NISA change proposals

[eyeswideshut]

Still, if one has a maxed out regular NISA going into 2024, there will be 3,600,000 million new tax-free to use, along with 4 years worth of remaining regular NISA balances (which might be worth upwards of 4,800,000 hopefully), for a total 8,400,000 tax free bracket. Then in 2025 it's up to 7.2 + 3.6 (10.8m), 2026 to 10.8 + 2.4 (13.2m), 2027 to 14.4 + 1.2 (15.6m), and then in 2028 just the 18.0m. (After 5 years, these assets under investment will hopefully be worth more than the tax-free allocation anyway.)

This is my thinking also. For those who have fully invested regular NISAs, rolling them over until they expire and contributing the max to the eternal NISA as soon as possible nets you the most possible 'tax free' investment pool over the short run.

[ClearAsMud]

At least until now, J-NISA balances could be rolled over - e.g. my J-NISA from 2018 has been rolled over for 2023's allocation. It was always 800K per year but only up to 5 years, similar to a regular NISA in that respect. I seem to recall reading that similar rollover procedure will be for the remaining years too, but indeed it seems a pointless requirement now, given the changes.

The other change for J-NISA I gather is, with the initial investment accounts ending in 2023, from 2024 the rule about the child being 18 years of age is to be eliminated, so one could access the funds anytime one likes. However, with there being no obvious new tax-free home for these old J-NISAs, I am currently thinking I'll indeed leave them in J-NISA and not plan on selling out.

The FSA website contains a detailed if rather confusing description of what will happen to Junior NISA in 2023 and beyond (other sites will eventually explain in less bureaucratic language). It may help simply to focus on the modified J-NISA system that comes into effect in 2024 and the question of rollovers for under-18s.

According to the FSA page, the basic five-year tax-free period remains in effect for Junior NISA through 2027. Beginning in 2024, new investments in J-NISA accounts will no longer be possible. Existing J-NISA account holders below the age of 18 who have opened or contributed to their accounts between 2019 and 2023 will be able to roll over the assets from maturing years, along with any gains, into what is being awkwardly termed a "continued management valuation" (継続管理勘定), which is essentially a pool of all maturing J-NISA assets that have nowhere else to go. Once inside this legacy J-NISA pool, gains continue to accumulate tax-free until the investments are cashed out completely (and tax-free) or until the legacy J-NISA account holder turns 18, at which time the assets either get transferred to a taxable account or moved into an "eternal" NISA account (with no limit on the value transferred).

The relevant FSA diagram seems to suggest that assets in the legacy J-NISA pool can also be cashed out to an age-restricted taxable account, although I'm not sure how much of an advantage that would be. But another possibility to consider, I suppose.

[zeroshiki]

In previous calculations, I've determined that a 5-year NISA invested at 1.2M will not beat a 400k T-NISA + 800k taxable investment all things being equal. The only way a NISA "wins" would be to roll over once (which is not available anymore) and then move the remaining into a T-NISA.

The calculation changes if you have a 2018 NISA to roll over into 2023 of course but for a fresh account I can't see how a standard NISA account is a good idea for the long term investor. (I say this as I have my CC and Rakuten Cash tsumitate already locked into regular NISA for January)

[sutebayashi]

a 5-year NISA invested at 1.2M will not beat a 400k T-NISA + 800k taxable investment all things being equal.

Does the 800k go to the new NISA in 2024 or stay in taxable, in the scenario?

I saw this article that suggested if one has money upfront from an inheritance then investing in a regular NISA could be better than a T-NISA. (I don’t have an inheritance to invest, but I do already have funds available, currently in taxable account.)

https://www.president.co.jp/finance/con ... ch#toc-2-4

for a fresh account I can't see how a standard NISA account is a good idea for the long term investor.

Yes, that seems fair. A newbie would probably be better to start with a T-NISA I think too - at least I started doing tsumitate style investing with my regular NISA.
But if one does have 1.2 to invest, they can still get five years tax free for it, versus 0.4m for 20 years. It seems like a tricky decision to me, so 1) I am glad that my decision was already made so I have nothing to ponder anymore! And 2) I guess these kinds of issues are one of the reasons for combining the accounts into one from 2024.

[zeroshiki]

a 5-year NISA invested at 1.2M will not beat a 400k T-NISA + 800k taxable investment all things being equal.

Does the 800k go to the new NISA in 2024 or stay in taxable, in the scenario?

I saw this article that suggested if one has money upfront from an inheritance then investing in a regular NISA could be better than a T-NISA. (I don’t have an inheritance to invest, but I do already have funds available, currently in taxable account.)

https://www.president.co.jp/finance/con ... ch#toc-2-4

The 800k goes to a taxable account also in 2023. It was just a way to do an apples-to-apples comparison between NISA and T-NISA so I equalized the amounts to invest. Basically the 400k compounded for 20 years being tax-free beats the larger 1.2M base of the regular NISA.

I have the numbers posted somewhere on this forum. I would show them to you but I don't have the Excel file with me right now.

[sutebayashi]

Interesting, a case of the tortoise and the hare, then

[beanhead]

The 800k goes to a taxable account also in 2023. It was just a way to do an apples-to-apples comparison between NISA and T-NISA so I equalized the amounts to invest. Basically the 400k compounded for 20 years being tax-free beats the larger 1.2M base of the regular NISA.

The rollover was the key which made regular NISA a really useful tool. Without that, just for 2023, as you say tsumitate is more powerful.
We are talking fine lines, though.
I am sure if we modeled investing 1.2M in regular in 2023, then using that amount as part of the new "eternal" (quote Ben) from 2028 the results would also be very nice. It is not quite a rollover but the effect would be similar, wouldn't it?

[TokyoBoglehead]

The 800k goes to a taxable account also in 2023. It was just a way to do an apples-to-apples comparison between NISA and T-NISA so I equalized the amounts to invest. Basically the 400k compounded for 20 years being tax-free beats the larger 1.2M base of the regular NISA.

The rollover was the key which made regular NISA a really useful tool. Without that, just for 2023, as you say tsumitate is more powerful.
We are talking fine lines, though.
I am sure if we modeled investing 1.2M in regular in 2023, then using that amount as part of the new "eternal" (quote Ben) from 2028 the results would also be very nice. It is not quite a rollover but the effect would be similar, wouldn't it?

More updates! https://old.reddit.com/r/JapanFinance/c ... _the_fsa/

[beanhead]

The FSA website contains a detailed if rather confusing description of what will happen to Junior NISA in 2023 and beyond (other sites will eventually explain in less bureaucratic language).

https://www.fsa.go.jp/policy/nisa2/abou ... index.html

Something weird happened to your link.

[ClearAsMud]

The FSA website contains a detailed if rather confusing description of what will happen to Junior NISA in 2023 and beyond (other sites will eventually explain in less bureaucratic language).

https://www.fsa.go.jp/policy/nisa2/abou ... index.html

Something weird happened to your link.

Thanks -- a missing referrer. Corrected now.