iDeCo Application Success

It was a long time coming

My iDeCo application took a long time. I didn’t help matters by writing the wrong numbers on the application form (which meant an extra three weeks back and forth with Rakuten Securities) but my account is now finally up and running.

My March payslip shows two monthly payments have been taken out, and logging in to Rakuten I saw the following screen:

It took around three months all told. I suspect the wait time will come down in the future, as the system becomes more efficient and the initial spike in numbers comes down (after all, once you have an account, that’s it, unless you change providers).

Happy at this development, I then tried to log in and set up my account.

No dice. The screen did not show the expected functions. I guess the account had not actually been activated at the point I saw the message (but before they had sent me an email notification). Another opportunity to practice patience 😉

​But then about twenty minutes later I got this screen:
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Plugging in the password and account number I received earlier in the week from JIS&T (Japan Investor Solution and Technology -the company that got the contract to administer iDeCo) took me to this screen.

Or rather it would have, if I hadn’t thrown away the account number assuming that Rakuten would do that automatically for me. Unfortunately I had, so I had to call them and ask them for the number.

This was relatively straightforward but still required several phone calls and for me to dig out my nenkin number.

And then I finally got into my account.

Rakuten gives you a choice of using their tools to help you figure out your portfolio allocation, or just choosing it if you know what you want.

I had a quick look at the tools, but for most people it’s going to be quicker just to choose from the list. The tools also appear to steer you towards the more expensive funds. I’m sure that’s just a coincidence 😉

A few impressions about the Rakuten lineup.
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The balanced and target date funds are too expensive. Most people should skip these.

iDeCo accounts make it quite easy to invest a set allocation, and to change the allocation, so you can easily get the benefits of a balanced or target date fund without paying the higher fees.​

There is at least one low-cost fund for each domestic asset class

​Costs are really important over the long-term, so all things being equal most people should choose from the highlighted cheaper funds above.

Same for international

Again, go for the cheapest highlighted funds. Emerging markets are more expensive but not unreasonable.

These are pretty horrible

Definitely avoid that domestic/international equities fund. You could buy both separately and pay 1.3% less in annual fees…

The fee for the gold fund seems high but if you want to own gold may be worth it (stay tuned for a post on how to invest directly in gold though).

I chose my allocation (the procedure for which is needlessly complicated, as they make you choose, then on the next screen you have to input the amounts again in a different form) and finalized.

So I went with 100% stocks: 50% world equities, 30% emerging markets, 20% Japan equities.

Now bear in mind this is an aggressive allocation and just a fraction of our family portfolio. This mix is unlikely to be a perfect fit for you. Please consider your own situation when deciding what to invest in.

So my iDeCo account is finally up and running, and the payments for February and March came out of my paycheck today.

I shouldn’t have to do anything to my iDeCo account for the next twenty-one years, apart from take a look at it every year or so and make sure the allocations aren’t completely out of whack.

How about you? Did you open your iDeCo account yet? What allocations did you go with and why?

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20 Responses

  1. An aggressive portfolio indeed! Although the risks become negligible after two decades of staying in the market =)
    Currently still waiting for SMBC to process my iDeCo application so that I can start investing for retirement whilst enjoying the sweet tax benefits.

  2. Did my iDeCo a month ago I guess with Rakuten, papers arrived in a few days. Filled with the company and just 1-2 weeks later, got a mail from Rakuten that they’ve sent it to the government for approval. Hasn’t come back yet.
    When that gets sorted out (and I get my account) I hope I can use the same account as a standard securities account too 🙂

  3. I’ll be trying to set this up shortly as a part-time teacher (and therefore freelancer in iDeCo terms). Has anyone on here done so already? How did you find your employer/s? On top of things?

  4. Hi Adam
    I’m not sure as it’s been a while since I did my wife’s application, but I am not sure if employers have to do a self-employed one.
    I was the first person to sign up at my uni 😉
    … but the HR department had received the memo and knew what to do.

  6. Hi Adam
    I tried to find the info now, but didn’t manage to track it down. I guess you can see what kind of paperwork they send you.
    I get the feeling that just paying Type 1 pension is enough.
    Let us know how it turns out!

    1. Hi MNG
      Those two funds will give you a similar effect to the ‘Buffet portfolio’, with the proviso that he was talking about domestic US assets. Strictly speaking the Japanese equivalent would be Japanese equities and bonds, but most people would say they are not as robust.
      I personally tend towards world equities and bonds.

      1. Yeah, a friend said that he wouldn’t be as confident about the Japanese equivalent and so I thought it better to stick with America. As for the NISA I think I can just buy the Vanguard S&P 500 (VOO) through Rakuten but I don’t think they offer iShares 1-3 Year Treasury Bond ETF (SHY). Do you have any recommendations for an alternative? Is it true that you can only buy vanguard on Rakuten and not SBI?

  9. I’m not an American and hope to retire in Japan so that’s why finding something in yen would be best since as I understand it, if I want to buy Vanguard products I need to change yen to dollars and when I want to change it back I’ll be charged again. But I don’t think even Japanese funds that track S&P 500 have fees as low as 0.05%.

    1. You are right. 0.2 or so seems to be the best for equity mutual funds in Japan.
      I guess the question is are you going to invest enough for the 0.15% to be more than the exchange fees, etc.
      As long as you are saving and investing, my take on this is that it’s not particularly important 🙂

  10. Finally today I received my info from JIS&T in the mail. This was after last receiving an email notification from Rakuten almost 3 months ago noting that my application had been received. My monthly contributions will seemingly start from next month.
    I don’t have a normal Rakuten account (personal circumstances…), so I have to login directly to the JIS&T site to set my iDeCo allocations. (This Japanese blog was useful for me in my circumstances: http://mukaiyouhei.blog.jp/archives/20170315.html)
    I have set up the following allocations to start:
    38% advanced economies equities fund
    38% emerging markets equities fund
    4% foreign REIT fund
    10% advanced economies bond fund
    10% emerging economies bond fund
    Personally I don’t want to own Japanese domestic assets. I am paid in yen, so I have enough eggs in my yen basket as it is.
    So I am all foreign equities, REITs and bonds.
    I am in my 30’s but I have opted for some bond fund exposure. The primary reason is that I want to be in a position to buy more stocks cheap, when the opportunity presents itself. I figure there should be a couple of major market crashes between now and when I retire. So when those events occur I will switch my bond funds to equities.
    I am also considering a modification to have a small allocation (max 5%) in the みずほＤＣ定期預金, for the same purpose. When a global stock market sell-off occurs, the yen will likely increase in value (unless the sell-off occurs because of Japan’s economy blowing up). In that case having yen cash equivalent assets in the iDeCo account ready to snaffle up foreign equities would likely produce a higher bang for the yen/buck than would foreign bonds, which will depreciate in value in yen terms. But then this also means foregoing foreign bond yields for zero yen interest in the meantime. So I’m in two minds about this, at least for the iDeCo account.
    Probably I will leave the iDeCo account as it is, and deploy yen savings from my bank account instead, should the time and opportunity come.

    1. I got mine yesterday too! 🙂
      I wonder if they bulk-sent or something.
      I don’t have general Rakuten securities account yet (just applied a few days ago) so maybe I can add the rakuten ideco account to my securities account later 🙂

  11. Hi, this is my first comment here,
    As I saw that this thread was becoming a little bit of a sharing portfolio mini-forum, I just wanted to share mine.
    I applied for an SBI account and I got a lot of links and information about the funds line-up for iDeCo, which is impressively long and they are providing the information for each and every one of them, along with the past month rentabilities. I have to say that it’s an overwhelming piece of information (76 pages of report!!!).
    I was trying to get through some of this information and I came up with my first pre-portfolio. I just wanted to share with you guys. At least if you are using SBI as your brokerage then you could find it familiar.
    These are the funds that I chose:
    35% for ＤＣインデックスバランス（株式４０）… 0.1944 (fee)
    15% for ＤＣニッセイ外国株式インデックス … 0.2268 (fee)
    15% for ｉＦｒｅｅ　ＮＹダウ・インデックス … 0.2430 (fee)
    35% for ｉＦｒｅｅ　８資産バランス … 0.2484 (fee)
    Any thought on this funds?
    Thank you for your time in advance and congratulations for your useful blog about retirement in Japan! 😀

    1. Hi Ivan
      Congrats on getting started! It’s a big, positive step 🙂
      The fees look fine, but I am not sure what you are trying to do with that portfolio.
      The two balanced funds contain a mix of asset classes, then you have extra international stocks and extra US stocks on top of that.
      Balanced funds tend to be more expensive than their components, so I am wondering if you couldn’t get the same portfolio by buying the assets separately?
      You also have a lot of bonds in there, 55% in the 40 balanced fund and 36% in the 8-asset thing. This may be a good fit for you, or not, depending on your age and situation.
      Basically as long as you understand why your portfolio looks like that and are happy with it I think you’re good.
      If you want to get more comments I recommend posting to the forum: https://www.retirejapan.com/forum/

      1. Hi,
        Thanks for your super prompt answer. I really appreciate it.
        Actually I will be turning 40 years old next year, so I thought it was a good movement to start with the iDeCo. As an employee of a company without private pension system/benefits I can put up to 23K yen a month for the iDeCo.
        But as you mentioned before I might be a little bit lost when talking about funds, as it is my first time (not in stocks though).
        I did not want to put everything into stocks, so I thought that bonds could also be a part of my portfolio.
        I though that the 35% for ＤＣインデックスバランス（株式４０） could be not so risky, as only 40% of this balance fund is on stocks (25% Japan, 15%US) and the rest is mostly bunds, as you highlighted. I know I could have chosen the same fund family but with more risk into stocks （株式6０）or （株式8０）.
        Also the balance fund ｉＦｒｅｅ　８, according to the SBI report it seems it has 26% in foreign bonds, 24% in foreign stocks, 12% in foreign REIT, 12% in japanese stocks, 12% in japanese bonds and 12% in japanese REIT and the rest is just others. I thought it was a good balance and it also got the 4th position in the Fund of the Year 2016 (http://www.fundoftheyear.jp/2016/1.html). Well, actually last year was the very first year for this fund.
        So I wanted to have like a 70% on this balance funds, and then the rest of the 30% on another stock funds, but as you were mentioning even the balance funds have some positions in stocks (both Japan and US).
        One of the things that I liked from the ｉＦｒｅｅ　ＮＹ (15%) fund is that it wanted to have some product like an ETF for the Dow Jones. The fund compositions is mainly:
        Boeing Co. 7.11%
        Goldman Sachs 6.58%
        3M Co. 6.02%
        United Health Group 5.79%
        Apple 4.83%
        McDonalds 4.72%
        Home Depot 4.44%
        Intl Business Machines 4.22%
        Johnson & Johnson 3.88%
        Travelers Cos Inc 3.60%
        …
        And for the last 15%, again US stocks. ＤＣニッセイ外国株式インデックス
        Apple 2.43%
        Microsoft 1.54%
        Facebook 1.13%
        Amazon.com 1.11%
        Johnson & Johnson 1.01%
        JP Morgan 0.92%
        Exxon Mobile 0.89%
        Alphabet C 0.82%
        Alphabet B 0.79%
        Nestle 0.74%
        Etc,
        What do you think about it? It might be a weird portfolio, so I will try to balance a little more, as it was my very first draft.
        Do you think that this it also a very aggressive portfolio? Do you have any recommendation about it?
        Sorry about me doing that many questions, but as you can see I am kind of a newbie.
        Any opinion about it will be highly appreciate it. (I know investment is sort of personal, but I would be glad of having some opinions / thoughts on that).