Simple Q&A - iDeCo

[sutebayashi]

Yeah you can have your iDeCo wherever you like and nisa wherever you like. The two schemes are independent.

I think I had my iDeCo with Rakuten at first, but later switched it to Monex, where I have my nisa.

You have to apply for each one separately I do believe.

[Adamakin86]

Thanks so much!

[Martyn]

I’m 58 years old and I have to retire from my English teaching job at 60. Do you think that it is still worthwhile for me to join Ideco now?

[RetireJapan]

I’m 58 years old and I have to retire from my English teaching job at 60. Do you think that it is still worthwhile for me to join Ideco now?

If you are teaching full-time you are likely a member of a kyousai, which means your monthly contributions will be capped at 12,000 yen.

Considering it takes about three months to open an iDeCo account (if you get the paperwork right first time -I never have), it might not be worth the hassle, unless you're planning to pay kokumin nenkin on a voluntary basis from 61-65 (so you could contribute a lot more).

I might just focus on NISA, especially the New NISA from next year.

[Martyn]

Thanks very much. The new NISA looks really attractive.

[JimmyK]

In a nutshell, is investing in iDeCo a good move? I understand this allows investments in Japanese stocks, which are doing well recently thanks to weakening yen and overseas interest in Japan I imagine. Any alternatives to getting into the markets here? Not sure how difficult it is to get a brokerage account set up as a non-Japanese with limited Japanese language skills.

[beanhead]

In a nutshell, is investing in iDeCo a good move? I understand this allows investments in Japanese stocks, which are doing well recently thanks to weakening yen and overseas interest in Japan I imagine. Any alternatives to getting into the markets here? Not sure how difficult it is to get a brokerage account set up as a non-Japanese with limited Japanese language skills.

Yes, it is a good move as long as you don't mind tying up the money until you are at least 60.
iDeCo investments are in funds, not individual stocks. Broad, worldwide funds are recommended.
Some Japanese language is required to set up brokerage accounts. Often you will need to fill out paper forms initially.

[adamu]

In a nutshell, is investing in iDeCo a good move?

iDeCo is an account, not an investment, so the question does not really make sense.

I understand this allows investments in Japanese stocks

This is somewhat true, but not relevant. You can only buy Japanese-domiciled funds as beanhead mentioned, which may or may not consist of Japanese stocks. The reason to use iDeCo is for the tax benefits.

[Tkydon]

In a nutshell, is investing in iDeCo a good move? I understand this allows investments in Japanese stocks, which are doing well recently thanks to weakening yen and overseas interest in Japan I imagine. Any alternatives to getting into the markets here? Not sure how difficult it is to get a brokerage account set up as a non-Japanese with limited Japanese language skills.

iDECO - Individual DEfined COntribution Pension Plan - is a Tax Advantaged Pension Plan. Any money you put in to your Pension Plan will be eligible for a Tax Deduction on the way in, by claiming the Contributions as Tax Free Income, and thereby reducing your Taxable Income by that amount.Therefore, you will receive a Tax Benefit equal to your Marginal National Tax Rate and 10% Residents' Tax Rate.
You cannot access the Pension Plan until at least Age 60.
Distributions will be subject to Aggregate Income Tax in retirement. Tax Free on the way in, Taxable on the way out.
The amount you can contribute depends on whether you have other tax advantaged pension plans such as a Company Defined Contribution Plan, Kosei Nenkin or Kosei Nenkin Kikin, etc..

NISA - Nippon Individual Savings Account - is a Tax Advantaged Savings Plan. Any money you put in to your NISA will be from Post-Tax Income, and not eligible for a Tax Deduction.
You can access the Funds at any time, Tax Free. Post-Tax on the way in, Tax Free on the way out.
This could be used for intermediate savings requirements, with access to the funds when you need them at various stages of your life.
The NISA system is being revised next year.
This year, you can save upto EITHER Y1.2M in a NISA Account OR Y700,000 in a Tsumitate NISA Account (Monthly Contribution NISA), but not both.
Next year, you will be able to save upto BOTH Y2.4M in a NISA Account AND Y1.2M in a Tsumitate NISA Account, to a maximum Y18M of Lifetime Contributions.

Both are a Tax Arbitrage Play, arbitraging the Tax Rate on Distribution against the Tax Rate at the time of putting the funds into the account. The amounts that you can contribute to each on a monthly or annual basis are limited, so you can only get a limited amount of funds into the accounts, and therefore only receive the tax benefits on those limited funds.

If you want to invest more than the maximum allowances for iDECO and/or NISA, you would have to use a regular Brokerage Account. Post-Tax on the way in, Taxable on the way out.

All are just accounts, and you then have to make investment decisions of how to invest the funds within the accounts, depending on the financial instrument options available from the Account Provider within the account.

Finally, you should also consider Insurance in your financial plan, especially when you are young, don't have many assets and do have a lot of liabilities. Which Insurance products would depend on your, and your family's, actual circumstances.

[thejunman]

I haven't opened an iDeCo yet because I don't know how long I plan to stay in Japan.

However, if I do open an iDeCo and I do decide to leave Japan in the future, would I be able to close it and get all the money back? I've read that we cannot take any money until we actually reach retirement age.