Junior Nisa - investment amount

[workbalance]

I have two daughter and was putting money into the Junior Nisa every month. I was thinking about the five year investment rule of the Junior Nisa and how you have to reinvest every five years. If you invested 5 years of 80万円, would that be the maximum you could put in a Junior Nisa? And,if you maxed out for the 5 years, then any profits made in the account would not be available for reinvestment and would just sit in the account. If this is the case and your child is very young, then you should not max out a junior nisa and instead maybe only invest a smaller amount so that you can reinvest your profits in the future. Am I correct? If you have any opinions, It would greatly appreciated.

[RetireJapan]

I have two daughter and was putting money into the Junior Nisa every month. I was thinking about the five year investment rule of the Junior Nisa and how you have to reinvest every five years. If you invested 5 years of 80万円, would that be the maximum you could put in a Junior Nisa? And,if you maxed out for the 5 years, then any profits made in the account would not be available for reinvestment and would just sit in the account. If this is the case and your child is very young, then you should not max out a junior nisa and instead maybe only invest a smaller amount so that you can reinvest your profits in the future. Am I correct? If you have any opinions, It would greatly appreciated.

Hi workbalance

I don't think Junior NISA works like that. Each year's allocation is tax-free for five years, but after that it could just be moved into the ordinary account and would be able to continue to grow (although no longer tax-free). There is no limit on the amount of investment in the ordinary account.

The biggest question on my mind is what happens after Heisei 35, when the current Junior NISA system expires? I assume it will be continued or replaced with something similar, but if not then we'll see what happens with the invested funds.

We plan to continue maxing out our granddaughter's Junior NISA (opened it this year) so I will write a progress report on the blog each year.

[workbalance]

Using Rakuten, when you transfer money into the account it goes into the regular account (green) and then you transfer it to the NISA junior account (orange). At this point the account warms you that your cannot withdraw the money until the child is 18. (not 100% sure, my Japanese is not perfect). This is the difference with the regular NISA. Which I presume means it can't be taken out of the NISA junior wrapper. So if at the end of 5 years if you have over 80万円、you can`t reinvest any of the profits. Anyway, I hope you are right!

[RetireJapan]

Yes, we use Rakuten as well. I think within the child holding account there are both NISA and regular investment accounts. I will check when I get home today.

[Steve]

As far as I can tell, Work balance is quite correct: the Rakuten junior NISA page makes it quite clear (three times) that under normal circumstances the account is not accessible until the holder turns 18.

What I cannot see anywhere - my Japanese isn’t up to it - is what happens between the end of the NISA period and the child’s 18th birthday.

[RetireJapan]

As far as I can tell, Work balance is quite correct: the Rakuten junior NISA page makes it quite clear (three times) that under normal circumstances the account is not accessible until the holder turns 18.

What I cannot see anywhere - my Japanese isn’t up to it - is what happens between the end of the NISA period and the child’s 18th birthday.

Hi Steve

That's not the question I was trying to answer

You don't get access to the money until the child is 18, and they get full control when they are 20 (although I saw something about being able to get the money early by paying a penalty -will investigate).

No, the question was 'what happens to any funds over the initial 800,000 a year'? And I suspect the answer is that they will be held in the 未成年総合口座 (the general minor account). Will try to find a definitive answer.

[sutebayashi]

I was reading about this recently in some Nikkei mooks and I have the recollection that the max initial investment is 800,000 x 5 years = 4mm, but that if those investments aren’t sold they can be rolled over to the next nisa period, until they are disposed of. Transferring positions to a taxable account is an option.

If the investments are down, there is no tax benefit of keeping them in nisa at that point so move them out; if the investments are up then roll them over or sell them for tax free profits. I think this was the general advice I saw.

Also the year that the kid is 18 as of March 31 is the one when the money can be withdrawn.

So if you are able to pick an investment that triples between your initial investment and the time your kid hits university no tax need be paid.

In practice, I don’t see what prevents parents etc from using junior nisa as a personal retirement account. I want to gift investment knowledge to my kids, but if I do well enough then i might like some of the money for me!

[RetireJapan]

In practice, I don’t see what prevents parents etc from using junior nisa as a personal retirement account. I want to gift investment knowledge to my kids, but if I do well enough then i might like some of the money for me!

Yeah, NISA means that a family of four can invest 4m yen a year tax free. Not too shabby!

[crew]

[/quote]
would be able to continue to grow (although no longer tax-free). There is no limit on the amount of investment in the ordinary account.

[/quote]

How does this work exactly. Lets say I maxed out 4M in the Junior NISA.
After 5 years it has grown to 6M.
No tax, my kid gets to keep the entire 6M worth of assets (but it stays in the account until he is 18).
It gets converted to a regular account.

If he does nothing with the account and when he turns 18, the value is now 20M, is that entire 20M tax exempt?
If he adds 1 million every year from the 6th year, this portion will be the only one taxed?
If we sell the assets on the 5th year and convert to another asset (is it even allowed) will this be treated as a new investment?

[crew]

...but after that it could just be moved into the ordinary account and would be able to continue to grow (although no longer tax-free). There is no limit on the amount of investment in the ordinary account.