Planning to stay long-term but not retire here

[SML]

I was looking at setting up an iDeco mainly so I can have the tax breaks on my income tax, but I heard it’s really recommended for people who want to retire in Japan.
I still plan to live in Japan long term but maybe 20 years at most (in my 40s), and better retire back in my home country. Is it better to use my money on something else if my main reason is for the income tax breaks?

[Tkydon]

Based on the current rules, which may change in the next 20+ years ??? :

You cannot take the money out of iDECO until retirement age, age 60 or later.

However, when you move offshore, you will no longer be able to contribute, as non-Japanese are not entitled to make voluntary Kokumin Nenkin contributions overseas, so the account will be 'hibernated'.

You can get the Tax Saving advantage if you have taxable income to offset, and it would definitely be to your advantage. The higher your income, and marginal rate of income tax, the more you save, and get the government to contribute to your iDECO pension.

As a regular employee (guessing), you would (probably) be entitled to invest Y23,000 per month, out of which the government will contribute around 40% in tax saving...

Definitely recommended (if you are not a US Citizen or Green Card Holder, due to PFIC), as the invested funds will grow gross, but will be taxable either in Japan, if you are still here, or overseas when you receive disbursements. You should check (probably Article 17 of) the Tax Treaty between Japan and your country regarding taxation of Pension income.
https://www.mof.go.jp/english/policy/ta ... st_en.html

It is a long way in the future, but you will probably be able to take a Tax Free (in Japan) Lump Sum and then receive an Annuity Income, which would both be taxable only in the other country where you will be living then.

You should also consider NISA.

You can take the money out of NISA at anytime tax free in Japan.

However, when you move offshore, the gains from NISA may not be tax free in the other country, so you would probably want to liquidate all NISA before leaving (probably in the year before the year in which you leave) and transfer Cash from Savings so as to avoid taxation at the other end.

[Wales4rugbyWC23]

I was looking at setting up an iDeco mainly so I can have the tax breaks on my income tax, but I heard it’s really recommendedyen for people who want to retire in Japan.
I still plan to live in Japan long term but maybe 20 years at most (in my 40s), and better retire back in my home country. Is it better to use my money on something else if my main reason is for the income tax breaks?

Very similar situation started an Ideco and the small business pension in my 40s when my mortgage tax credit ran out. I pay quite a bit of income tax, not because I have a super high salary but because I do so many part time classes at one university in a month. I am taxed at 33% on the first yen, very painful but thanks to pensioning up get most of the income tax back when I do my tax return.

Also not thinking of retiring to Japan, maybe going back home, but in 20 years or so.

[SML]

Thanks a lot for writing up a detailed explanation and also for sharing your experiences and decisions. It looks like overall it is a good way to save on getting taxed too much

[zhinjp]

Thanks for explanation!
Can "hibernated" account still be managed? (e.g. rebalance between funds)
A foreigner (non-Japanese) can still hold iDeco account? and take money out at age 60?
Is there government website to show related regulations for above? (I don't mind reading Japanese)

[Tsumitate Wrestler]

Thanks for explanation!
Can "hibernated" account still be managed? (e.g. rebalance between funds)
A foreigner (non-Japanese) can still hold iDeco account? and take money out at age 60?
Is there government website to show related regulations for above? (I don't mind reading Japanese)

Great question. My assumption is that the might have to handle your ideco through the jis&t interface and not the broker. That interface should allow you to rebalance.

You'll probably want to get a firm answer for your broker and/or jis&t. Please do let us know.

[TunaSki]

Thanks for explanation!
Can "hibernated" account still be managed? (e.g. rebalance between funds)
A foreigner (non-Japanese) can still hold iDeco account? and take money out at age 60?
Is there government website to show related regulations for above? (I don't mind reading Japanese)

Great question. My assumption is that the might have to handle your ideco through the jis&t interface and not the broker. That interface should allow you to rebalance.

You'll probably want to get a firm answer for your broker and/or jis&t. Please do let us know.

The terminology you’re looking for is to become an investment instructor. This enables you to continue to perform switching instructions, but you can no longer contribute, until you become enrolled in, and pay Kokumin Nenkin again.

You have to set it up with your provider, but How it’s managed after you arrange to become an investment instructor with your broker, as in can you still keep the broker account to manage your iDeCo, I’m not too sure.