Back to the postcard
Everyone paying into nenkin should receive an annual update, called nenkin teikibin (ねんきん定期便). This will either arrive by post, usually in the form of a postcard, or (if you have selected the option) will only be delivered via the nenkin website. Personally I opt to receive the postal version as I want the paper record and find it easier to read than the website (particularly the future pension estimates).
You can see the Pension Update 2017 here (this post explains a lot of the format etc.), the Pension Update 2018 here, the Pension Update 2019 here, the Pension Update 2020 here, the Japan Pension Update 2021 here, and the very exciting Japan Pension Update 2022 here.
This year I received a postcard again, but they seem to have improved the design and made it easier to understand.
The front of the postcard is new to me, and includes pension in retirement based on contributions up to last year (1,062,639 a year) and pension in retirement based on contributions up to this year (1,151,502 a year). It also explains how you can receive a larger pension by delaying it, up to a maximum of +84% if you wait until 75 to start receiving it. I am probably going to do this, for reasons explained here.
The key figures are :
1.) total amount contributed so far (this includes employer contributions from kosei nenkin and public servant nenkin as well as contributions to kokumin nenkin): 10,250,585 yen,
2.) number of months contributed (you need 120 to receive a pension and 480 for a full pension): 297 months, and
3.) projected annual pension based on contributions so far: 1,151,502.
Nenkin is valuable
The true value of the government pension is that you can receive it for as long as you are alive, so it provides you with a minimum income even if you become unable to work (or manage your investments!). It also provides diversification as it is not affected by stock market movements, etc.
Nenkin also includes disability insurance, and a survivors pension should you die and leave dependents behind.
Of course, the state pension is unlikely to allow you to live the kind of life you want or are used to, so it is important to also save and invest money on top of this. The Japanese government estimates the average couple will need 20m yen in savings on top of a full pension to help pay for retirement.
Check out some of the resources on the site or ask in the forum if you are not sure how to save and invest your way to 20 million 😉
A change in circumstances
I had been assuming my wife and I would end up with Japanese state pensions worth around 200,000 yen a month in retirement between us, but this estimate is starting to look like it might be on the low side.
So far I have been paying into kosei nenkin (kyosai nenkin) through my employer, and my wife has been paying into kokumin nenkin.
I finished working last March and am now paying into kokumin nenkin. This is a fixed payment of 16,590 yen a month rather than a variable amount based on your pension. It also gives me access to iDeCo at the freelancer rate (I can pay up to 68,000 yen a month into iDeCo and this amount is taken off my income for income tax purposes).
My wife is considering incorporating her business (she is currently a sole proprietor) which would result in both of us enrolling in kosei nenkin.
Kosei nenkin is much more valuable than kokumin nenkin, so us paying into it for another 5-10 years (in my wife’s case) and 15-20 years (in my case) is likely to result in pensions worth at least a combined 250,000-300,000 yen a month. Not quite enough to fund the lifestyle we want, but probably enough to pay the bills.
We’re both likely to delay receiving the pension to make it larger, as this will give us insurance against living for a long time and managing a pension is much easier than managing investments.
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“by delaying it, up to a maximum of +84% if you wait until 75 to start receiving it. ”
That is a big difference, will also try and do this. I will likely not have much more than 120 months contributed so will need to do this anyway
It’s supposed to be revenue neutral for the system (so the increased amount of each payment is balanced out by not receiving the payments given up in exchange for the increase), but for the individual it’s a good way to hedge against living too long.
Hey Ben, so in regards to the 480 months to receive the full pension, did you start your payment at 20 years old? (The maximum age to pay into the pension is 59 years old).
Backstory: I didn’t pay into the pension for 5 years I was here, tried to go and pay the remaining but was rejected to pay into it.
I started when I was almost 22.
There is an option to pay into kokumin nenkin voluntarily until 65 at the moment, and if you are working you can(must) continue paying into kosei nenkin.
I suspect all the contribution limits will be raised in the future too -it is just not feasible for people to retire at 60 and live to 95.
@Ben
Thanks for that. I am currently paying into Kosei nenkin, but I’m thinking of adding into the kokumin nenkin from herein on. Wonder how the calculation goes in that sense.
Ah, kosei nenkin includes kokumin nenkin (it’s better). You can only pay into kokumin nenkin if you don’t have kosei nenkin.
If there was a like button I would just input into it. Thanks
I’m a little concerned since I came here at age 40, and since I’m expatriating I won’t receive pension from my home country I think. At most, I can only get 31 years towards a pension amount, and I don’t even make 300,000 a month now (this is still more than I made as a teacher in the U.S. though–sadness). I wonder what I can do to live comfortably in retirement.
Well, it is never too late to start thinking about personal finance ^-^
You may be able to receive US social security (alternatively, you may be able to count the years paid in the US towards nenkin).
And possibly most importantly, you can start saving and investing for yourself.
Do you know how the projections are calculated? I have soon been paying into the system for 7 years (since I was 28) an my current projected pension is 400’000 JPY. That seems very low for me. 😱
I’ve been lucky that my current salary has increased quite a lot the last years and I now earn much more than a few years ago. I see that this years projection is about 70’000 JPY higher then last year’s projection but I’m guessing it won’t increase that much every year…
I’m actually planning a YouTube video about this, but basically it depends. If you pay kokumin nenkin it is very easy to calculate, but Kosei nenkin depends on how much you were earning when you paid in.
Your current projection will be based on how much you paid in so far and should grow in the future, but nenkin is not generous and will not provide you with a similar lifestyle in retirement without you saving and investing for yourself to supplement it.