issues are my primary concerns. Economically, I find Japan to be pretty reasonably priced in terms of cost-of-living, and I’ve been able to exploit the Japanese-speaking gaijin labour-market niche to effectively increase my earning power. Of course, cost of living depends on where/how you live, but you can do a lot worse than Japan in terms of options across the frugality-to-extravagance spectrum. Yes, I spend more on food here than I would back home, but that’s only one part of the overall package.

      1. “I find Japan to be pretty reasonably priced in terms of cost-of-living, and I’ve been able to exploit the Japanese-speaking gaijin labour-market niche to effectively increase my earning power. Of course, cost of living depends on where/how you live, but you can do a lot worse than Japan in terms of options across the frugality-to-extravagance spectrum. Yes, I spend more on food here than I would back home, but that’s only one part of the overall package.”
         Yep. Food, especially items like good cheeses, can be expensive. But on the other hand avocados here come from Mexico, Peru, and New Zealand. Bell peppers from Korea and Holland. Beans from all parts of the world, depending on seasons. Similar for other veggies (some nice broccoli from California recently). Pineapples here, tho a little smaller, are actually cheaper than when I was on the big island last summer.
         Some of those places are already well up the value chain, and are not emerging economies where domestic demand is going to mean empty shelves here. And diversity, whether it’s sourcing food, or investments, is a good thing.
         It could be idiosyncratic, but I find Japan to be cheap. We’re not in Tokyo, and have owned a house for ages—with free parking (cost ~¥23M, worth less now). We both drive, but far fewer total kilometers and gas costs than the US. And once you’ve percolated down, car insurance is cheap.
         Public uni, tho not free, is a really good value. Healthcare, tho some complain, is also very much on the positive side of the ledger. Both our kids went to public/subsidized daycare (保育園), and grandkid #1 is already enrolled. And her mom took about a year off, receiving the equiv of half her monthly pay, got her same job back. I was 正社員, my wife still is (and that daughter), and there are some nice employment guarantees that go along with that.
         We haven’t gotten rich, but Japan is, and has been, really good to us.

8. Could anyone recommend a reputable tax consultant that is very familiar with both US and Japanese tax reporting systems.
   For example, if I was to sell my home in the US, and have a 500K gain, I would not have a tax liability. Would I have to pay tax on the gain in Japan, and report that 500K gain as income?
   By the way I am in Fukuoka, but any good office anywhere in Japan is possible.
   Thanks in advance.

   1. This is the only person I know of: https://www.linkedin.com/in/frederickgundlach/
      I haven’t worked with him though.

   2. You would likely have to declare the gain as a gain as opposed to income and it would be taxed as CGT. The thing about CGT on houses is that the exemption usually applies only to your principal dwelling place. If that is not your house in America then you may well have to pay tax when you sell. Perhaps the rule is different in the US but that is how it is in the UK and I thought I had heard similar about properties in US. (May well be wrong though). If you are tax-resident in Japan I think you are liable declare world wide capital gains. You might also want to check if the US exemption still applies if that house is no longer your principal dwelling place.

      1. Thanks “goodandbadjapan”.
         It is my principal home in the US, and a 500K capital gain on its sale is tax free.
         I am wondering if Japan would tax me 15% long term capital gain tax, on my reporting of the sale!

9. Thanks a lot. I will check him out.
   Best regards.

10. Would have his contact email?
    His LikedIn listing shows him in Lancaster, PA, but Google does not list him or is LLC company at all!!
    Strange.

    1. I don’t I’m afraid. I only know him from his (knowledgeable and helpful) posts on various sites.

11. A related query – have you ever written about the availability and cost of Expat (English speaking) assisted living apartments in Tokyo? Or do you have a good reference to research this?

    1. Hi Ron
       That is a great question. I have never even considered that.
       My guess is that such services would be rare and expensive. May become more common in the future, especially if Japan succeeds in importing its nursing staff from abroad (and I guess if we see automated/robot assisted living -it will be easy to change the language settings).
       An alternative might be to retire somewhere cheaper like the Philippines or Thailand, which already have that kind of infrastructure.