How to retire with a 4 mil yen a year payout?

[Conrad]

Hello,
I would like to learn how to set my finances up so that I get a yearly retirement income of 4 mil yen.
I know very little about investing.
I have 25,000,000 yen saved in Japanese banks.
I am 53.

Have money in Canada in mutual finds.
Canadian bank advisor says I need 800,000 invested there to reach this goal. (so far payout without touching principle would be 25,000/year)
This is possible but money will then be in Canada and will be a hassle to get it to Japan. Or at least I think so.

Advice welcomed.

Sincerely,
Con

[RetireJapan]

Hi Con

Welcome to the forum

To be honest, there are so many variables in that equation that it is going to be hard to give you advice. Check out these blog posts for some ideas on this issue:

https://www.retirejapan.com/blog/how-mu ... -in-japan/
https://www.retirejapan.com/blog/its-good-to-talk/

Are you paying into nenkin? Will you receive any other pensions? How long are you planning to work?

You may want to think about investing to reach your goal. Doing so as a Canadian in Japan is relatively straightforward.

[Conrad]

Hello,
Glad to be here.

Thanks for the links will give them a read and no doubt have more questions.

In answer to your questions:
Not in Nenkin.
Will only get funds from what is invested in Canada after I quit work.
Planning to work till 60 or 65 if I have to. Would prefer to retire tomorrow, but not financially possible.

Am willing to start investing that is not a problem, it is trying to figure out where/how to invest that is causing me grief.

Thanks for the reply.

[jcc]

Hi Conrad,

Regarding your planned payout of 4mil a year: hope for the best, plan for the worst.

The best case is getting returns more or less in line with long term stock market returns of 6-7% an year.

The worst case is going through a down period early in your retirement or saving/investing. Most people still figure you can keep withdrawing at 3-4% an year.

So put like that, we can figure out just how much you need:

At a 3% withdrawal rate(which is very conservative and very unlikely to even touch your principle), you're going to need 133 million yen by the time you retire.

You can bump that up to about 4% which would reduce the minimum to 100million. And at high end(7%) returns, 57million may be enough. You might get even better, but planning for getting lucky is a foolish pursuit.

Now considering you don't necessarily have to keep your principle, you can spend it down slowly, so I'd say the 4% withdrawal rate should be fine, at least so long as you don't live to 110 and retire at the worst possible time with multiple economic downturns.

So that gives you a target investment savings of a grand total of 100mil assuming you have no pension to supplement it after retirement.

Your post isn't very clear on what your investments in canada are. Are you already getting 25k CAD a month? If so, that covers half of your annual need so you'd need to save up 50mil total(so another 25m yen) and you should be able to retire on an annual 4m yen, but that may involve some moving money between canada and japan.

Finally, I'd be very dubious of what your bank advisor is telling you. They'll promise you the world, but they're probably only presenting you best case numbers. Have a look at how much you have invested in canada, and then figure out what a 4% annual payout on that would be like to get a more realistic number.

There's so much more that could be covered here, but hopefully this can get you started. If your canadian advisors assessment is accurate, you're already 3/4 of the way there, so doing pretty ok. The information you posted is pretty incomplete so there's a lot of assumptions in here. I'd recomment trying to learn this stuff yourself, but if you can't, then get advice from a professional(but pay them by the hour. If you invest through them, they are not incentivised to work in your best interest)

[Conrad]

Hello jcc

Thanks for the detailed reply.
It is truly appreciated.

Sorry for the unclear post earlier.
Hope this makes it somewhat clearer.

The account my money is in is a Investment Mutual Funds account. (index funds and stocks)
The best year for returns was 8% and the lowest was 3%.
The average so far has been around 6.5%. (I realize that does not mean it will stay that high.)
Over ten years of using that account, but only started to seriously put money into it recently.

The 25K payout would be assuming the account was left as is until I was 65 before I started to withdraw money. then the money would come from gains and the principle.

Am trying to learn this but am slightly overwhelmed and don’t know where to start. Thanks for this site.

Thanks again for taking the time to answer.
Enjoy!

[Sybil]

Interest rates are basically zero. Anyone remember 5% plus interest rates?

As we have experienced a long bear run, eventually the stock market will go into negative territory. As you are 53 it will most likely happen before you retire.

Where you put your money depends on your appetite for risk. If there is a dramatic downturn you might not make up your losses before you retire.

[DragonAsh]

? As we have experienced a long bear run, eventually the stock market will go into negative territory. As you are 53 it will most likely happen before you retire.


You mean a long bull run. We're basically on a 10-year bull run, longest in history. We will have a bear run at some point, it's a matter of when, not if. Might be next month. Might be next year, or the year after next. But it will come. As noted, you're 53 so when the inevitable bear run hits, you may not have much time left to ride it out and enjoy the subsequent rally. Plan accordingly.

[Conrad]

I understand the risks and that they will come eventually and unexpectedly. But I’d like to know what planning accordingly means in specific terms. And how to do it.

Thanks for responding.

[0x143]

You do not specific the current net value of your Canadian investments.

The 4% rule is a super common rule of thumb used in the Retire Early community. It was derived from back testing historic returns. The result being that even if you retired right before the great depression with a 4% withdrawal rate you would only go broke in X percentage of scenarios where X is a lowish number.

Thus the 4% rule makes sense when asking "how much money do I need to live from ages 60 to 100 without working", but it is less effective when calculating how much one needs if working is still a viable option.

In your case with 25Million yen, no pension, and only 10ish years left to work and leave the money growing you are not in a safe situation.

You need to sit down and plan where you want to retire. If you want to live in Canada then you should focus on building investments and income there. If you want to be in Japan then avoid the extra risk of having your investments overseas. Next if you do not already own your own home then you will want to consider buying. Japan's model of retirement depends on people owning their own home. Almost no one in Japan out of the regular population owns enough investments to afford renting for 30years, and pension payments would only cover the smallest danchi.

Canada or Japan do not matter so much. Long term currency rates do not change many magnitudes. If you want to invest in American or Canadian stocks you can do so from a Japanese brokerage.

[Conrad]

Thanks for taking the time to answer my question.

The net worth of my investments in Canada is 285,000 CDN $.
Should go up by 50,000$ or so later this year from sending money home.

Ideally we would like to live in both countries.
Own property in Canada (Sask. but will likely live in BC)
Rent in japan.