Retirement Allowances (taishokukin 退職金)

[hbd]

That colleague forfeiting 40% (I'm imagining around the equivalent $40,000) must be plain desperate to leave. I hope they have a very good job offer somewhere else so that they can make good use of those 8 months!

Seeing as you went to the trouble of finding that correct page deep in the website (and thanks for doing that), did you happen to see whether it said anything there about 退職金 in cases of 'retirement due to ill health'? It strikes me as odd - to say the least- that someone who for medical reasons has no choice but to 'leave on their own' is then docked a huge portion of the money they would have received by staying on a year or 2 until the end of the contract or the retirement age. Would a pro rata figure (e.g.. the stricken individual worked 8 years of a 10-year contract, or worked for 8 years up to age 63 rather than 10 years to age 65, so they receive 80% of the full amount) not be both more appropriate and far more humane in such circumstances?

[regular]

Hope to add a pointer.

I left a faculty position at a national university to join a faculty position at a private university after working for 4 years. I was given 4 x 0.6 = 2.4 months of my last salary as 退職金. However, that was not a case of 40% cut because of leaving voluntarily. Anyone, for any reason, who left before some stipulated time at the national university system then, 5 years I think, got only 60% of the number of months for years worked, more than that for longer work years.

At my current private university, anyone who leave for any reason before working 10 years, get 60% of the number of months for years worked. 23.5 months for finishing 20 years, 41.5 months for finishing 30 years and so on.

[captainspoke]

I was at a small private uni. The chart was in the rule book, and yes, I had a post-it marking the place. The chart was revised for new hires quite a few years ago, but people already there were 'grandfathered' in. I don't think there were any specific year points where the multiple jumped more than some other time. I think the increase was something like this graph, so the longer you'd stay, the bigger the carrot got, slowly at first and then larger yearly jumps as you stayed longer:

I was there 29yrs, retired as expected on the next 3/31st after my 65th, and the relevant multiple was 47.5.

[regular]

Captain,

I think half of your 退職金 above 15 million yen were taxable income the following year. So, how many months out of those 47.5 were gone because of taxes?

[captainspoke]

I don't remember exactly (4.5yrs ago now), but the tax hit was surprisingly small--something like 3-5%, to guess at it. The 人事課 people did their numbers work, and the following year at the tax office that 源泉 was attached (as with others) but as I recall there was no adjustment that following tax season. I think age was a factor, the number of years I'd been at that one school, and maybe(?) that I hadn't had another such payout.

As for "half of your 退職金 above 15 million yen were taxable income the following year", I don't remember that to be the case. The next tax season (for the year following after my retirement year), I don't think anything was carried over.

[RetireJapan]

That colleague forfeiting 40% (I'm imagining around the equivalent $40,000) must be plain desperate to leave. I hope they have a very good job offer somewhere else so that they can make good use of those 8 months!

Seeing as you went to the trouble of finding that correct page deep in the website (and thanks for doing that), did you happen to see whether it said anything there about 退職金 in cases of 'retirement due to ill health'? It strikes me as odd - to say the least- that someone who for medical reasons has no choice but to 'leave on their own' is then docked a huge portion of the money they would have received by staying on a year or 2 until the end of the contract or the retirement age. Would a pro rata figure (e.g.. the stricken individual worked 8 years of a 10-year contract, or worked for 8 years up to age 63 rather than 10 years to age 65, so they receive 80% of the full amount) not be both more appropriate and far more humane in such circumstances?

My colleague is leaving Japan to receive medical treatment. They are pretty much at retirement age and also very much FI. No money worries at all.

In my experience, 'appropriate and humane' carries very little weight when weighed against the written employee manual.

[RetireJapan]

Captain,

I think half of your 退職金 above 15 million yen were taxable income the following year. So, how many months out of those 47.5 were gone because of taxes?

Taishokukin receives special tax treatment under the 退職金控除.

You accumulate a tax-free allowance as follows:

400,000 yen per year for the first 20 years +
700,000 yen per year for the following 10 years

The maximum tax-free allowance is 15m yen after 30 years. This is completely tax free. Anything above the tax free allowance is treated as follows:

1/2 is tax free. The remainder is taxed as ordinary income.

iDeCo also uses this allowance, so it is important to consult a professional if you will receive both in order to figure out what order to take them in, etc.

I have seen universities that allow you to structure taishokukin as a lump sum plus montly payments for x years (presumably to reduce tax).

[fools_gold]

Here's how it works at our school:

The salary multiples increase with years of service. For the first 10 years you get 1 month's salary for every year, 1.1 month's salary for years 11-15, 1.6 month's for years 16-20, etc. If you quit voluntarily or die before you've served 10 years, you only get 60%. If you work 11-15 years you get 80%, and 90% for 16-20 years. After that you get the full amount. There is another set of multiples that apply if you work right up until retirement age.

iDeCo also uses this allowance, so it is important to consult a professional if you will receive both in order to figure out what order to take them in, etc.

Apparently there is a loophole where you can claim the full tax free allowance for both if you cash out your iDeCo 5 years before you receive your taishokukin. Unfortunately, our retirement age is 63, so I can't take advantage of this.

[RetireJapan]

Apparently there is a loophole where you can claim the full tax free allowance for both if you cash out your iDeCo 5 years before you receive your taishokukin. Unfortunately, our retirement age is 63, so I can't take advantage of this.

Generally speaking people with large taishokukin are unlikely to have much of an iDeCo contribution, so might not be such a big problem.

[fools_gold]

Generally speaking people with large taishokukin are unlikely to have much of an iDeCo contribution, so might not be such a big problem.

It's not a huge problem, but I'd prefer not to pay more tax than I need to. When I started my iDeCo, I assumed that it would be tax-free going in and out, but it turns out it's not that simple...