My retirement plan

[ArabikiDavid]

Hi everyone. I thought I would post about my retirement plan and see if anyone could make suggestions. To me, retirement is not just about financial considerations but also about health / longevity, and well-being. In terms of the financial, I am eligible to receive both Japanese and U.S. social security. My wife is also eligible for both and has already started receiving Japanese social security. I also have a retirement nest egg saved up in a brokerage account in the U.S. over the 20+ years I've been working here in Japan. Wells-Fargo has been bugging me for years to sell off my investments and close the account (I suppose because of FATCA). I'm in the process of doing that now. I have a dollar-denominated account with a Japanese bank and also have a brokerage account here in Japan. I figure I can put that nest egg in mutual funds and draw off the proceeds, never touching the principle. I also intend to continue working even after starting to receive social security benefits from both countries. All said and done, with a 16.6% (investment income) / 33% (work income) / 50% (social security), we should actually have about 200,000 yen a year MORE in income than at the present. We can save / invest the rest to cover old age. The weakest link for me is the working part. I want to keep working into my 80's (my parents did it) but I've heard that it's difficult to get jobs in Japan once you've retired. Any thoughts on that? On the health / longevity front, I've had a thorough physical exam every year as a part of my employment since coming to Japan. I'm generally in good health and I go to a gym several times a week. At 61, my resting heart rate is below 50. There is one issue that I'm looking into and if that sorts itself out, I should be good to go all the way to 100. As for well-being, there is the issue of a possible Nankai Trough earthquake and potential tsunami. If a tsunami came to the area we live, our house (which is paid off) would be swept away or al least be unlivable. For that reason, I think it would be good to sell the house and land and use that to buy a condominium of about the same value, one that is above the third floor so it would not be flooded. Well there it is. What do you think?

[RetireJapan]

Welcome to the forum! Great post to start with

A few quick thoughts (I'm sure others will chime in too).

I guess you are a US citizen? You need to be careful with what you invest in in Japan (and will find that you are not allowed to invest in many things): https://www.retirejapan.com/us-citizens ... d-holders/

Also you may find the US reduces your social security if you are receiving another pension.

Depends on your line of work, but freelancing/working part-time might be an option after 'retirement'. You can taper off your work.

I think it is sensible to at least consider the potential effects of earthquakes, climate change, etc. I'm planning to sell our manshon in the next ten years or so as it is only a metre or so above sea level.

Anyone else?

[captainspoke]

Being US, I guess I'm biased, but I think investing/holding funds in a US account has many advantages. One name that is commonly mentioned is Interactive Brokers, LLC (generally referred to as IB). https://www.interactivebrokers.com/en/home.php I think this would really simplify your US tax reporting. Yes, you'd still have to do some work for reporting in japan, but at least you would not have to worry about investing in something that triggers unusual US taxes. (There's another place, TD Ameritrade? that supposedly allows accounts in japan, but I could be mis-remembering.) Also, instead of selling off your investments, which could trigger some taxes, I'd push for any holdings to be transferred to a different broker.

As for "the big one", I'd probably choose to move inland or to a higher elevation. An upper floor of a condo may not get flooded, but if it becomes unlivable (lower floors flooded)..., you will have preserved your lives, but you'll still need a place somewhere else immediately.

[TokyoWart]

I am also a US citizen and, turning 57 this year, have make some of the same plans. Here are my thoughts:

1) That heart rate is pretty low but can be common (and not require treatment) in people our age and older. Make sure they check your thyroid function during the work-up.

2) I second what was said about Social Security possibly being reduced by the windfall prevention rule because you will have not paid in for several years and were covered at that time by another country's pension system. I expect to be in this situation.

3) Not mentioned in your post, but bravo for planning on being in the Japanese medical care system during retirement instead of US Medicare. That also will save a small fortune compared to what you would face retiring to the US.

4) The US stock market is certainly not cheap right now but over the longterm it has outperformed other developed countries (maybe especially Japan). I like the idea of maintaining a US brokerage account and US investments during retirement. I found that TD Ameritrade allowed me to open an account while in Japan.

5) I think working in retirement is great but counting on working in retirement is not. From what I see, Japanese are even more wary of hiring those above certain ages than what I see in the US. Do you really think 33% of retirement income will come from working? My impression is the biggest hurdle is getting hired permanently so maybe temp positions (e.g. through an agency) or working in some form as a consultant within your prior line of work? Sorry, not much helpful advice on this one.

6) I recommend you start reading about safe withdrawal rates so you can consider options in case living off dividends and interest from your portfolio doesn't quite make ends meet. On my Obon holidays I read William Bernstein's "The Intelligent Asset Allocator" and "The Investors Manifesto" which go into how to structure your portfolio. There are a lot of other writers or podcasters on the subject.

I hope these preparations work out well for you.

[ArabikiDavid]

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Thanks for your reply!

Also you may find the US reduces your social security if you are receiving another pension.

Yes, I am. I'm finding out about this problem as my Japanese wife is about to apply for benefits based on her work record. It might work out best if she just applies for spousal benefits (that would be half of my benefit amount and wouldn't be subject to WEP). WEP may end up being repealed. A bi-partisan bill in the Senate (SB 521) and in the House (HR 141) called the "Social Security Fairness Act" were introduced early this year. All the 2020 democratic senate presidential candidates are co-sponsors. I'm not holding my breath on that one, though as probably nothing will happen unless we change presidents.

Depends on your line of work, but freelancing/working part-time might be an option after 'retirement'. You can taper off your work.

I'll look into it, thanks!

I think it is sensible to at least consider the potential effects of earthquakes, climate change, etc. I'm planning to sell our manshon in the next ten years or so as it is only a metre or so above sea level.

Good luck! Hope you can find something that won't require you to put up a lot more than the value of your current place!

[RetireJapan]

Good luck! Hope you can find something that won't require you to put up a lot more than the value of your current place!

We should be inheriting my in-laws' place at some point. Paid for a big renovation project on it last year to make it more comfortable for them so hopefully we'll get to live in it sometime. It is in a much safer (in terms of earthquakes/tsunami) area

[ricardo]

My plan is very simple.

Retire at 60 (eight years from now) and get a company pension from the UK which I paid into since I was 19. It’s an index-linked, final salary scheme. Then, when I’m 67/65, I get UK and Japanese state pensions as a top up.

I could defer any or all of the above for bigger benefits in the future. But I’m not going to.

The biggest risk for me to live with (not manage) is the exchange rate since the UK pensions will be paid in GBP. I’ll probably have them paid into my UK bank account then pull funds as and when I need them, hopefully when the exchange rate is reasonably favourable. But I might just ask them to pay it directly to my Japanese bank account every month and simply accept the fact that it will fluctuate every month. I’ll assume a worst case scenario and consider anything better to be a bonus.

Brexit is currently driving the Pound to historically low levels. I’m assuming that when I retire we’ll have been out of the UK for several years, with a decent economy and that the Pound will have recovered somewhat. I suspect that the Euro will be suffering by then and the Pound will be strong.

Tip for any young readers: pay into a pension as early as you can and pay as much as you can. In most countries, including the UK and Japan, you don’t pay income tax on the money you put it. Then, when you retire, you get it all back! When I lived in the UK I effectively paid £60 and got £100 in my pension fund.

[ArabikiDavid]

Being US, I guess I'm biased, but I think investing/holding funds in a US account has many advantages. One name that is commonly mentioned is Interactive Brokers, LLC (generally referred to as IB). https://www.interactivebrokers.com/en/home.php I think this would really simplify your US tax reporting. Yes, you'd still have to do some work for reporting in japan, but at least you would not have to worry about investing in something that triggers unusual US taxes. (There's another place, TD Ameritrade? that supposedly allows accounts in japan, but I could be mis-remembering.) Also, instead of selling off your investments, which could trigger some taxes, I'd push for any holdings to be transferred to a different broker.

As for "the big one", I'd probably choose to move inland or to a higher elevation. An upper floor of a condo may not get flooded, but if it becomes unlivable (lower floors flooded)..., you will have preserved your lives, but you'll still need a place somewhere else immediately.

Thanks for your response. I'm currently applying for an account w/ TD Ameritrade. You can't apply only so I had to fax the application. As far a taxes go, I think Japan levies higher taxes on investment than the U.S. does. I gamed out the taxes I would owe be filling out a mock 2019 return and because it's long-term capital gains and because my income falls below the exemption for expats, I would end up owing zero taxes on the sale of my investments.

[ArabikiDavid]

To update, my wife has applied for her social security. We had to supply the Tokyo embassy with copies of several documents, including our 戸籍謄本 (in which my name is misspelled). We don't know how much she's going to get but we know it will be much less than the estimate based on paying FICA taxes for her entire working life. I'm want to see about paying some of the unpaid amount to boost her / my benefit amount. Don't know if that's possible.

As for TDAmeritrade, I was able to open an account but it's taken a lot of time. The transfer from our previous brokerage account is finally underway. I don't know if I'll be able to trade in the account because we live in Japan. I'll post an update once it gets that far. Also, TDAmeritrade is about to merge with Schwab so we'll probably have to look for an alternative once that goes through

[TokyoWart]

To update, my wife has applied for her social security. We had to supply the Tokyo embassy with copies of several documents, including our 戸籍謄本 (in which my name is misspelled). We don't know how much she's going to get but we know it will be much less than the estimate based on paying FICA taxes for her entire working life. I'm want to see about paying some of the unpaid amount to boost her / my benefit amount. Don't know if that's possible.

There are a number of online resources to strategize taking social security as a couple, although I am not familiar with any way to buy unpaid years. One which lists some of the considerations for couples is here:
https://www.nerdwallet.com/blog/investi ... -benefits/

Also Mike Piper is considered a leading expert on social security strategies and he blogs here:
https://obliviousinvestor.com/new-free- ... alculator/

As for TDAmeritrade, I was able to open an account but it's taken a lot of time. The transfer from our previous brokerage account is finally underway. I don't know if I'll be able to trade in the account because we live in Japan. I'll post an update once it gets that far. Also, TDAmeritrade is about to merge with Schwab so we'll probably have to look for an alternative once that goes through

I opened a TDAmeritrade account after moving to Japan and they do let me trade securities. I also have a Schwab account, which I had opened before I moved to Japan and of course changed my address of record to my Tokyo address. Schwab will not let me buy certain mutual funds I think because those funds aren't registered in Japan. I had the same experience with Fidelity (I've never tried to buy mutual funds in my TDAmeritrade account). Schwab will let me trade any stock or ETF I have tried.