Hurry up and wait
I decided to go with Rakuten Securities as my provider, as they have some of the lowest fees (you can see an interactive comparison of iDeCo providers here).
Applications for public servants opened in mid-December, so I received my paperwork just before Christmas.
There were only three simple forms to fill out, each one less than one page: one form for the individual, one for the employer, and something to sign to authorize the provider to use your personal information.
I quickly filled in my form (needed my pension number but the rest was easy). The next step was to submit the employer form to my university.
I asked the university to deduct the iDeCo payment from my salary, which I hope will simplify tax reporting (we’ll see how that works in practice once it gets going). I’ll be contributing the full 12,000 yen a month (although I hope this will be increased in the future).
They needed some extra paperwork (copy of my pension booklet and an internal form authorizing them to use my info) and then it took less than a week for the HR department (ไบบไบ่ชฒ) to complete the form and return it to me.
I asked whether many people were opening accounts and they told me it was just me so far ๐
Then I returned the forms to Rakuten, who acknowledged receipt on January 11th. The next and final step is for the government to approve my application, after which the account will become active.
Once the account becomes active, I will need to choose my investments from the list of available funds and decide the asset allocation.
After that I can ignore it for the next twenty years ๐
I’ll report back again once the account is active and I see how they handle the deductions from my salary.
Anyone else open an account? How did you find the process?
โ
I applied to Rakuten for the application forms over a week ago but they haven’t arrived yet ๐
I suspect they are a bit overwhelmed! 67 million people are now eligible to open an account, 27 million of them starting from this month…
Can you log in to your Rakuten account? If so it will tell you when they send the paperwork (like in the picture above, mine was sent on December 14th)
The forms finally arrived last Friday. Just put the forms in today at work to be filled in with my employer’s details.
I asked if anyone else had applied and apparently a few people at my university have already asked for the forms. I’d like to hope that profs teaching economics at least would be clued in.
Great news! I sent my corrected forms back today…
To be honest I haven’t found much crossover between economics knowledge and personal finance savvy so far myself, but you never know ๐
Thanks very much for running this blog, the information here is invaluable!
I just wish there wouldn’t be the heavy language barrier in Japan, especially for written stuff. I’m still struggling with opening a Rakuten broker account and expect the ETF buying procedure not to be easy either, or even understanding the cost structure (I’ve experience with German broker accounts and ETF buying there though). From what I have gathered a Japanese online broker with English interface simply does not exist, right?
My main questions:
1.) I’m also planning to open a j401k soon. I’m employed with a regular company (in fact I’m the owner of the company), is the max contribution still only the measly 12,000/month? Or could I go up to 68,000 yen?
2.) ETF Options for J401K: Looking at your list of available fund options, they vaguely resemble familiar ETF funds like MSCI World, AWCI World or Emerging Market, which ones would you chose?
Are these really comparable to iShares or Vanguard equivalents (also the TER seems a little higher than those)?
Hi Ben
Thanks for the kind comment ๐
Once you have your Rakuten account open, buying stocks, ETFs, funds is easy enough. You just need to know which two or three buttons to push.
Unfortunately I’m not aware of any broker with an English-language interface.
1) if you are self-employed or own your own company, you may be able to contribute up to 68,000 yen a month into iDeCo (the new name for J401k). You might also look into the small and medium business association retirement plan, which allows you to pay in up to 70,000 yen a month of pre-tax income: http://www.smrj.go.jp/skyosai/index.html
2) I’m nitpicking, but you can’t currently buy stocks or ETFs within an iDeCo account (that I’m aware of). You are restricted to mutual funds. The costs are slightly higher than the cheapest ETFs, but the tax savings on the account more than make up for it.
I recommend getting the ‘passive’ funds, but beyond that you will need to think about your asset allocation based on your situation and goals. Check out Millionaire Teacher if you need a refresher on this.
Hope that helps!
Many thanks for enlightening me, much appreciated! ๐
Right, I’ll see where I end up with the Rakuten broker account, probably I’ll focus on setting up the j401k anyway.
1.) Great, that amount (70k/month) looks it can make a bit more of a difference over time.
2.) I see, no real ETFs etc in a j401k. Agree, I also would pick from the few “passive” ones available with the lowest TER. Which ones would you choose in detail e.g. Tawara no-load developed country stock or/and Index Fund Overseas Emerging Markets?
Was considering Mizuho for the J401K, it looks like the list of relevant passive fonds is similar there: http://www.dcnenkin.jp/search/product.php?mode=show&item=71, do you see any big difference?
Just to be completely clear, you can combine those (68,000 a month and 70,000 a month) to reduce your taxable income by over 1.5m yen. It’s great if you have a profitable business (there is also the national pension overpayment system, ๅฝๆฐๅนด้ๅบ้, which gives you an additional 800,000 yen a year if you are super-profitable).
Developed markets and emerging markets are different asset classes, you need to think about your asset allocation.
I am considering a mix of the two, overweighting developing markets as they seem undervalued BUT this is a very personal decision that I can’t help you with.
Mizuho is probably fine. I’m sure all the big providers have similar products. The key comparison points are monthly charges by the provider and annual charges on the funds.
Good luck!
I am also in the process of opening an account at the moment. as a company owner in contrast to being self employed you are technically being employed by your own company and should be paying ็คพไผไฟ้บใ(shakai hoken). in that case the maximum monthly contribution is 23,000 yen.
although by law it is compulsorily for a company to enlist its full time workers to shakai hoken, I know there are many small companies who don’t. I wonder if anyone know if in that case their employees (and the owner) are eligible for the 68,000 yen monthly contribution or not
Hi itay
Good point. I hadn’t considered that company owners would be classed as employees!
I believe that companies with fewer than five(?) full-time workers can be exempt from paying ็คพไผไฟ้บ, but people will then need to be paying ๅฝๆฐๅนด้ in order to be eligible to open an iDeCo account.
What’s funny is that Rakuten uses English internally for 5 good years now: http://blogs.wsj.com/japanrealtime/2012/06/29/rakutens-english-policy-just-speak-it/
But when it comes to internationalizing their sites… ahem.
For what it’s worth, Google translate does a pretty decent job at translating the fees pages. For transaction pages I would try to understand the Japanese directly though.
Yes, I opened a bank account with them today and I had to guarantee I could handle all communications in Japanese.
Spoke too soon! Got an email this morning from Rakuten saying there is a problem with my paperwork and they’re sending it back -took them a week to check it…
Ugh, I just got the email this morning telling me that my forms are coming back too.
Sorry to hear that! Seems to add an extra 3-4 weeks to the process.
Mine have now gone through to the government. We’ll see how long that takes!
I had a really bad experience with Rakuten’s stockbrocking account. So much so I gave up on them. They have a really odd internal rule about names being eight characters. No one could explain if that would cause problems with tax returns etc. given that my legal name in Japan is my katakana name. So I went with Monex for stocks and the J401k. I am in the process of doing the paperwork for my iDeCo now.
I talked to my university yesterday and they at least were aware of iDeCo. I sent in my request for the application docs to SBI yesterday. I already have an account with them and their fees seem to be among the lowest, so I figured that is the easiest. Hopefully, I’ll have it set up in the next couple of months.
As an American, I want to avoid buying any mutual funds in Japan. I saw your comment about individual stocks and ETFs being unavailable through iDeCo. So, what other investment products can I buy using iDeCo?
Hi Q
Originally I thought that Americans would not be able to use the iDeCo account due to the negative treatment of foreign mutual funds by the IRS.
I have now modified that slightly, and I think older Americans can use iDeCo to reduce their income taxes.
Basically most iDeCo accounts offer access to 3 types of products: mutual funds, insurance products, and savings.
I believe it may be possible for Americans to use the iDeCo for the tax saving (around 30%) and just put their money into a savings account. When they reach 60 years of age they get their money back.
This of course would work better for older people who are only a few years from 60. For younger people I think inflation would reduce the benefits of this strategy.
Insurance products may also be an option, but I haven’t looked at them at all so far.
Hope that helps! I’m still thinking about this, so don’t have a great answer yet.
Thanks. I’ll start looking into the insurance products and savings options available and post back here if I find any useful information.
I’d love to hear from others about their experiences with the savings or insurance through iDeCo.
Lots of good info here. Thanks!
I set up my iDeCo with SBI since I already have an account there, and as Brian mentioned, their fees are among the lowest.
I was also very pleased to find SBI has a campaign going on now where set up fees and monthly fees are waived when opening an account with more than 500k.
I went with Rakuten as they have the lowest maintenance fees, and this year are making it free even for accounts below 100,000 which would be most people paying a max 12,000 per month.
I have a Monex account but they have no iDeCo support so Rakuten it was. I sent in my application form without opening a general account with them, so I can’t login to check the status. But they did send me an email a week or so back to say they received the forms and it might take a month or more to get the government approval.
Would be nice if more investment options but the tax benefit is attractive enough.
I started doing furusato nozei last year too to reduce income tax and local tax.
(Glad to find this blog!)
Hi
Thanks for the comment, and good to have you with us. I’m still waiting on my Rakuten iDeCo account, but sometime soon…
The Rakuten campaign is nice -basically gives you a year to get over 100,000 and qualify for lower fees.
Just a quick nitpick -furusato nozei doesn’t affect income tax and doesn’t reduce local taxes. What it does is allow you to get some swag for 2,000 yen -post on what I got this year tomorrow ๐
Ah yes quite true about the furusato nozei. It’s more like paying tax upfront in order to get some goodies in return, isn’t it.
I did rice, chicken, beef, and a 32 inch TV just before New Years. So long as one chooses things you would definitely buy in any case I think one comes out in front.
We’vs decided to go with SBI over Rakuten, even though we use Rakuten for our NISA.
It’s extra paper work for sure, but the number of available funds is much larger. My wife researched what was being said on the Japanese Internet, and it seems like people are saying SBI is better in terms of fees and waiving minimum balance fees until your account has time to grow as well.
Hi Colin
Having your iDeCo at a different provider is probably a good idea in spreading institutional risk, despite the hassle of having two accounts.
However, I would comment that if you check the data here: http://www.dcnenkin.jp/search/commission.php
Rakuten waives fees for balances over 100,000 yen, and SBI for balances over 500,000 (both have the first year free, so anyone paying in over 8,000 a month would qualify for Rakuten after a year, while they would have to pay in just under 50,000 a month to qualify for SBI).
The initial setup fee for Rakuten is 2777 yen, while SBI is 3857.
Rakuten currently has 28 funds, while SBI has over 60 (most of these are expensive though). I think for someone looking for passive, low-fee funds they have similar offerings.
I think both are fine choices, but SBI is not clearly superior at this time.
SBI and Rakuten both seem far better than the rest but I Rakuten does seem to be better in terms of fees.
Incidentally I got my mistaken application form back from Rakuten the other day – my mistake was a bit of a gaijin problem: when I first came to Japan I didn’t use my middle name, but these days with ID checks more thorough they required that the names be exactly the same. Anyone writing the application should be sure to write your name as on your ID card, even if you have a different name written in your pension booklet.
Oh, how I hate the ‘we insist you write your name according to our view of the correct way to write it’ thing here in Japan. There are at least half a dozen ‘official’ ways for me to write my name here, and I’m never sure which one I used in which situation…
One reason to naturalize -then I’ll just have one name to worry about ๐