Depends, but generally as late as possible.
JAPAN
For Japan, the normal age to start claiming nenkin is 65. For each month that you delay claiming, your pension will increase by 0.7%. If you delay until 70 (the maximum) you will receive 142% of the usual pension.
EDIT: Japan now allows you to defer your nenkin to 75, which would continue the table below until a maximum pension of 184% from age 75.
Most people that make it to 70 will probably live another 10-30+ years. Particularly as they get older a regular government payment will be much easier to handle than an investment portfolio so it might make sense to spend down your investments if that will allow you to delay starting to take your pension.
THE UK
The UK system is more generous than the Japanese one for the basic pension, but less generous for postponing. Currently for each nine weeks you postpone taking your pension it will increase by 1%. One important point is that the amount of the base pension will be set when you reach the normal age and will not increase in line with the ‘triple lock’ if you are living outside the UK or a country that allows for those increases (Japan currently does not).
THE US
It seems like you can currently defer social security until you are 70 years old, and your pension will increase by 8% per year deferred. This is broadly in line with Japan.
SO WHAT?
As a state pension is basically an income floor (insurance against being poor) for many people it makes sense to take it as late as possible, in order to maximise their minimum income. As we talked about in the pensions are not investments post, it is not really helpful to try to figure out how to get the maximum amount out of your pension, but rather to increase your chances of having a comfortable life in retirement.
This means that one useful strategy is to try to save up enough money to live on between retiring from your main job and receiving your state pension as late as possible. This should be possible even for people who are close to retirement if they make an effort or work part-time to make ends meet.
Right now my wife and I will probably take our Japanese and UK pensions as late as possible in order to maximise the amount we receive each month.
What do you think? Are you currently planning to defer your pension? Any flaws in my reasoning?
I’m taking my pensions, but the 国民年金 is not much–about ¥38,000/month in my case. Multiply that by 1.42 and it’s ¥53,960, and let’s call that ¥54k.
¥38k x 12mo x 5yrs = ¥2,280,000. To regain that from the difference in the higher payment would be that total divided by 14,000 = ~163mo, or ~13.6 years. So I’d have to live to 83.6 to break even (70 + 13.6).
But let’s pretend that I do take the ¥38k/mo for those five years, instead of delaying it that long–and that, instead of spending it, I invest it, and get a return of 4%. Then, instead of ¥2,280,000, I’d have ¥2,620,000. Divide that by that difference of ¥14,000, and that’s another 24 months I’d have to live to break even (up to 85.6 years old). And something over ¥2M in hand could be given away, used for your own benefit, or left aside and reserved as money towards a funeral.
Okay, okay, pensions are not investments…! I understand that.
Just playing with some numbers to see (and I hope I got those right!).
Mathematically correct, but behaviourally slightly optimistic perhaps 😉
Also somewhat likely that you would lose money in the short- to medium-term.
I believe you can defer kosei nenkin too, as well as kokumin, for the same gain. For us that would be increasing our 200,000 a month (rough estimate) to 300,000 a month or so, which would take it from survival to somewhat comfortable 🙂
I suppose another consideration with delaying pension till 70 is that you’d likely choose a more conservative investment allocation for the years leading up to your 65th–knowing that you’d be relying on that totally. Five years might be the minimum for that switch. Earlier could be safer, while later might be rolling the dice.
A corollary could be that taking your pension at 65 could mean that you could invest more aggressively up to that age, perhaps even longer.
I guess for people with money/investments it’s just a matter of personal preference, but for people who are underprepared for retirement this could make all the difference -doing some part-time work and spending down savings in exchange for a more comfortable retirement long-term…
I get the feeling most people don’t know about this option, or really understand the potential.
For the US and Japan, the age at which you can receive 100% of SS or pension is slowly being increased. It depends on your date of birth. I know that my 100% age is 67years and a few of months. So we are planning around my husband’s 100% age, which is more than 65. We have a few years to go.
It is hard to decide whether to start at 100% age or delay. I have a Japanese pension calculation from about 15 years ago and a more current one. The amount I would receive has dropped by several 10,000yen. So waiting 5 years may reduce the amount even further, especially since we are towards the end of the baby boom generation. In Japan, I think that is relevant to the pension calculations.
That’s an interesting point, but I believe the amount is set when you reach pensionable age, and they apply the bonus (penalty) to that. I can’t imagine it changing in the short-term.
Even now changes to the pension system are implemented on people further from the goal (normally expressed as ‘people born before/after arbitrary date’).
Delaying is basically betting that you will live longer, and that you have the means to live without your pension in the meantime. I think it makes sense for a lot of people.