Retirement Allowances (taishokukin 退職金)

[FukuokaJen]

3) Average for the 40-year salaryman at a big company used to be almost 30M yen.
I read somewhere that it is down to less than 20M (17M maybe), for those who put in their 40 years. Of course, many large Japanese companies have switched to DC plans from taishokukin anyway.

Sorry! I left out a zero. I've fixed it but I meant $200,000, which would be like twice my average salary, so it sounded so large to me.

[FukuokaJen]

The Retirement Allowance Foundation for Private Universities and Colleges of Japan (私立大学退職金財団) conducted a detailed survey of retirement age and retirement allowances at Japanese private universities in 2018 (download it from https://www.shidai-tai.or.jp/files/user ... port30.pdf).

Thanks! This is interesting info!

[FukuokaJen]

1) See the Tables above.
After Special Deduction of 400,000 per year (<20 year) and 700,000 per year (>20 years)
Basically, first 1,949,000 5% 0.105% 10% = 15.105%
Next 1,349,000 10% 0.21% 10% = 20.21%
and so on...

I really appreciate your putting this all in one place! But still, you have to admit, it's pretty complicated . . .

[Moneymatters]

1) See the Tables above.
After Special Deduction of 400,000 per year (<20 year) and 700,000 per year (>20 years)
Basically, first 1,949,000 5% 0.105% 10% = 15.105%
Next 1,349,000 10% 0.21% 10% = 20.21%
and so on...

I really appreciate your putting this all in one place! But still, you have to admit, it's pretty complicated . . .

so most places are calculated based on one month salary per year of service. This is typical caculated based on your salary when leaving. Companies need to allow for these payments in their financials.

If you leave through reaching age limit or based on company convenience then there is tpically a multiplier based on the number of years worked.
In education sector this multiplier seems much higher than in business but maybe final salaries are lower based on industry averages someone else linked to..
Taking a hypothetical business example.
Let's say final annual salary is 8mil (666,666 monthly) and you worked there 30 years retiring due to the age limit.
So 30 years x 666,666 = 20mil.
But you worked more than 20 years the multiplier is x1.3(and example from personal knowledge of a few firms) so you'll get 26mil which is what another poster mentioned as typical for 30 years.

No, how much of that 26mil after 30 years do you get to keep.
https://keisan.casio.jp/exec/system/1292387069D
24.7 mil.

If you get 20mil after 20 years you'll keep 18.6mil

[ClearAsMud]

No, how much of that 26mil after 30 years do you get to keep.
https://keisan.casio.jp/exec/system/1292387069D
24.7 mil.

Interesting that the link provided by Moneymatters differs by an extra character from the one I gave earlier
(https://keisan.casio.jp/exec/system/1292387069), but the result is the same. For taxes:

• Income tax on the taxable amount of 5.5M: 686,622
• Residence tax (municipal): 330,000
• Residence tax (prefectural): 220,000
• Take-home: 24,763,378

As I mentioned, I've found the the Casio calculation to be quite accurate.

[RetireJapan]

Important to keep in mind that the salary multiple is based on base salary, not actual income including stipends, allowances, overtime, bonuses, etc.

For me that was 14.46x base salary after 13 years. An employer should be able to provide the tables they use for the calculation.

[ClearAsMud]

Important to keep in mind that the salary multiple is based on base salary...

Indeed. One has to know the retirement allowance itself (at least roughly) before the Casio calculator can be used effectively. My uni starts with base salary at retirement and multiplies that by a factor according to the number of years employed, the factor increasing each year, with no upper limit. The uni makes it possible for employees to get a pre-calculated rough estimate of their taishokukin online -- very convenient.

After 13 years at my private uni, the multiple would be 14.5, almost exactly the same as RJ, although public and private salaries tend to differ.

[captainspoke]

At my place there were different columns in the chart depending on the reason for separation. For a given number of years worked, the highest multiples were for reaching natural/standard retirement age, and for the probably rare case in which the school/employer had to ask you to leave. The figures in the column for leaving on your own (eg, resigning to leave for another job) were much less. I got 47.5 as a multiple since I was retiring normally--if I had quit on my own two weeks earlier it would have been 29.

Tax on it was surprisingly low, something like 3% if I remember correctly. There was a separate 'gensen' for it, and when I was at the tax office the next year, filing as I usually do, they hardly gave it a glance. Also, it was paid into an account before 3/31st (my official final day), not after.

Late in the month there was a meeting in a back office where all the retiring people were together, maybe a dozen or so, getting some sort of info from personnel. When it was done, I suggested to the woman next to me, who was retiring from the general office staff, and who I had always liked and joked around with, that it would be a good time for us to run away together...

[RetireJapan]

although public and private salaries tend to differ.

[JapHans]

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).

I will be retiring in March 2024 (60 in Dec of this year).
My years with the company will be 11, at that time.
I can decide to take either the lump-sum taishoku payment or have it put in a pension scheme that pays out over 10 years.
I don't know yet what the pension option is going to look like, but assume that the cumulative gross payment (over 10 years) will be higher than the lump-sum. However, I don't expect much here. The issue I assume to exist is that with the lump-sum you get this special tax treatment, indicated in this thread, but with the pension option, I think this cannot exist. Of course, payout spread over 10 years probably leads to a lower annual tax amount, but most likely not as low as with the special tax treatment of the lump-sum payment. Any thoughts on this, from a tax point of view?