Slow and steady
iDeCo is a retirement account (like a US 401k) that locks up your money until you are sixty years old. In exchange, you get to invest pre-tax income (which reduces your income taxes) and won’t get taxed on your investments while they are in the account. When you eventually cash out you get taxed at a reduced rate.
I think it is one of the best options to invest for retirement in Japan, and pretty much everyone is eligible to open an account. You can see more details in our beginner’s guide to iDeCo.
This is my second year of using iDeCo (public servants only became eligible to use iDeCo last year) and unfortunately the maximum I can pay in is 12,000 yen a month. I would happily put ten times as much in if they would let me 🙂
You can see last year’s progress report here.
I haven’t made any changes since I set up the account, and iDeCo is very low maintenance -once you set up the account your contributions are taken and invested automatically each month. Here’s how my account is looking now:
I have paid in 257,677 yen (plus the initial set up fee and monthly fee -you can see these for each provider here). My account is currently worth 246,327 yen. Along the way I have also saved on my income taxes -I’m in the 20% tax bracket so my contributions had an immediate 20% ‘return’ for the year I paid them.
My account is 100% invested in stocks: 50% developed world, 30% emerging markets, and 20% Japan. This means it is overweight both emerging markets and Japan. The emerging markets in particular have not had a good year, but this is fine. I expect that to change at some point over the next 19 years.
Here are the specific funds I hold in my account (with Rakuten Securities):
At some point over the holidays I may take a closer look at my account and see if there are any cheaper/better options. One great thing about iDeCo is that you can rebalance (sell one investment and buy another) within your account without paying fees or taxes.
I don’t think it is worth spending much too much time thinking about it, but checking every couple of years or so to see if you can save a bit on fees might be a good idea.
How about you? Do you have an iDeCo account? If not, why not? If you do, how are you getting on?