Thinking about early retirement - some basic questions

[Hedgehog]

This is a request to the experts here for some advice with a bit of life planning. (I am early 50s; JP spouse; PR.)

If I were to stop working in, say, 3-5 years' time and take early retirement here in Japan what are the ongoing/regular payments (other than accommodation costs) which I would face? And would those costs/payments change in any fundamental way once I a) passed 60; and b) started receiving my JP pension?

My current employer takes care of my annual tax return, so I would need to start doing that (or pay someone to), I assume, and as I understand it my income tax + city tax would then be based on my income from my investments (JP and non-JP). How does one go about paying into the pension fund and other national health insurance contributions? At the local ward office/tax office? Are there any other costs I've overlooked? I realise these are very basic questions, but retiring in Japan rather than elsewhere has only recently started to become a distinct possibility, and so I have never really looked into what it would mean in practical terms.

If this has been covered elsewhere in the forums, I'd appreciate it if someone could show me where. Many thanks in advance.

[RetireJapan]

It's a great question and would make a good blog post/video. I will try to put something together. In the meantime, any replies here would be appreciated

[donpaulo]

Some answers are obvious but probably worth mentioning

Once we reach age 60 we do not have to contribute to the pension system.
The current law says that we can begin to receive pension payments at age 65, but the government has openly called for moving that to age 70. So you need to factor that into your calculations.

So my understanding of the situation is that you would be "on the hook" for your pension payments until you reached age 60.

We pay our various expenses through a dedicated bank account. Every month its deposit X, transfer Y.

We did have to visit our local pension office and there was some negotiation. In fact we ended up talking with about 3 or 4 different people before we got someone who was willing to make a decision on the situation. So be aware that the answers you seek may be somewhat up to the conditions and situation in the office. We were lucky to find someone professional with the authority to take action.

For clarification I am not retired nor am I thinking about it, but I have run my own shop since day 1 so have had to swim in the food chain for some time.

Your employment situation and age will affect your tax profile as well. Its important to get a qualified professional to sit down and take a look at your individual conditions. They should be able to forecast what if any changes are in store for you.

A good example would be if there is an elderly parent in the house vs living outside the house. The tax numbers are a concern there.

anyway I hope this helps a bit

[Tkydon]

See detailed discussions in these threads...

https://www.retirejapan.com/forum/viewt ... 952#p37952

https://www.retirejapan.com/forum/viewt ... 967#p37967

https://www.retirejapan.com/forum/viewt ... 994#p37994

https://www.retirejapan.com/forum/viewt ... 063#p38063

Some answers are obvious but probably worth mentioning

Once we reach age 60 we do not have to contribute to the pension system.

Contributions to Age 60 are compulsory.
You can choose to make Voluntary Contributions to get your Number of Years / Months up from 60 to 65.
See 'Voluntary Contributions' Section
https://www.nenkin.go.jp/international/ ... nsion.html

The current law says that we can begin to receive pension payments at age 65, but the government has openly called for moving that to age 70. So you need to factor that into your calculations.

You can start receiving 70% of your qualified Pension Amount at 65 from Age 60
https://www.nenkin.go.jp/service/jukyu/ ... 21-01.html

increasing to 100% of your qualified Pension Amount at Age 65

increasing to upto 184% of your qualified Pension Amount at 65, if you delay until Age 75
https://www.nenkin.go.jp/service/jukyu/ ... 21-02.html

So my understanding of the situation is that you would be "on the hook" for your pension payments until you reached age 60.

Yes, Basic Pension Contributions, currently Y16,920 per month.

[Hedgehog]

Many thanks for the replies. Plenty to read through and think about.

[captainspoke]

... (A) my income tax + city tax would then be based on my income from my investments (JP and non-JP). (B) How does one go about paying into the pension fund and other national health insurance contributions? ...

A--correct. And doing your own taxes is not hard, and you'll have time.

B--For health insurance I set up auto-deduct from a bank account, tho initially I got a sheaf of payment slips and simply paid those until the auto kicked in (which took 4-5months, iirc, and this is opt-in, you have to do the legwork at city hall to initiate). I'd assume pension payment slips and then auto deduct would unfold the same way.

Same auto deduction for national and residence tax. For national they ding my account once for a single payment, residence tax is broken into four payments* once they announce what it will be. Healthcare is x12/monthly.

*These are 'front loaded' a little. First is taken right away (july 1st?), second is end of august, third end of october, fourth end of january. Then feb-june, nothing.

[Tkydon]

National Health Insurance is 10 payments per year (Annual Premium / 10), June to March, with no payments for April and May.

However, REMEMBER, your Residents' Taxes and Health Insurance Premiums (National or Private) will be based on the previous Tax Year's Total Income, and so, depending on which month you leave employment, you will have to pay 12-18 months at the Pre-Retirement Rate before your payments get reduced to the Post-Retirement Level, either in one or two steps...

e.g. If you leave in June 2025, you will just receive the bills based on 2024 Full Year Employment Income.
Then, in June 2026, you will receive the bills based on 2025 Half Year Employment Income and Half Year Retirement Income.
Then, only in June 2027, will you will receive the bills based on 2026 Full Year Retirement Income.

You need to budget for this, or it will come as quite a shock!

[Wales4rugbyWC23]

National Health Insurance is 10 payments per year (Annual Premium / 10), June to March, with no payments for April and May.

However, REMEMBER, your Residents' Taxes and Health Insurance Premiums (National or Private) will be based on the previous Tax Year's Total Income, and so, depending on which month you leave employment, you will have to pay 12-18 months at the Pre-Retirement Rate before your payments get reduced to the Post-Retirement Level, either in one or two steps...

e.g. If you leave in June 2025, you will just receive the bills based on 2024 Full Year Employment Income.
Then, in June 2026, you will receive the bills based on 2025 Half Year Employment Income and Half Year Retirement Income.
Then, only in June 2027, will you will receive the bills based on 2026 Full Year Retirement Income.

You need to budget for this, or it will come as quite a shock!

National health insurance is calculated slightly different to municipal and income taxes and the tax free (health insurance) allowance is a lot lower...

[captainspoke]

Maybe this is city/prefecture dependent? Or someone retired and older vs younger and still employed but paying their own?

My health insurance payments (deductions) are monthly, x12 over a year, no gap in april/may. They do vary a day or few depending on the calendar, due to weekends vs business days, or holidays. They are numbered as 1-12 in my bankbook.

April, May, and June are usually a little different than the previous payments--I'll guess that the city gets a quick preview of my tax figures, and boosts/cuts these a little depending on that. Then when the final calculation comes in June, those are rolled in as a part of the total, and the balance is divvied up accordingly.

I asked my wife and we compared. She also has 12 numbered payments (retired pensioner, too, but younger). We noticed one difference--my 介護保険 is automatically subtracted from my 国民年金 payments--so no itemized line about that in a my bankbook--where she has those deductions listed in her bankbook. I can't remember if this was a choice or option I might have had 7-8yrs ago.