Review: iDeCo (J401k) Book

The new edition of the best guide


I’m a big fan of Minako Takekawa, a financial journalist, author, and speaker. Hope to make it to an event and meet her one of these days.

In the meantime I will have to make do with her excellent rewrite of her J401k book. I was a big fan of the first edition (published 2013) but this one is even better, fully updated with the changes coming next January.

This is the best book I am aware of about the J401k, and I recommend it to anyone that can read Japanese. It’s also good to give to a Japanese spouse or friend, as it is written in a clear and non-specialized manner (I found it great as she explains financial terms, often putting furigana on them).

Here are the highlights.

1. The J401k had a terrible, cumbersome name in Japanese: 個人型確定拠出年金 which no normal person understood and sounded horribly complicated. In line with the expansion of the scheme from January, the government has come up with a new, ‘catchy’ name for it: iDeCo (pronounced イデコ), short for individual defined contribution. Note the Apple-seeming lowercase ‘i’.

Only five years too late, MOF dudes 😉

We’ll see if the name catches on. In the meantime, the longer version is descriptive and, while a bit of a mouthful, is more likely to be understood at the moment.

2. From January, pretty much everyone (the cover of the book unfortunately says ‘all Japanese people can join the scheme’, but I’m guessing the author isn’t really thinking of an international audience) who is working and paying into the state pension scheme in Japan will be able to open one of these accounts (even dependent housewives or -husbands). The maximum monthly payments are as follows:

  • Self-employed/freelance: 68,000 yen
  • Company employee: 23,000 yen
  • Public servant: 12,000 yen
  • Housewife/husband: 23,000 yen

3. The tax savings can be considerable. You can check how much you would save in income taxes and local inhabitant taxes by going to this website.

Even though I will be paying in as a public servant (the lowest rate) the site gives me the following if I pay in the full amount of 144,000 yen a year:
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So that is annual savings of 43,200 yen, a 30% rate of return. Unbelievable. I would save almost a million yen in taxes just by funding my J401k account until I am 60.

Ms. Takekawa recommends people also invest the saved taxes rather than spending the money. I strongly agree!

4. You have to choose where to open your account. You can compare providers at this website. The important aspects to think about are: monthly fees, range of products offered, and service. Here’s a screenshot of what it looks like.


You can sort by the various categories.

I am considering opening my account with Rakuten Securities as they are one of the cheapest providers, have a decent range of products, and most importantly I already have an account so it will be very easy.

5. You can cash out at the age of 60 or let the money ride until you are 70. There is a lot to think about regarding when and in what form (lump sum, installments, or a combination of the two) and the book provides a lot of detail on this.

​Basically Ms Takekawa has once again written the definitive guide to the J401k. I’ll be updating our J401k page with the newest information, but I really recommend getting the book for the most complete picture.

And of course, if you are likely to be in Japan until you are 60, you pay taxes and contribute to the state pension system, and you have a bit of spare money each month to invest, you should definitely open one of these accounts.

They are a win (reduced taxes), win (tax free investing), win (tax advantaged payout) proposition.

The only people who should not do this are US citizens, because of their tyrannical and illogical tax system. It is my understanding that the IRS would not consider J401k accounts to be tax-advantaged, and also additionally penalize people who invest in non-US domiciled mutual funds.

There is a chance Americans could use the J401k for the tax savings only by investing in savings accounts or insurance products, but they should seek professional advice before doing so.

I’d like to thank Desmond P. again for providing some of the links in this article.

Any questions? Anyone already have a J401k account?

11 Responses

  1. Great to see the upcoming changes to the J401k system. Just the tax savings alone is immensely compelling!
    There are however 2 important points for us investors to take note of.
    (1) The law which states that capital gains are not taxed upon withdrawal will expire on 31 December 2037
    This should not be too much of an issue since there is a guaranteed 20 years of tax free compounding.
    Do also take note that this 20 years window coincides with the upcoming changes to the NISA scheme. Probably not unintentional.
    (2) There is a law called 特別法人税 (Special Corporate Tax) which can be applied on J401k accounts
    The implementation of this has been continuously frozen for many years.
    Once activated all J401k accounts are subject to a flat annual tax rate of 1.173% regardless of circumstances, which is a de facto 1.173% management fee for us investors.
    It is highly doubt that this law will ever come into effect, but if the Japanese bureaucrats suddenly decide that they need more money then all bets are off 😉

  2. So if I work for a private university, I should be able to qualify for the ‘company employee’ category, right?

    1. Hi TS
      That’s a tricky one. Until now teachers at private schools and universities have been treated the same as public servants (ineligible to join the scheme), which makes me think they might be treated as public servants going forward.
      One way to find out would be to ask your HR department (人事), however in my experience no-one understands the system so you might not get a decent reply.
      The best way to find out is to get an application pack from one of the J401k providers and submit the form that employers have to fill out, which guarantees that it will get kicked up the chain high enough to get an answer. You might have to wait until January to do this though.

  3. Thanks Ben for keeping the information coming. I’ve just ordered the book and will hopefully get through it over Christmas.

  4. I read the whole thing and it took me 4-5 days, but you could save a lot of time by skipping sections that don’t apply to you (maybe 30-40% of the book?). She’s very thorough, which means that not all the content is necessary for each person.

  5. Would you recommend this for those who aren’t sure where they’re going to retire? Presumably you can still cash out at 60 regardless of where you’re living?

    1. Hi Adam
      I checked with Iwate Bank (my wife’s provider) earlier this year, and they told me, if you leave the country:
      1. you can’t contribute any more money
      2. you can continue to administer the account (changing the investment allocation)
      3. you would get access to the money as normal between 60 and 70 years of age
      There is a small amount of political risk (the government may change the rules) but I would recommend it just for the tax saving if nothing else.

  6. Do the iDeCo investments have to be done monthly, or is it possible to invest the same amount of cash but split into payments once or twice a year? Thanks! (This could matter for U.S. investors seeking to mitigate paperwork needed to deal with irritating U.S. tax laws.)

  8. I’m afraid so. Playing into the national pension is a legal obligation for all adult residents of Japan, and you cannot use iDeCo without being paid up.