Nisa & Ideco Investment Inquiry

[nicolina]

Hi, everyone!

This marks my first post, and I'd like to begin by extending my best wishes for a Happy New Year to you all!

I recently stumbled upon Retire Japan and have been exploring both the forums and the website. They have proven to be immensely helpful in understanding personal finance and investment for foreigners residing in Japan. I'm planning to start my investment journey with NISA and iDeCo, currently in the process of setting up my Rakuten account. I have some questions and would greatly appreciate any available advice.

Here's a snapshot of my situation:
- I haven't delved much into investing before, so this marks a critical first step for me. I have a lump sum to invest, presently sitting in a savings account in the UK and Japan.
- I am 50 years old, with plans to retire in Japan. I don't anticipate needing to access the invested money for the next 10 to 15 years.
- I applied to backdate the class 2 state pension contribution in March 2023 and am still awaiting confirmation from HMRC.

My current plan for the NISA (tsumitate & growth) account is as follows:
a) 80% on eMAXIS Slim 全世界株式（オール・カントリー）
b) 20% on eMAXIS Slim 先進国債券インデックス
Does this sound reasonable? Considering my age, would it be advisable to increase the bond ratio?

For iDeCo, I'm contemplating setting up the account with Rakuten, but my priority is to get the NISA account operational. Is eMAXIS Slim 米国株式（Ｓ＆Ｐ５００） available for investment in iDeCo? Any suggestions or comments on what to invest in iDeCo would be appreciated. I plan to maximize both the NISA and iDeCo accounts within 5-7 years.

I also have a few questions:
1) I've read that it is possible to put a lump sum (using the bonus option) in NISA tsumitate, rather than adhering to the monthly limit of 100,000 yen, and wait for a year to reach the 1.2 million limit. In the comparison of one lump sum vs. DCA, what is the worst-case scenario?

2) Once you've set a monthly amount, are you allowed to reduce it if circumstances change in the future?

3) I receive rental income in the UK and am contemplating transferring some money to Japan for NISA and iDeCo. Are there any taxes or restrictions I should be aware of when transferring money from overseas to Japan?

Thank you all for your insights and suggestions. Your comments are greatly appreciated.

[beanhead]

For iDeCo, I'm contemplating setting up the account with Rakuten, but my priority is to get the NISA account operational. Is eMAXIS Slim 米国株式（Ｓ＆Ｐ５００） available for investment in iDeCo? Any suggestions or comments on what to invest in iDeCo would be appreciated. I plan to maximize both the NISA and iDeCo accounts within 5-7 years.

I also have a few questions:
1) I've read that it is possible to put a lump sum (using the bonus option) in NISA tsumitate, rather than adhering to the monthly limit of 100,000 yen, and wait for a year to reach the 1.2 million limit. In the comparison of one lump sum vs. DCA, what is the worst-case scenario?

2) Once you've set a monthly amount, are you allowed to reduce it if circumstances change in the future?

3) I receive rental income in the UK and am contemplating transferring some money to Japan for NISA and iDeCo. Are there any taxes or restrictions I should be aware of when transferring money from overseas to Japan?

Thank you all for your insights and suggestions. Your comments are greatly appreciated.

Welcome to the community.

1) lump-sum vs DCA is nothing specific to Japan or NISA. The bogleheads website has some good resources, for example this one:
https://www.bogleheads.org/wiki/Dollar_cost_averaging

2) yes you can change the monthly tsumitate amounts

3) sending the money is not a taxable event. Making the money is.
So you should already be declaring this on your Japanese tax return each year as additional income.
If the amount you send is large (over 10M yen?), your bank here will stop the deposit and ask you to explain what it is. They are required to do this.

Rakuten does not have the eMaxis Slim series for iDeCo. The go-to alternatives are the Tawara No Load Developed Countries or 2 Rakuten Vanguard/VT funds, US or whole-world.

Bonds...hmmm...
Some advocate 0%, some a lowish number like your 20%. If buying dollar-denominated bond funds, there is a currency risk for those of us in Japan. So the bond discussion is not as simple as you will read on US-based sites or in American books.
Japanese bond funds or straight bonds do not have the currency risk but the returns are horrible, sometimes even negative.

Ideally, you should use this tax-advantaged space in NISA, iDeCo for assets which will grow, which will be the equity funds rather than bond funds.

[TokyoWart]

3) sending the money is not a taxable event. Making the money is.
So you should already be declaring this on your Japanese tax return each year as additional income.
If the amount you send is large (over 10M yen?), your bank here will stop the deposit and ask you to explain what it is. They are required to do this.

Doesn't this depend on whether or not nicolina is now a permanent tax resident for Japan. For the first 5 years in Japan my understanding is that the foreign income becomes taxable if it is repatriated to Japan but not if it stays overseas.

[beanhead]

3) sending the money is not a taxable event. Making the money is.
So you should already be declaring this on your Japanese tax return each year as additional income.
If the amount you send is large (over 10M yen?), your bank here will stop the deposit and ask you to explain what it is. They are required to do this.

Doesn't this depend on whether or not nicolina is now a permanent tax resident for Japan. For the first 5 years in Japan my understanding is that the foreign income becomes taxable if it is repatriated to Japan but not if it stays overseas.

Yes, good point. I was assuming that nicolina is a permanent tax resident. This doc confirms what you wrote:
https://assets.kpmg.com/content/dam/kpm ... -Japan.pdf

[nicolina]

Thank you both for your advice, the information you provided was exceptionally helpful. I am looking to start investing in nisa tsumitate

Nicolina

[Tkydon]

3) I receive rental income in the UK and am contemplating transferring some money to Japan for NISA and iDeCo. Are there any taxes or restrictions I should be aware of when transferring money from overseas to Japan?

How long have you been in Japan, and what is your Immigration Status?

[nicolina]

I have been in Japan more than 10 years and I got the permanent resident visa (永住者).

[nicolina]

I just wanna update you all that I got my NISA account sorted for Emaxis Slim all country. Regarding the voluntary state pension contribution, my gateway account status indicated "completed," but no word from HMRC yet, unsure if it’s approved or awaiting further verification.

Thank you for all your help!

[Tkydon]

I have been in Japan more than 10 years and I got the permanent resident visa (永住者).

See this related thread

https://www.retirejapan.com/forum/viewt ... 944#p35944