Progress Report 2023

The Progress Continues

It’s the blog post none of you have been waiting for 😉

This year once again I am publishing my personal financial progress report post. You can see last year’s post here (and follow the chain back through time if you are interested -the first was in 2017 or so).

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

2023 was kind of interesting. My income fell a lot, which was more stressful than I had anticipated. Still, despite that I more or less succeeded in my goal to spend more money this year, taking trips to Okinawa, Europe, and around Tohoku and having more quality time with the family.

Stock markets were largely flat, and the yen remained weak. Despite this our net worth once again grew by a multiple of our annual spending, which was reassuring. A few more years of that and I may feel more relaxed about the lack of income. Maybe.

I had a lot more control of my time, which was nice. RetireJapan benefited from this (see next week’s blog post for more details on progress there) with a few big projects finally getting completed. My health was not great this year. I wrecked my knee in February and took most of the year to get it correctly diagnosed, have surgery, and recover from the surgery. My seasonal allergies continue to get worse (would I be better off leaving Sendai?) and my overall health is far worse than it was pre-2020.

All in all though, life is pretty good and I am looking forward to 2024 🙂

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.

As a kokumin nenkin payer, my contribution limit is still 68,000 a month, but I also pay fuka nenkin (400 yen a month) which reduces my iDeCo allowance by 1,000 yen.

The difference between last year:

and this year:

is pretty stunning.

At this rate I’ll be able to pay in for at least another 19 years (it is now possible to pay in until the age of 65), or longer if they extend the limits more in the future.

I ran the numbers a bit (made a video about it) and it seems that if I continue paying into iDeCo at this rate I should end up with over 40 million yen in the account by age 65. I would then have the option at that point to leave the funds in there to continue compounding until age 75 at the latest. Either way, this would probably be enough to fund our retirement on its own.

Just shows how effective it can be to invest reasonable sums of money over time.

I have my account with Rakuten and changed the fund I am investing in this year, from the Rakuten Vanguard all-country fund to the Tawara no-load developed country fund.

The reason I made the change was fees. The Rakuten Vanguard fund I was investing in has an annual fee of 0.192%, compared to the Tawara fund’s 0.0989%.

Yes, that is a tiny difference, but with the amount of money I can put into my iDeCo account, and the number of years it will be invested in there, this kind of small difference in fees will make enough of a difference to be worth the couple of minutes it took to change. One big benefit of iDeCo is that you can easily switch funds and rebalance your portfolio if you decide to (but be careful: you don’t want to be constantly fussing with it).

The funds are not quite the same (the Rakuten Vanguard fund also includes developing countries and Japan, whereas the Tawara fund does not) but the bulk of my investments are in all-world funds so I am not too worried about missing out here.

NISA Progress

The new NISA is almost upon us, and I set up my tsumitate orders for the new account a couple of weeks ago.

Here’s how my NISA account is looking right now. In 2023 I had a tsumitate NISA account:

This will be tax free for another 19 years (until I am 65, funnily enough) so should have a chance to grow a bit. Once it comes out of the tax-free wrapper I can keep the funds invested in a taxable account or sell them without having to pay capital gains tax.

Other than that I just have a few funds in my NISA accounts because of the way I reorganised my investments last year.

Going forward I am planning to use new money to fund the tsumitate portion of the new NISA (100,000 yen a month) and sell some of the investments in my taxable account to fund the growth portion of the new NISA (2.4m yen per year). This should allow me to use up my lifetime NISA allowance by the end of 2028, and then give those investments a chance to grow as much as possible before we need to use them to pay for our retirement. My wife will do the same thing.

Junior NISA

Junior NISA ends this month. After next week it will no longer be possible to add money to the accounts, but existing investments will continue to grow tax-free until the child reaches the age of 18 and assumes control of the account. The funds can also be withdrawn without penalty from next month, but this would be a bit of a waste compared to letting them grow tax-free.

My grandkids all have their accounts, and assuming we can persuade them not to sell but instead transfer the contents to an adult NISA when they reach the age of 18, they should be very comfortable indeed.

Another option is to give them money to invest in their junior taxable accounts (which they got when they opened the Junior NISA). They would have to pay tax on this, but it is a good way to pass some money onto them now rather than waiting and paying inheritance tax on it later.

Mortgage Progress

I still don’t see any reason to pay my mortgage off early. The interest rate on the loan is still 0.5% (floating), my monthly payment is under 30,000 yen, and we have 7,057,635 left to pay over the next 20-odd years.

If I get cancer or die the loan will be paid off by insurance, and I am pretty sure investing any spare money will give me a better return than using it to pay down the mortgage.

Giving Progress

I haven’t given much thought to my giving this year, but continue to donate money to the following charities automatically each month:

I also decided to add the Japanese Red Cross this year. I made a donation of 24,000 yen this week, and will likely continue to do that as an annual donation going forward (annual is much easier than monthly as you only have to type in one amount into the tax form, so I will also be reorganizing my Second Harvest donation to be annual rather than monthly from next year).

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

Overall

Well, that was a long post. Thank you for reading all the way to the end!

Things continue to go surprisingly well on the financial front. I hope you find this inspiring and positive. I can’t believe how much my life has changed since I started taking an interest in personal finance in 2008, and if you get started and make some small changes your life can change in ways your couldn’t imagine too.

How are you getting on with your plan? How did 2023 treat you? We’ll be doing a planning post in January, so have a think about your goals before then.

14 Responses

  1. Thanks for sharing, Ben.

    Honestly speaking, I am always amazed how much of your personal information you are willing to share.

    I guess 2023 has been a good year for most people with investments in shares etc.
    However, I personally am not too much concerned with these snapshot views.
    I hope for you that 19 years from now, when you are 65 and your iDeCo is about to get released, the value of the portfolio is also good.

    Regards,

    Hans

    1. Ha, ha, don’t think anyone is particularly interested but I figure it might be helpful or inspiring for someone.

  2. Hi Ben, thanks for sharing your progress report. It was motivating to read it and review my own financial situation.

    I have a question about the junior NISA. I have regular accounts for my children that I will leave untouched until they are 18. As I understand the current owned assets will gain value and can be withdrawn at age of 18 with no tax.

    So how about monthly investing for my children from now? What are the benefits or disadvantages of the junior taxable account? I hope to continue monthly payments into index or mutual funds for my children-Is this the best approach?

    Many thanks,

    1. I guess the benefit is that you can give them money to them now (as long as they get less than 1.1m yen a year, they won’t need to pay tax on this). The disadvantage is that it then becomes their money and they get full control when they get to 18 years old.

      1. Originally you posted;
        Another option is to give them money to invest in their junior taxable accounts (which they got when they opened the Junior NISA). They would have to pay tax on this, but it is a good way to pass some money onto them now rather than waiting and paying inheritance tax on it later.

        You mean they don’t have to pay tax on it until they turn 18? After 18 they have to pay tax if they make withdrawals? Or it’s totally tax free if deposits under 1.1 mill a year?

        1. Sorry, that could have been clearer.

          If children receive less than 1.1m yen a year in gifts, there is no gift tax to pay.

          Investments in the junior taxable account (tokutei -tax reporting, or ippan -ordinary) are subject to capital gains and dividend tax at 20.315%.

          Investments in junior NISA are tax-free until the child reaches 18, after that point the investments would move into the (no longer junior) taxable account. At that point I recommend the new adult sell the investments, open a NISA account, and rebuy the investments in there.

          1. Thanks again. Now I understand the ordinary account is useful to avoid paying the gift tax.

            20% tax will be on any gains made? It doesn’t seem like a good deal. So for next year what is the best option for monthly purchases of stocks for children under 18?
            I understand that we can’t make any further purchases for the Junior Nisa.

  3. >20% tax will be on any gains made? It doesn’t seem like a good deal. So for next year what is the best option for monthly purchases of stocks for children under 18?

    It is still your best option since there is no tax-free option.
    This is assuming you are maxing out your tax-free space in NISA. If you are not, do that instead (for you and spouse?) and then give the money to the children to invest themselves tax-free from 18.

    1. Hi BEAN, thanks for the comment. Yes, that makes sense-I should use the tax free space in my own NiSa.

      Here’s something I was wondering about. Is it possible for my children to keep the stocks they have in the taxable account after they turn 18 and then just transfer them to a regular adult (tax free account)?

      I’m other words they wouldn’t be selling the stocks, but transferring them, so they wouldn’t have to pay any tax. Or do they have to sell everything at 18?

      Many thanks and happy holidays!

      1. It is not possible to move investments between accounts (ordinary, tokutei, NISA). You have to sell them and then buy them again.

  4. Hi Ben,
    Thank you for providing this information. I’m curious, could there be any complications if a spouse transfers their salary into a joint account under only one person’s name? Specifically, my wife transfers her monthly salary to my account for household expenses. Would this arrangement pose any legal issues or tax implications? transfer is more than 1.1 million per year. Hence asked.

    1. If the money is used solely for household expenses, and you can prove this if audited, no problem. It is not a joint account (these do not exist in Japan).

  5. Happy New Year Ben,
    Thanks for the updates. I like seeing these real life examples especially as I am in a similar situation with my accounts.
    Regarding ideco and changing your fund, is this using “switching”? I’m still a little confused on the whole process.

    Keep up the good work. Looking forward to seeing what’s in store for 2024 and beyond!

    1. Yes, switching is when you sell one fund and buy another with the proceeds. This can be done within the iDeCo account 🙂