Pension/IDeCo conundrum

[Bubblegun]

This is probably going to be long winded and complicated and I think many non Japanese people may have this problem from the conversations I’m having.

So I'm personally paying into the Japanese pension system, and according to someone on the internet the payout will be 66,000 yen per month,(class 1 JPN) if you have paid the maximum into the pension system.

However, ( if we took the time to think about it,) nobody can live on 66,000 yen per month, that's why people here are looking for other ways to make money.
Here is the dilemma that some of the people have brought up with me.
All the people I have spoken with said, they should save more money, (excellent)which then takes money away from the kids, medical, school, college, and experiences today, only to spend it on rent, health care etc when they reach 60/65. Thats why they haven’t payed into the pension or have any savings/or employers dodging stuff.

A) No-one can live on 66,000 yen, which takes the maximum of 40 years to accrue, and many non Japanese with say 25 years are going to receive way less than the 66,000. So if they plan for the future, how are the people who are “Time poor” and will be “pension poor” going to live, due to the poor return on any investments, even if they started now?

I hope you can see where I am going with this, as I think they have a fair point regarding their age/TIME and pension/Savings/Return problem.
So If we assume they receive 60,000(pension) and this is topped up to 120,000.(60,000 by seikatsu hogo)
this would mean that any investment they would need to make today would need to give a return of +60,000 yen per month in say 15/20 years to make it worthwhile because if they save their OWN money and there is no financial benefit at the age of retirement, they are essentially subsidising the government who would have topped up their pension with the seikatsu hogo system anyway.

This was certainly something I came across in the UK working in the the NHS. People I saw wanted to work full time, but realised they were only earning another 40 pound a month and It just wasn’t financially worth it, when they could spend that time with their young children/family/friends.(it has changed now).
40 hour week x4 weeks= 160 hours a month with a net return of 40 pounds.



I hope you can see the pension conundrum. They can reduce their spending today and save/invest money which come retirement, may never actually increase their pension by any reasonable amount. When they could keep the money for their kids, travel and have life experiences this year while fit and healthy. So what would be the point of say saving/investing to get a return of 60,000,(per month which is highly unlikely) for the government to reduce any benefit by 60,000 (or the same amount).Thereby cancelling each other out.

It seems to be a problem many of them have talked about or are locked into, and I think they have a good point.
Is the "TIME" too short for any meaningful return on that investment in 15 year? In "their eyes" they are effectively loosing money in the long run
Especially if they have IDeCo and they have to buy an annuity/income with it.

I think they seem to have a good point or am I missing something?

Thank you in advance.

[captainspoke]

(1) Are you sure you (and your wife?) are going to be comfortable on 120,000/month? I ask because you seem quite ready to accept that. (when, to my mind, you will need more)

(2) I guess I don't know much about the 生活保護 that you mention. Are you sure you can count on the figures you suggested being there for you? And are you okay personally (self esteem) living off the backs of others... uh, the government like that? You're okay with your kid(s) knowing you put yourself in that situation? ...by choice?

Hey, you do know that I still pay taxes, as a retiree, and that that means you're counting on someone like me, to support your retirement? I'll give you about one guess to figure out what I think of your 'plan.' Again, I don't know much about the 生活保護 system--but I hope you really have to jump thru some hoops before you qualify.


Some advice:

(3) How about you cut way back on the "travel and life experiences" (this year, and in coming years) and save that money instead?

(4) Send your kid(s) to a nearby 県立大学／国立大学 so that they can live at home while going to school. Do the math and bank what you'll be saving by not sending them away somewhere.

(5) If you're behind where you should be on the savings curve, don't even think of 'retiring' at 60. And retiring at 65 may also be out of reach for you. Nobody owes you a good retirement (esp. at 60!), it's something that you have to plan for and create for yourself. (Are you a teacher? If so you should be able to work till you're 70.)

(6) Does your wife work? If so, fine. If not, then maybe she should be.

(7) Do some more reading on this and other sites. Saving isn't rocket science, a lot of it is mindset.

[Bubblegun]

(1) Are you sure you (and your wife?) are going to be comfortable on 120,000/month? I ask because you seem quite ready to accept that. (when, to my mind, you will need more)

I am not actually asking about my self, because i am quite happy with my situation

I guess I don't know much about the 生活保護 that you mention. Are you sure you can count on the figures you suggested being there for you? And are you okay personally (self esteem) living off the backs of others... uh, the government like that? You're okay with your kid(s) knowing you put yourself in that situation? ...by choice?

Well this was a few figures given to us by the Japanese website themselves. So I have to assume they are correct.
I am not referring to my self but the question has certainly been brought up by OTHERS who are happy NOT to pay into the japanese system, their own system back home or even save.And frankly I am not happy at them not paying into the system while I do, they go swanning off to Vietnam,Thailand,Philipinnes and then ask US to pick up the pieces.

Captain spoke

You're okay with your kid(s) knowing you put yourself in that situation? ...by choice?

Hey, you do know that I still pay taxes, as a retiree, and that that means you're counting on someone like me, to support your retirement? I'll give you about one guess to figure out what I think of your 'plan.' Again, I don't know much about the 生活保護 system--but I hope you really have to jump thru some hoops before you qualify.

.

I'll give you about one guess to figure out what I think of your 'plan

This is not me,This is not about MY PLAN, but it is about the hundreds if not thousand of GAIJIN who are either put into this position. Either by choice or because the employers are dodging this by not enrolling them.especially the English teachers. This is why every single person who works part time should have a percentage taken directly from their wage packets, and not have their pension contributions taken from a bank account.
So if anything please do not call it "MY PLAN", but it does seem to be many of the other who are not contributing.



So just to reiterate, this is not specifically about me, but about the thousand of other who may never build up the full 40 years contributions. If you come here at say 30 or 40, they will not have payed enough in to get the max out.
Like you,I am rather cheesed off that so many people think it is a game to dodge paying into the system, and that includes the Health care system, because it isn't efficient at enrolling people or collecting pension payments but the whole question is about how many of the other gaijin are not paying into it... are they just going to get something anyway on the backs of you and I ? Even though they never payed anything into the system.
Captain spoke, while I understand you think everyone will be able to work until 70, I can assure you that many can not, and we will pay for them.(
However I am well chuffed they introduced the My number system so they can catch the people who refuse to pay and throw themselves on the system, because hopefully they will be paying into. I hope that clarifies the situation and the discussion i have had with fellow GAIJIN who do not want to pay into the system.
I can't help but wonder if they have a good point. Even though it really ticks me off.
This is one my biggest bug bears. Gaijin who never pay their health insurance, have an emergency, roll into the hospital, get their care, then beg city hall to enrol them into the system with a few months back pay, then go on to reclaim the discounts. As a nurse this really really annoys me, because they laughed it all off for years, thought it was a game, until they needed that health care.

[adamu]

I don't think much use can come from hypothesising about the needs of a faceless crowd. The best we can do is understand investing principles, what options are available to residents of Japan, listen to people's needs when they tell us, and try to advise them on how to make decisions in their best interests.

[Bubblegun]

I don't think much use can come from hypothesising about the needs of a faceless crowd. The best we can do is understand investing principles, what options are available to residents of Japan, listen to people's needs when they tell us, and try to advise them on how to make decisions in their best interests.

Your totally right of course Adamu and I appreciate that. I was trying to get one of my friends to join the Japanese pension system but he hasn't, because of what he said above and (imho thankfully) they have now caught up with him.( but he won't have enough to live on thats for sure)
Advice is what I was looking for, not being blasted because I thought someone brought up a fairly good question, and someone here might know more about it. Mathamatically speaking! Not morally speaking because I think we are all here for the same reason.

Thanks Adamu.

[captainspoke]

Bubblegun--my apologies for not reading carefully enough and thinking you were going along with this other crowd that you were describing. I'm truly relieved that you are not in that position.

[captainspoke]

And a little personal info. I retired when I was 65 (the next March 31st after I turned 65). That was the 'normal' retirement age for where I worked--not 60. Tho some quit completely, as I did, I think as many others (more?) keep their hand in the pie, in one way or another.

I have 29 years of pension contributions, and I now collect about ¥38,000/month (国民年金). That's not much, but I'm not going to turn it down, either. I knew from the get-go that it wouldn't be the full amount (and knew that specific number years before I retired). My response was to save more.

Like you, I'm glad that the My Number system will likely 'catch' some non-payers, tho I think that there are far more Japanese like that than expat eikaiwa teachers. It's been a while, but I read elsewhere that the gov't is working down the income tree--checking on and 'catching' higher income people first. Eventually tho, I think they'll get to everyone.

These days (internet), the excuses that "I didn't know," or "My school didn't enroll me," or "They said I didn't have to join," just don't make sense. And I'd agree with this POV:

This is why every single person who works part time should have a percentage taken directly from their wage packets, and not have their pension contributions taken from a bank account.

(And again, sorry that I mis-read your OP.)

[Bubblegun]

And a little personal info. I retired when I was 65 (the next March 31st after I turned 65). That was the 'normal' retirement age for where I worked--not 60. Tho some quit completely, as I did, I think as many others (more?) keep their hand in the pie, in one way or another.

I have 29 years of pension contributions, and I now collect about ¥38,000/month (国民年金). That's not much, but I'm not going to turn it down, either. I knew from the get-go that it wouldn't be the full amount (and knew that specific number years before I retired). My response was to save more.

Like you, I'm glad that the My Number system will likely 'catch' some non-payers, tho I think that there are far more Japanese like that than expat eikaiwa teachers. It's been a while, but I read elsewhere that the gov't is working down the income tree--checking on and 'catching' higher income people first. Eventually tho, I think they'll get to everyone.

These days (internet), the excuses that "I didn't know," or "My school didn't enroll me," or "They said I didn't have to join," just don't make sense. And I'd agree with this POV:

This is why every single person who works part time should have a percentage taken directly from their wage packets, and not have their pension contributions taken from a bank account.

(And again, sorry that I mis-read your OP.)

Bubblegun--my apologies for not reading carefully enough and thinking you were going along with this other crowd that you were describing. I'm truly relieved that you are not in that position.

Captainspoke,
Thank you for that.I really appreciate that. We are certainly on the same page, those who should pay ,darn well should pay.
Like you, retirement from where I am is now 68 years old and it will increase further depending on your date of birth.


Glad you got something out of the system,
I just got my letter from my home county confirming that I have my full 35 years contributions.
So I also hope to have at least 25 years from the Japanese system and hopefully other bits and bobs from work pensions and IDeCo. I'm probably going to get about the same as you.As you said its not much, but you have earned the right to it, and like you I intend to save more.

[RetireJapan]

A bit late to this discussion, but some general thoughts:

1. RetireJapan exists to help people learn about their options and to encourage them to take action.
2. A state pension is a valuable asset because it is guaranteed by a government and will arrive every (couple of) month(s) until you die.
3. 生活保護 is a system of last resort and is pretty punitive (people receiving it are not allowed to do certain things and are faced with scrutiny by government workers). I certainly wouldn't want to rely on it, let alone plan on it being an integral part of my post-work life!

Kokumin nenkin is 16,000 yen a month. After paying it most people should also be trying to max out iDeCo and invest extra on the side. This should take priority over things like having a car, eating out, or holidays.

If people choose not to do that, their last few decades will be miserable.

[jcc]

You don't get squat from the nenkin if you didn't pay into it, so you probably don't need to worry about the dodgers getting money for nothing.

Beyond that though, there's a hard question of when you are living for. I'd say it's also important to enjoy life when you are healthy. You can save 60% of your post-tax income and be ready to retire by 45, but what happens when you get cancer or something?

So really, everyone is going to have to strike a balance, and beyond doing your part for society(by paying taxes and paying into the pension), it's going to be a very personal decision with no right answer, which also depends on your circumstances. Ironically, the lower your income is, the more of it you should be saving, but people with lower incomes obviously are going to have the hardest time saving.

Starting early and using a long term investment plan can help, and perhaps if you want to convince someone of this, the best way to do it is to run the numbers for them. If you can get 4% post-inflation returns on average, there's a LOT of savings to be made even if you can only save 10% of your salary for 40 years