Quick questions about a retirement plan for 20y/o

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adamu
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Re: Quick questions about a retirement plan for 20y/o

Post by adamu »

UnderscoreEX wrote: Wed Aug 18, 2021 9:12 pm 1) As I have heard there is an option to extend from the 5y Nisa to Tsumitate Nisa, would you advise to start with 5 year and switch to 20 afterwards? (I saw some threads about maximizing your Nisa investments doing this however I am not sure if it was only an option for me starting out)
You can try to game it (by doing 5 years NISA + switch to Tsumitate), but then you won't be able to roll over your original NISA. So it'll get max 5 years protection. If you start with Tsumitate from the beginning, you get 20 years from the start.
Better to just keep it simple and start with Tsumitate. You can always top up extra in a taxable account.
UnderscoreEX wrote: Wed Aug 18, 2021 9:12 pm 2) Do you think that i am missing out by being limited to Japanese funds? Stocks and ETFs were the main recommendations everywhere I have searched before this.
No. ETFs are just funds traded on the stock exchange. With iDeCO and Tsumitate, you just buy the funds direct rather than on the exchange. The only thing different is that you can't buy regular stocks. Japanese funds still invest internationally and there are plenty of options.
UnderscoreEX wrote: Wed Aug 18, 2021 9:12 pm Would anyone have a recommendation for the best options with Rakuten for Nisa and iDeCo?
In my travels so far I have heard of
- Rakuten US Stock index fund, which is good for passive investment with low purchasing fees
- VTI (vanguard) which was not recommended for passively investing, because of its high transfer fee.
For Rakuten iDeCo, the simplest option is the Rakuten Whole World Index fund.
This fund is a wrapper of the VT ETF. So it's more expensive than buying VT directly, but you also get (some) tax protection.
Consider that VT itself is 0.08% but the Rakuten fund is 0.212%.
eMaxis Slim All Country for comparison is 0.1144%

For Rakuten Tsumitate NISA, eMaxis Slim All Country is available.
UnderscoreEX wrote: Wed Aug 18, 2021 9:12 pm Would this still apply to me? as ETFs and Stocks aren't an option with Rakuten?
Maybe I am confusing US funds with Japanese funds of US stocks (the terminology is still getting hard to grasp)
It depends what you buy. If the Japanese funds subsequently buy foreign stocks or ETFs, you will be exposed to the taxation that comes with that. The Rakuten fund is 100% VT, a US ETF. So 100% of the dividends (including Japanese and other non-US dividends) are subject to US Tax, even inside an iDeCo. At least, that's my understanding.

Summary
If you're set on Rakuten.
iDeCO: 100% 楽天・全世界株式インデックス・ファンド
Tsumitate: 100% eMAXIS Slim 全世界株式(オール・カントリー)
Is what I would do.
Last edited by adamu on Thu Aug 19, 2021 1:58 am, edited 1 time in total.
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Re: Quick questions about a retirement plan for 20y/o

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beanhead wrote: Thu Aug 19, 2021 1:42 am
Established wrote: Wed Aug 18, 2021 11:44 am Japanese investment accounts are only insured up to 1000万.
The risk is of course low. HOWEVER banks have failed in Japan (mainly smaller local ones).
I was aware of the bank 10M limit on insurance, but not that there is a similar limit for brokers as well.
I also need to do more research into this. I thought that theoretically investments are stored in nominee accounts, so even if the broker collapses, the investments are secured. Theoretically... So I assume the 10M limit would only kick in if that also failed.
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Re: Quick questions about a retirement plan for 20y/o

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adamu wrote: Thu Aug 19, 2021 1:49 am You can try to game it (by doing 5 years NISA + switch to Tsumitate), but then you won't be able to roll over your original NISA. So it'll get max 5 years protection. If you start with Tsumitate from the beginning, you get 20 years from the start.
Better to just keep it simple and start with Tsumitate. You can always top up extra in a taxable account.


For Rakuten iDeCo, the simplest option is the Rakuten Whole World Index fund.
This fund is a wrapper of the VT ETF. So it's more expensive than buying VT directly, but you also get (some) tax protection.
Consider that VT itself is 0.08% but the Rakuten fund is 0.212%.
eMaxis Slim All Country for comparison is 0.1144%
Just checking that these numbers (0.08%, 0.212%) are brokerage fees for buying the stocks, right?
So it costs a little more but it still a the best option.
It depends what you buy. If the Japanese funds subsequently buy foreign stocks or ETFs, you will be exposed to the taxation that comes with that. The Rakuten fund is 100% VT, a US ETF. So 100% of the dividends (including Japanese and other non-US dividends) are subject to US Tax, even inside an iDeCo. At least, that's my understanding.

I see. And even with this tax, it would still be a better ROI to choose this option?
I am not too worried about if it is an amazing choice, but just if it the most responsible choice with the current options.
Summary
If you're set on Rakuten.
iDeCO: 100% 楽天・全世界株式インデックス・ファンド
Tsumitate: 100% eMAXIS Slim 全世界株式(オール・カントリー)
Is what I would do.
Thank you so much. I will mark all of this down and get started with all of the applications.
You have been a great help ! :D
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Re: Quick questions about a retirement plan for 20y/o

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UnderscoreEX wrote: Thu Aug 19, 2021 3:46 am Just checking that these numbers (0.08%, 0.212%) are brokerage fees for buying the stocks, right?
So it costs a little more but it still a the best option.
No, those are annual fees on the entire balance. So keeping them low is a huge priority. Although for these funds, they're all pretty low.
You don't actually see the fees, because they are deducted from the underlying assets, but they're reflected in slower growth.
UnderscoreEX wrote: Thu Aug 19, 2021 3:46 am I see. And even with this tax, it would still be a better ROI to choose this option?
I am not too worried about if it is an amazing choice, but just if it the most responsible choice with the current options.
Personally I can't justify paying Rakuten 3x the underlying fund fee for nothing, with the tax disadvantages added on top.
That's why I recommended eMaxis Slim with Monex instead, for the iDeCo. But Rakuten is not a terrible choice, if you feel more comfortable keeping everything in one place. It even covers slightly more of the market than the eMaxis slim option (it uses a broader underlying index). Once you've set up the iDeCo, it's not really worth switching, so better to put some thought into it now.
UnderscoreEX wrote: Thu Aug 19, 2021 3:46 am Thank you so much. I will mark all of this down and get started with all of the applications.
You have been a great help ! :D
This is just my advice, and I'm an eMaxis slim / simplicity evangelist (although only because it's the best option right now 😎), so maybe other people have other opinions? These recommendations will give you a globally diversified 100% stock portfolio. I don't think you can go wrong with that getting started at ~25. :-) The only risk is that you panic next time there's a market crash and switch to lower risk assets, which will lock in your losses. So, don't do that. Easy to say, but it's probably the hardest thing any investor can go through seeing their savings vanish (albeit temporarily, hopefully...).
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Re: Quick questions about a retirement plan for 20y/o

Post by zeroshiki »

I think Rakuten offers emaxis Slim Developed Countries and emerging markets funds so you could build your own All Country if you feel really strongly about it. Someone else probably has the percentages.
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Re: Quick questions about a retirement plan for 20y/o

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zeroshiki wrote: Thu Aug 19, 2021 4:46 am I think Rakuten offers emaxis Slim Developed Countries and emerging markets funds
Not in their iDeCo (although SBI do).
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Re: Quick questions about a retirement plan for 20y/o

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adamu wrote: Thu Aug 19, 2021 4:14 am
No, those are annual fees on the entire balance. So keeping them low is a huge priority. Although for these funds, they're all pretty low.
You don't actually see the fees, because they are deducted from the underlying assets, but they're reflected in slower growth.
Oh I understand. Thanks for clearing that up .
Personally I can't justify paying Rakuten 3x the underlying fund fee for nothing, with the tax disadvantages added on top.
That's why I recommended eMaxis Slim with Monex instead, for the iDeCo. But Rakuten is not a terrible choice, if you feel more comfortable keeping everything in one place. It even covers slightly more of the market than the eMaxis slim option (it uses a broader underlying index). Once you've set up the iDeCo, it's not really worth switching, so better to put some thought into it now.
Yes, you are right about that. I have time now so I will take a look at the SBI option for iDeCo. I can still use my Rakuten account for Nisa so at least it wasn't a waste to set it up.
This is just my advice, and I'm an eMaxis slim / simplicity evangelist (although only because it's the best option right now 😎), so maybe other people have other opinions? These recommendations will give you a globally diversified 100% stock portfolio. I don't think you can go wrong with that getting started at ~25. :-) The only risk is that you panic next time there's a market crash and switch to lower risk assets, which will lock in your losses. So, don't do that. Easy to say, but it's probably the hardest thing any investor can go through seeing their savings vanish (albeit temporarily, hopefully...).
Yeah I have been doing a lot of research about general investing and that was the consensus too. This might be too much of a different topic but a lot of the info that I saw is saying that the market will likely crash very soon so it is a worry. But I haven't got anything in it yet so I can't let it stop me now.

Thanks again for the help.
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Re: Quick questions about a retirement plan for 20y/o

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UnderscoreEX wrote: Thu Aug 19, 2021 8:26 am This might be too much of a different topic but a lot of the info that I saw is saying that the market will likely crash very soon so it is a worry.
https://jlcollinsnh.com/2012/04/15/stoc ... -save-you/
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Re: Quick questions about a retirement plan for 20y/o

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UnderscoreEX wrote: Thu Aug 19, 2021 8:26 am
Yeah I have been doing a lot of research about general investing and that was the consensus too. This might be too much of a different topic but a lot of the info that I saw is saying that the market will likely crash very soon so it is a worry. But I haven't got anything in it yet so I can't let it stop me now.

Thanks again for the help.
If you are 25, you have 30 or 40 years to invest to build a nice sum. If you invest regularly, sometimes the market will be up and sometimes it will be down. Treat that as noise and ignore it. Just keep investing in sensible, diversified funds and you will not regret it.
Aiming to retire at 60 and live for a while longer. 95% index funds (eMaxis Slim etc), 5% Japanese dividend stocks.
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Re: Quick questions about a retirement plan for 20y/o

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beanhead wrote: Fri Aug 20, 2021 8:24 am sometimes it will be down. Treat that as noise
It's worth remembering that when the market is down it's usually for a reason and you're likely to see your finances and possibly income and job prospects affected at the same time. So ignoring shrinking savings is no small feat, and is the reason why having a hefty cash buffer is worth it.
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