Could I afford to NOT retire in Japan?

[RetireJapan]

Are dividends tax-free in this new NISA structure?

Dividends and capital gains

[TokyoBoglehead]

Are dividends tax-free in this new NISA structure?

Dividends and capital gains

Right, but remember the dividends exit the nisa limiting growth. Considering accumulating funds.

[RetireJapan]

Are dividends tax-free in this new NISA structure?

Dividends and capital gains

Right, but remember the dividends exit the nisa limiting growth. Considering accumulating funds.

Just had a thought about this: being able to reuse the lifetime allowance means that it is now possible to invest in accumulating funds (mutual funds that reinvest dividends) for growth, then sell them and buy dividend payers in NISA.

Best of both worlds for people who want the simplicity of dividend income in retirement?

[TokyoBoglehead]

Dividends and capital gains

Right, but remember the dividends exit the nisa limiting growth. Considering accumulating funds.

Just had a thought about this: being able to reuse the lifetime allowance means that it is now possible to invest in accumulating funds (mutual funds that reinvest dividends) for growth, then sell them and buy dividend payers in NISA.

Best of both worlds for people who want the simplicity of dividend income in retirement?

Not really, accumulating funds allow you to reach 18 million (+) much easier. And continue to grow the tax free pot. That should be the goal in the accumulating phrase.


Dividend strategies are suboptimal.

[northSaver]

Just had a thought about this: being able to reuse the lifetime allowance means that it is now possible to invest in accumulating funds (mutual funds that reinvest dividends) for growth, then sell them and buy dividend payers in NISA.

Best of both worlds for people who want the simplicity of dividend income in retirement?

You mean... invest 18m in accumulating NISA funds over 5 or more years... let it grow to, for example, 36m tax free... sell all of that when you retire... pocket 18m (or reinvest some/all in a taxable account)... and reinvest the remaining 18m in NON-accumulating NISA funds for the dividend income? Interesting

(I'm assuming the NISA provider will keep track of how much you paid for a fund when you bought it, and not allow you to reinvest more than that when you sell it).

[RetireJapan]

Just had a thought about this: being able to reuse the lifetime allowance means that it is now possible to invest in accumulating funds (mutual funds that reinvest dividends) for growth, then sell them and buy dividend payers in NISA.

Best of both worlds for people who want the simplicity of dividend income in retirement?

You mean... invest 18m in accumulating NISA funds over 5 or more years... let it grow to, for example, 36m tax free... sell all of that when you retire... pocket 18m (or reinvest some/all in a taxable account)... and reinvest the remaining 18m in NON-accumulating NISA funds for the dividend income? Interesting

(I'm assuming the NISA provider will keep track of how much you paid for a fund when you bought it, and not allow you to reinvest more than that when you sell it).

Exactly. Some people don't want to sell down their portfolio in retirement and would prefer to have dividends in retirement. The New NISA seems to allow them to do this.

[northSaver]

Exactly. Some people don't want to sell down their portfolio in retirement and would prefer to have dividends in retirement. The New NISA seems to allow them to do this.

One drawback is that you can't reinvest the 18m all at once in NISA. But if you cashed out near the end of the year, and were allowed to reinvest during the same year, then it would take just over three years to reinvest the entire 18m.

[sutebayashi]

As I understand it, the sold allocation will only become available in the next year, not immediately.

So it’s a hassle but yes that’s a good point - one would have to sell not all at once but stagger sales over years and then reinvest into the freed up allocation at the beginning of the new year. Not so good for the tsumitate allocation maybe.

It’s a mess really. Ideally the tax system would not distort behavior, and people would instead focus on buying and selling for other reasons, rather than how to maximize their tax breaks. Something makes me think that this won’t be the last of the Nisa revisions!

[TokyoBoglehead]

As I understand it, the sold allocation will only become available in the next year, not immediately.

So it’s a hassle but yes that’s a good point - one would have to sell not all at once but stagger sales over years and then reinvest into the freed up allocation at the beginning of the new year. Not so good for the tsumitate allocation maybe.

It’s a mess really. Ideally the tax system would not distort behavior, and people would instead focus on buying and selling for other reasons, rather than how to maximize their tax breaks. Something makes me think that this won’t be the last of the Nisa revisions!

To be honest systems like ideco that force people into indexing, and prevent withdrawals are probably the most beneficial to the general population.

When given free reign the vast majority really do themselves harm.

There's the semi-apocryphal story of a brokerages best performing clients being dead, or having forgotten their accounts existence or login credentials.

Systems that incentive "no-touching!" are a good approach to modifying poor investment behavior.