Progress Report 2021

The Progress Continues

This year once again we will combine all the progress report posts into one huge long report. I think they work better as one post. You can see last year’s post here (spoiler alert: this year’s is very similar).

We’re going to cover the following areas in order:

• Overall Progress
• iDeCo Progress
• NISA Progress
• Mortgage Progress
• Mutual Funds Progress
• Dividend Progress
• Giving Progress

Lots to cover, so let’s get started!

Overall Progress

Strictly in a financial sense, 2021 was a fantastic year. Stock market gains, combined with the appreciation of the dollar against the yen (most of our investments are US based), and our regular contributions means that our net worth is up more than 20% year on year (and last year wasn’t too shabby either).

This has very much softened the blow of me losing my job next March, although I am a bit wary of relying on our current numbers -I am expecting some kind of stock market drawdown/correction/crash, although of course neither I nor anyone else has any idea of if or when that might actually happen.

In practice this just means we keep socking money away every month into mutual funds and dividend stocks. The constant drip drip drip into our investments has taken us from broke to pretty much financially independent in just fifteen years -an amazing illustration of the power of good financial habits.

The bulk of our assets have come from saving my salary and the profits from my wife’s business, helped along by stock market growth. It happened very slowly at first, then in the last few years very quickly. The key I think was just to save and invest consistently every month.

iDeCo Progress

At the risk of repeating myself, I think iDeCo is one of the best investment options for people who are planning to retire in Japan.

My contribution limit on this account remains frustratingly low as I am a member of a kyosai, but this will change from April next year and I should be able to put in much more. My current maximum contribution is only 12,000 yen a month. Non-kyosai salaried workers may be able to contribute up to 23,000 yen a month, and people paying kokumin nenkin up to 68,000.

Here is the current overall picture:

Again steady growth compared to last year’s total of 645,966. The markets were kind this year, but what this really shows is the power of monthly contributions. Even investing a small amount of money every month can end up being a significant sum.

At this rate I’ll be able to pay in for at least another 21 years (the government recently extended the pay-in period by five years to 65) so this should end up being quite a nice retirement bonus.

I have my account with Rakuten and finally got round to switching funds last year as the ones I had chosen originally were no longer competitive with new options.

This allocation is a bit weird, as I decided to move my entire balance into emerging markets last year, and then allocate new funds into the all-world Rakuten fund.

My reasoning for doing this was that emerging markets looked very cheap when I made the changes. This is essentially a small bet that in the future emerging markets will outperform and the US (which makes up most of the world stock market) will underperform. We’ll see how that turns out!

NISA Progress

NISA is not as good a deal as iDeCo, but it does have some advantages, mainly that your money is not locked up (you can cash out at any time) and the contribution limits are much higher.

The current ordinary NISA will be replaced with the New NISA in 2024.

Here’s how my NISA account is looking right now:

I have decided to switch to tsumitate NISA in the future, but will be rolling my 2017 holdings into an ordinary NISA for 2022. Being able to put over 2m into a new NISA year was just too good to pass up.

My 2018 holdings were mostly fossil fuel individual stocks, which I got rid of towards the end of 2018. Seeing as I have almost nothing to roll over, 2023 should be a good chance to start using tsumitate NISA and building my retirement income ladder.

Junior NISA

Junior NISA is going to end at the end of 2023, so we ended up going all out and maxing out all three of our grandkids’ accounts this year (with some help from their parents and the other grandparents)!

We’ll probably try and do the same next year, and then just invest in the normal taxable accounts that come with the NISA until the kids reach the age of 20 and get control of the accounts.

After that when they start working I am considering doing some kind of ‘matching’ thing, where I will match their contributions to tsumitate NISA or whatever to encourage them to continue investing. That is a while off though (oldest is nine now).

Mortgage Progress

Something else I have changed my mind about. Last year I overpaid the mortgage slightly, but I didn’t bother this time round. I didn’t qualify for the mortgage tax refund, so that doesn’t come into consideration, and our monthly payment is under 30,000 yen so it isn’t big deal either way.

I still owe 7,694,603 (we originally borrowed 9.9m to buy our manshon for 9m), and our final payment is due in October of Reiwa 26 (2044).

My bank allows me to make extra payments without any kind of fee, so in the future I may or may not continue overpaying this. It doesn’t make much difference either way.

Mutual Fund Progress

A few years ago I opened an account with Monex to replace my THEO account after I decided the fees for THEO were just too high and buying a cheap mutual fund would probably yield better results.

So that’s what I did. I bought the eMaxis Slim global ex-Japan fund and had 50,000 yen a month taken out of my bank account automatically and put into that fund.

Recently I got a Rakuten credit card, so I decided to move this 50,000 yen a month purchase across to my Rakuten account instead. Along with this I decided to sell out of this account and move the money across to Rakuten.

While there are minor advantages to having more than one broker account (mainly in terms of security), there is also an advantage to having all your investments in the same 特定口座 (tax-withholding account).

Going forward I am planning to move my iDeCo to Monex and keep all my taxable investments at Rakuten. My wife also does this by having iDeCo at SBI and NISA/taxable at Rakuten.

Dividend Progress

This year was pretty good for dividends: I made an effort to get more dividend paying stocks, and especially to get more Japanese ones.

While I believe that the best way of investing for most people is going to be buying cheap diversified index funds and holding them for the long-term, I also kind of like dividend investing.

It may have a lower expected return and be less tax-efficient, but there is something about getting dividends every month and seeing them grow over time that appeals to me. I also love the simplicity of them: you don’t need to think about selling things when you need an income from your investments as you automatically get the dividends coming into your account.

I own mostly US dividend-paying shares, but also have some Japanese ones.

These are the annual dividends I have received over the last eight years (shown in yen, although most of them were actually received in US dollars):

Eventually I would like to fund my tsumitate NISA entirely from yen dividends (this is a medium-term goal as my yen dividends this year were only around 65,000 yen) and also earn at least 1.2m as a supplementary income (this is a long-term goal, I’m hoping to achieve it by the time I get my Japanese and UK pensions).

A few people have expressed an interest in seeing what stocks I hold, so I wrote a comprehensive blog post about my portfolio in June this year.

Giving Progress

I am continuing to donate money to the following charities automatically each month:

• charity: water $30/month
• Courageous Kitchen $25/month
• Amnesty International 2.50GBP/month
• The Severn Hospice 10GBP/month
• Second Harvest 3,000 yen/month
• Ocean Cleanup $10/month

I ended up adding the last two last year from reader suggestions (thank you!), and would like to add 1-2 more this year. Environmental charities and charities in Japan preferred. Please post any suggestions in the comments.

Also if anyone would like to donate to charity: water please consider doing so through my referral link.

Overall

Well, that was a long post. I’ll be surprised if anyone actually reads to the end…

So far so good, but some very big changes coming for us next year. I will leave formal employment and transition to freelance/project work as well as helping my wife with her business. We’re hoping to sell that in the next 3-5 years, which would also be a huge change.

Worry not, I will keep you posted.

How are you getting on with your plan? Was 2021 okay for you too? We’ll be doing a planning post in January, so have a think about your goals before then.