Progress Report 2022

The Progress Continues

This year once again I am publishing my personal progress report post. You can see last year’s post here.

I find it useful to go over my accounts and think about them, and hope this will help you see how you can invest over time here in Japan.

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

Lots to cover, so let’s get started!

Overall Progress

2022 was a year of huge changes, both financial and psychological. A lot happened and I am still trying to get to grips with it in many ways.

The pandemic continued.

My contract at the university finished.

I decided not to look for formal work.

We kind of, maybe, reached financial independence.

I realised I needed to simplify my portfolio.

We had a stock market decline (good!) alongside a very weak yen (bad!).

Despite all that, our finances held up and we’re still comfortably above our ‘number’. I am getting to grips with having a more flexible schedule and lifestyle, and life is good.

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 is now up to 68,000 a month! Finally. Until this year I was working full-time at a university, so was a member of the kyosai and thus my monthly contribution allowance was only 12,000 yen a month (this will be changing from late 2024: kyosai members will be able to contribute 20,000 yen a month from then).

Because I am paying kokumin nenkin, I was able to join fuka nenkin so my effective iDeCo allowance is 67,000 yen a month.

Unfortunately due to how long it took to update my iDeCo settings with Rakuten (changing from kyosai to kokumin nenkin, from paycheck withholding to bank account, etc.) I missed out on contributing in May, June, and July.

Now that it is fully set up though I am looking forward to putting a serious amount of money away over the next couple of decades.

Here is the current overall picture:

Huge improvement compared to last year’s total of 852,408.

At this rate I’ll be able to pay in for at least another 20+ years (it is now possible to pay in until the age of 65) so this should end up being quite a nice retirement bonus.

I have my account with Rakuten and my full iDeCo balance is in this fund: the Rakuten Vanguard World Stock Fund (it’s basically the VT ETF from Vanguard in a Rakuten wrapper).

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 Eternal NISA in 2024.

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

Because I sold everything earlier this year, my NISA account is basically empty other than a couple of mutual fund holdings from 2019 and 2020.

Going forward I have decided to use tsumitate NISA in 2023 (to give me 20 years of tax-free compounding on the money I invest) and start saving up to try to use my full annual allowance for the eternal NISA from 2024 (3.6m yen a year: going to be a stretch!).

Junior NISA

Junior NISA will end after 2023, so we ended up going all out and maxing out all three of our grandkids’ accounts again 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 18 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 NISA or whatever to encourage them to continue investing. That is a while off though (oldest is ten now).

Mortgage Progress

Something else I have changed my mind about. In the past I overpaid the mortgage slightly, but I didn’t bother this year. I don’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 7,376,915 (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. The interest rate on my mortgage is still 0.5%, and I think having a mortgage balance is probably a slight positive overall, so until we want to sell the manshon I won’t pay off the mortgage early.

Mutual Fund Progress

All my investments are now in mutual funds. I made that change earlier this year and finished selling all my investments by the end of March or so. I somehow timed the stock market perfectly but didn’t see the weak yen coming.

I now own just two mutual funds: the eMaxis All-Slim international stock fund and the eMaxis developed country bond fund. My target allocation for these is 80-20 and I try to rebalance by buying the weaker one each month. In the future I will buy the stock fund in NISA and the bond fund in my taxable account.

I think this is going pretty well and am much happier with how I am going to run my portfolio in the future (while contributing and then in retirement). Simplicity really is wonderful.

Dividend Progress

I no longer own any dividend paying stocks so this category will be eliminated from next year’s progress report.

Giving Progress

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

I will increase some of these amounts 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…

Some huge changes this year to my lifestyle, and a big reduction in income. So far so good, but will be trying to earn more next year to get ready to fund my eternal NISA! I want to max that out as soon as possible, so 3.6m a year from 2024-2028.

Worry not, I will keep you posted.

How are you getting on with your plan? Was 2022 okay for you too? We’ll be doing a planning post in January, so have a think about your goals before then.

10 Responses

  1. Continue to pay a great deal to have my wife taken care of at home rather than in a home or hospital. Forces me to keep working (I’m 67) so I will carry on until they force me out at 70. Apparently, that’s the new age to get someone out. Part time of course, university made me retire at 65.
    I get my wife’s nenkin plus what she gets from a life insurance account. Then I get my nenkin and the nenkin I get from a postal account along with working keeps me Ok in spite of paying over $5million a year to take care of her.
    So the savings are being depleted but slowly.
    I also donate to the Jimmy Fund which is dedicated to helping children with cancer in Boston as well as donating to homeless shelters and feeding the hungry in Boston.
    Hopefully, I will still be able to support them in the future.
    So as long as I continue to get my nenkin which doesn’t cover much we should be OK……..Merry Christmas

  2. Why is a Weak Yen bad? It depends whether your base currency is Yen or other…
    If you have funds already invested overseas, it increases your Yen denominated returns, or at least reduces your losses, as has been seen.
    The Strengthening Yen will reduce your returns, or expose or amplify the full extent of your losses denominated in US$ (and other foreign currencies).
    On the other hand, a Weak Yen makes it more expensive to put new Yen Funds into US$ (and other foreign currency) denominated assets.
    As the Yen Strengthens, these foreign currency denominated assets purchased with Weak Yen will lose value in Yen, meaning the assets will have to grow at a high rate just to make up for the Yen denominated loss and break even.
    On the other hand, if your base currency is US$ (and other foreign currencies), then the Weak Yen gives you the opportunity to buy Japanese assets at deep discount prices, be it real estate or equities, which could bring investment capital to Japan and generate significant gains as the Yen strengthens.
    Therefore, the Yen Weakness itself is neither good nor bad. It may be Bad for one, but Good for another.

    1. True!

      Just writing from my perspective, as someone who is planning to continue buying world stock funds for the next couple of decades.

      A falling stock market is good because my funds are cheap, a weak yen is bad because I can’t buy as much of the funds as I would have been able to with a strong yen.

  3. Thanks, Ben. Always interesting to read these updates.

    I have a quick question, is the monthly contribution allowance for ideco changing just for kyosai or are the other allowances changing, too?

    1. As far as I know, just for kyosai!

      There was a change this October that allowed more people with company DC plans to pay into iDeCo as well ^-^

  4. Great share, Ben.

    With regards to your mortgage progress, am I reading correctly that you bought your mansion apartment for just 9.9 million yen?

    I wonder where you’re located…

    1. We’re in Sendai. Outside the center, next to a train station. We got a great deal, and the manshon seems to have appreciated now. Similar units in the building have been selling for 15m+.

      1. I see, thanks again for sharing and congratulations on the apartment and continued appreciation.

  5. Sorry for the late comment on this great post, but I’m interested in your future mutual funds plan to buy the stocks on the NISA and the bonds on the taxable. Is the logic that the stocks are more likely to grow, therefore benefiting from tax exemption, than the bonds, which should be steady Eddie?
    Thanks again…great work as always!

    1. Yes, all things being equal you should put the investments you expect to grow the most in your tax advantaged accounts, as you will save more on taxes that way.

      (great name by the way, used to hear it a lot on late night radio when I were young)