Not sure which is the best option
Here is a prime example of how rich people get all the breaks. If you can afford to prepay your kokumin nenkin, they will give you a discount. The longer you prepay for, the bigger the discount. If you prepay the maximum 2 years’ worth, you get a 15,640 yen discount.
[Marxist rant] Somehow this seems unfair to me. I understand why they are offering this discount (they can save on admin costs and get the money in advance) but a lot of people on kokumin nenkin are hurting financially and unlikely to have 400,000 yen lying around. Those that do, probably don’t need the discount. [/Marxist rant]
We already prepay my wife’s kokumin nenkin in six month batches (giving us a 4,480 yen discount over two years, according to the table above) using a credit card to get air miles. The question is, should be prepay the full two years?
In favour of the motion, we could pay once and then not worry about it for two years, and it’s a 4% guaranteed return.
Against the motion, we have a good chance of doing better by investing the 400,000 yen and just paying kokumin nenkin every month or every six months as we do at the moment.
I suspect there is not much in it and both options are reasonable.
Personally I am inclined to prepay the full two years as this will diversify our investments somewhat and allow us to yen cost average into the stockmarket. I suspect we’ll have a stock pullback/crash sometime soon and the guaranteed 4% return will look pretty good at that point.
What do you think? Which is the better option in your opinion?
Wait, so you pay Y400’000 for 2 years worth, and you save Y16000. So, that’s a 4% return over two years, right? so, in other words, less than 2% per year?
It doesn’t sound like a “great” investment to me. I agree with the idea of it as a diversification effort, but I probably won’t bother, and instead put my money in my ETFs as usual.
Yeah, it’s less than inspiring, eh? For us I think it might make sense, but it’s by no means a convincing argument…
But you are paying via credit card, so you would also get the rewards for that, which could be an extra 2% or so no?
Yes, that is true, but you can also pay by credit card if you pay it monthly, six months, etc. so it doesn’t affect the decision to prepay two years or not…
Well… We do have that much sitting around for an emergency fund which is earning 0%. But like my wife pointed out, you have to be sure you will be here for two years. For some of us getting one year contracts every year, it’s would not be worth the headache of trying to figure that out.
That’s a good point. All things considered (including the hassle of calling them to set it up), perhaps we’ll just stick to paying every six months…
My biggest concern (and this doesn’t apply to everyone) is that when you do your yearly taxes you might get one huge deduction one year and nothing the next. This is assuming they don’t allow you to split the expense over 2 years of course.
I would especially be worried if I didn’t make that much to begin with and wasn’t able to use the entire deduction. That would seem like a waste. Hopefully they would have some sort of carryover provision for this sort of case.