Retirement bonus/pension tax on iDeCo

[RetireJapan]

That is very interesting ivanpgs. For my own situation this will work out well: get retirement bonus from job fairly soon, and take iDeCo much later.

How about more normal people though?

a) take iDeCo at 60, then get retirement bonus at 63
b) get retirement bonus at 63, then take iDeCo at 70 (but no contributions so no tax-exemption?)
c) get retirement bonus at 63, take iDeCo at the same time (can you share the tax-free allowance?)

[fools_gold]

a) take iDeCo at 60, then get retirement bonus at 63

I think Case 3 in this article covers it...maybe . It's all very complicated...
https://news.goo.ne.jp/article/financia ... 43754.html
My understanding is that whichever you take first, the tax allowance is calculated in the same way. i.e, it's based on the total length of service and contributions and overlapping years are not considered separately. If you use up your whole tax allowance cashing in your ideco the first time around, then you'll just get the extra allowance accrued in the intervening years. However, if you didn't use all your tax allowance up the first time, then the allowance is recalculated using "deemed years of service" 「みなし勤続年数」so that you don't lose out.

b) get retirement bonus at 63, then take iDeCo at 70 (but no contributions so no tax-exemption?)

From here https://toyokeizai.net/articles/-/221061?page=2: There doesn't seem to be any advantage to postponing because you can't accrue any more service years or ideco contribution years to build up extra tax allowance (last paragraph on the page).

c) get retirement bonus at 63, take iDeCo at the same time (can you share the tax-free allowance?)

Yes, but you don't get any extra allowance for overlapping periods. (Case 1 from the first article).

According to this article https://dc.daiwa.jp/ideco/column/article_104/, if you're likely to go over your allowance it might be a good idea to receive your ideco as a pension rather than a lump sum. You can get 600,000 yen per year tax free between 60 and 65.

My workplace has a retirement age of 63 so I'm in this exact situation. Most of the worked out examples I've seen have people retiring at 65, in which case they can take advantage of the five year rule and get a separate tax free allowance for both their ideco lump sum and taishokukin.

[regular]

Yes, I was also following this thread with interest. I teach at a private university where we retire at 65. If everything is OK, I will then have 30 years at this university and my retirement allowance is expected to be above 15 million yen. So I will use up my full tax-free allocation. I have not yet invested in NISA, iDECO, Tsumitate NISA.

I started to invest in individual Japanese stocks and funds in taxable MONEX account some 20 years ago and to be frank, I have not yet been able to recoup the losses. So I just kept money in cash to prepare for the eventual reality that I will retire in 9 years. I also carry a mortgage that still has 18 years to go. My wife does not earn much and my other dependents are still either going to college abroad or otherwise using up funds abroad. I am in a high tax bracket now and I'd like to lower my taxable income now, if possible.

I intend to work and earn beyond 65, though i will then work less, so earn much less and so would be in a much lower tax bracket. Just do not know what should I do with my finances NOW.

Is this a very abnormal profile? If not, how about this as 4th profile in addition to the three that Ben mentioned, retiring at 65, not even invested in ideco, nisa etc but looking at retirement in less than 10 years when a lump sum will be due.

[Kanto]

Yes, I was also following this thread with interest. I teach at a private university where we retire at 65. If everything is OK, I will then have 30 years at this university and my retirement allowance is expected to be above 15 million yen. So I will use up my full tax-free allocation. I have not yet invested in NISA, iDECO, Tsumitate NISA.

I started to invest in individual Japanese stocks and funds in taxable MONEX account some 20 years ago and to be frank, I have not yet been able to recoup the losses. So I just kept money in cash to prepare for the eventual reality that I will retire in 9 years. I also carry a mortgage that still has 18 years to go. My wife does not earn much and my other dependents are still either going to college abroad or otherwise using up funds abroad. I am in a high tax bracket now and I'd like to lower my taxable income now, if possible.

I intend to work and earn beyond 65, though i will then work less, so earn much less and so would be in a much lower tax bracket. Just do not know what should I do with my finances NOW.

Is this a very abnormal profile? If not, how about this as 4th profile in addition to the three that Ben mentioned, retiring at 65, not even invested in ideco, nisa etc but looking at retirement in less than 10 years when a lump sum will be due.

You should strongly consider iDeco and Nisa using low-cost, diversified mutual funds.

If you are incredibly risk-averse you can consider a heavier weighting of government bonds to stocks.

If you are very very risk-averse 国民年金基金 (kokumin nenkin kikin) might be a good option.

Government economists seem to think that 30,000,000 yen, in addition to nenkin, is necessary.
https://www.nippon.com/en/news/yjj20190 ... imate.html

It is worth watching this interview with Jack Bogle -> https://www.youtube.com/watch?v=dABY-e3EsUI