Ideco and NISA contributions is lose (or quit) employment

[RetireJapan]

The Tax Deduction is based on the actual amount of your iDeCo Contributions from Post-Tax Income in that tax year, and your actual Marginal Rate of Income Tax.

Sorry, this has nothing to do with my post.

I am referring to building up the taishokukin koujo, not any reduction in income tax (which wouldn't matter under the OP's original scenario of losing or quitting job).

I don't know what you mean by "accumulate the tax-free allowance".

iDeCo is taxed as retirement bonus when taking the lump sum option. This builds up over time, 400,000 yen a year for the first twenty years, then 700,000 yen a year for the next ten years.

My post was about whether this accrues automatically, or whether it is necessary to contribute to the account in order to get this credit.

[Tkydon]

iDeCo is taxed as retirement bonus when taking the lump sum option. This builds up over time, 400,000 yen a year for the first twenty years, then 700,000 yen a year for the next ten years.

My post was about whether this accrues automatically, or whether it is necessary to contribute to the account in order to get this credit.

Ah, I understand.

This accrues automatically for the number of years you have been a member of the fund against the gains of the fund, regardless of whether you contributed an any given year or not, in lieu of calculating the total contributions, average prices, Capital Gains and the Capital Gain deduction on that portion of the assets (too complicated )

I'm not sure where you get the 10 year limit for the longer duration Special Deduction. I have seen this mentioned before, but my book does not state any maximum on the number of years.

https://www.nta.go.jp/taxes/shiraberu/t ... u/1420.htm

shows the Special Deduction as Y400,000 per year for the first 20 years, and then Y700,000 per year over 20 years.

The calculation shown in the example is for a person who was a member of the system for 30 years, so 10 years at the higher rate, but it doesn't state that this a limit.

[JimmyK]

Thanks. Difficult (if not impossible) to predict the future. The tax benefits of iDeCo seem to make it worth having whilst working. Just trying to get all my ducks lined up in case the unexpected happens. Granted, it’s not ideal to set up the plan then to miss out on one of its main advantages, but if there’s flexibility to either increase, or decrease monthly payments as there seems to be (I’m guessing you can’t stop completely?) then its advantages might outweigh its disadvantages. Especially so if I ended up working for some years after all! NISA is an easier decision, given it has no annual tax deductible function to it. As you say, more flexible in terms of how you can contribute (monthly and lump sum) too, as well as having a higher limit. No connection with employment status either. BTW, how are people doing with fund selection these days, with both iDeco and NISA? The all world fund through Rakuten seems to be popular. Is it possible to buy ETFs too? Ishares fund tracking Nikkei looks interesting (if available), given how the Japanese stock market is doing now.

[JimmyK]

I’d expect (and want) to continue making pension contributions at the voluntary level, even if unemployed. I’m already well behind the 40yrs required for full pension (and will never reach it, as it’s too late to make back payments), so making as many of the remain ones between now (I’m 55) and retirement age is probably prudent. As for other taxes (such as city tax) I’d expect to have to pay these too. I imagine there’d be some reduction the following year, with a year of little, or no paid employment behind me. As for funds to invest in for iDeCo and NISA, I understand these are all listed on the Rakuten securities website. I’m now going through the process of registering online for an account (before paperwork is then posted!) and already encountering some ‘challenges.’ Among them, the fact I have 2 middle names, which has never sat well in Japan. My gaijin card has my full name, whereas my bank account was opened years ago with just my Christian and Surname (This is going back over 20yrs, but I recall at the time they couldn’t register my 2 middle names. No doubt there’ll be pain to come due to this). Once set up, my company will process the the necessary tax deduction paperwork. In that case, which box should I check on the Rakuten online application site? Leave to Rakuten, or sort out myself?