Help for 40yr old Brit, long term looking for advice

[plat]

Hi all,

I'm very glad to have found this forum. Nice to meet you all!

I'm wondering if someone can give me some advice on what to do please.

I'm a 40 yr old British guy living in Tokyo for about 15 years and I intend to stay in Japan long term. I'm new to investment, I never really had the opportunity to learn it and was brought up on just saving and not investing. I know that I don't have much time left to do much before I retire. I'm wondering if someone can give me some advice on what to do with my savings and for my future please.

I can speak Japanese but I would need to learn probably a little more regarding investment terms to be comfortable with investment websites here in Japan. I also have PR.

My current situation is this:
*Salary: 9.6m a year, a bonus may push that to 10.4ish (so I'm right on the line of the higher tax bracket)
*Savings 10m in Japan
*Saving 3m equivalent in UK (its just sitting there)
*DC pension plan with 13m in it.
*Standard government pension

Outgoings are roughly 150k a month for bills, food and a small travel fund and 200k roughly a month for International school for the kid. We paid off a mortgage in 10 years so there's no outgoing money for rent/mortgage from last month. I can probably realistically save/invest 250~300k per month going forward if I keep my head down.

With the DC pension plan I have I've dabbled a little over the past year but I would say I'm far from an expert in these matters but I'm keen to learn. I'm not currently doing anything to mitigate my tax at the moment either.

Would anyone be kind enough to give me some advice on what I should look at next please? Any help would be appreciated.

Many thanks!
Plat

[Kanto]

I would suggest looking into

1. Ideco -> Some DC plans allow for it in addition
https://www.retirejapan.com/ideco-j401k/

2. NiSA or Tsumitate Nisa
https://www.retirejapan.com/nisa/

3. Opening up a brokerage account in Japan with Monex, SBI or Rakuten

......

It seems other Brits here can opt-in for volunteer British pension payments. Search the forum for more details.

[fools_gold]

Have you looked into making Class 2 National Insurance contributions back in the UK? There are a couple of threads about it here. It's a cheap way to bump up your retirement income.

[sutebayashi]

I know that I don't have much time left to do much before I retire.

I'm a year older than you, still with a hefty mortgage, but not feeling at all like I don't have much time left - unless you are planning to retire early

Get yourself a NISA account for sure, and iDeCo too if your employment situation allows for it.

Some core concepts I recommend reading about are
1) passive investing, via mutual funds or ETFs that invest in stock market indexes
2) diversified investing, via mutual funds or ETFs that invest in different asset types, such as developed market stocks, emerging market stocks, developed market bonds, emerging market bonds, and domestic assets too if you are happy to invest in Japanese assets. A key thing is understanding the different risk profiles of different asset classes, and coming up with allocations in each asset class that you feel good about.
3) dollar-cost averaging, which should be good to know if you are planning to invest a 200K each month

Once you are comfortable with those core concepts, I recommend you set up your accounts to invest automatically, then focus on your family and job instead (except for annual re-balancing of your asset allocations). The #1 reliable way to make money is to work!

[mighty58]

The good news is that you're doing just fine at the moment, decent level of savings and income, and the fact that you will start investing soon is also great. The old saying in investing is that the best time to start was when you were young, but the second best time is today.

The self-education that poster above recommended is important.

Your likely next steps are to:
1. get your savings out of cash and into an index fund so that it can grow,
2. double check to ensure your 401K/DC money is being invested (if its just sitting there in a money market fund it's not going to grow),
3. looking ahead, come with a plan to invest. The first 1.2m in investments per year will be through NISA, then via a regular account for anything above that figure.

To enable 1. and 3., you will need to open an account at a brokerage (Monex, SBI, Rakuten are popular options) and then apply again to set up a NISA account within that account.

[adamu]

Agree with the others above!

About NISA.

For new investors that are planning on being in Japan for the long term, Tsumitate NISA is probably the better choice over the old/regular NISA which is on the way out. The annual limit for Tsumitate NISA is only 400,000 yen (compared to NISA's 1.2 million), but it's tax-free for 20 years instead of just the 5 that NISA gives you.

[RetireJapan]

All the good advice is already here

-pay into UK pension if you can on a voluntary basis
-use iDeCo and NISA to invest
-invest every month into something sensible
-automate everything so you don't have to think about it
-enjoy your life and slowly get rich without noticing

Ask questions here or book an online coaching session if you want more support.

[sutebayashi]

Hi adamu-san,

For new investors that are planning on being in Japan for the long term, Tsumitate NISA is probably the better choice over the old/regular NISA which is on the way out.

Is that so? I remember annual news reports each year about changes to the current NISA when tax system revisions are considered, but my guess is they will keep fiddling with it rather than completely eliminate it. I'm using it as a buy-and-hold vehicle myself, which is what I think the government is happy to incentivize, as opposed to tax-free speculative trading.

The annual limit for Tsumitate NISA is only 400,000 yen (compared to NISA's 1.2 million), but it's tax-free for 20 years instead of just the 5 that NISA gives you.

Each NISA account is for 5 years, but (at least as of today) we can roll over the investments in an expiring NISA account into the next year's new NISA account. This year I'm rolling over my entire 2016 NISA account balance to my 2021 account (which is more than 1.2 million's worth fortunately).
So the scheme does let you hold the investments tax-free for longer than 5 years. I'm accumulating more assets via taxable accounts, but I aim to keep as much of my equities funds in the NISA accounts as I can, to hopefully maximize the tax-benefits.

The potential downside I see with tsumitate NISA is that it takes 15 years to invest the same initial sum of money that can be invested in 5 years with plain NISA. That's a decade's worth of tax-free returns on 6 million yen worth of investment that is potentially foregone. Indeed, with tsumitate NISA you do get to invest another 2 million yen over the final 5 years of the 20-year period, but in my case I was able to build up to 6 million over 5 years, and am happy to have it invested already - the stock market has done nicely over that time. (I started NISA in 2014, maxed it out in 2016-2020, but had I been doing tsumitate NISA I believe it'd be 2029 before I can start investing the final extra 2 million, and I'd rather be invested than wait for tax-free benefits far in the future with no guarantee of profits when that time comes.

So for these reasons, personally I am happy with the vanilla NISA accounts, but I do think the tsumitate NISA scheme is good in that it does guide people into a safe form of long term investment, and the 400,000 annual allocation could be suitable especially for those in their early 20's, or otherwise only want to invest that amount each year anyway.

[Kanto]

Hi adamu-san,

For new investors that are planning on being in Japan for the long term, Tsumitate NISA is probably the better choice over the old/regular NISA which is on the way out.

Is that so? I remember annual news reports each year about changes to the current NISA when tax system revisions are considered, but my guess is they will keep fiddling with it rather than completely eliminate it. I'm using it as a buy-and-hold vehicle myself, which is what I think the government is happy to incentivize, as opposed to tax-free speculative trading.

The annual limit for Tsumitate NISA is only 400,000 yen (compared to NISA's 1.2 million), but it's tax-free for 20 years instead of just the 5 that NISA gives you.

Each NISA account is for 5 years, but (at least as of today) we can roll over the investments in an expiring NISA account into the next year's new NISA account. This year I'm rolling over my entire 2016 NISA account balance to my 2021 account (which is more than 1.2 million's worth fortunately).
So the scheme does let you hold the investments tax-free for longer than 5 years. I'm accumulating more assets via taxable accounts, but I aim to keep as much of my equities funds in the NISA accounts as I can, to hopefully maximize the tax-benefits.

The potential downside I see with tsumitate NISA is that it takes 15 years to invest the same initial sum of money that can be invested in 5 years with plain NISA. That's a decade's worth of tax-free returns on 6 million yen worth of investment that is potentially foregone. Indeed, with tsumitate NISA you do get to invest another 2 million yen over the final 5 years of the 20-year period, but in my case I was able to build up to 6 million over 5 years, and am happy to have it invested already - the stock market has done nicely over that time. (I started NISA in 2014, maxed it out in 2016-2020, but had I been doing tsumitate NISA I believe it'd be 2029 before I can start investing the final extra 2 million, and I'd rather be invested than wait for tax-free benefits far in the future with no guarantee of profits when that time comes.

So for these reasons, personally I am happy with the vanilla NISA accounts, but I do think the tsumitate NISA scheme is good in that it does guide people into a safe form of long term investment, and the 400,000 annual allocation could be suitable especially for those in their early 20's, or otherwise only want to invest that amount each year anyway.

The regular Nisa comes to an end in 2024

The NEW Nisa introduces a mandatory Tsumutate like feature and ends in 2028.

It sure as heck looks like they are planning to end the Regular/New Nisa and transition people to the Tsumitate.

[adamu]

The potential downside I see with tsumitate NISA is that it takes 15 years to invest the same initial sum of money that can be invested in 5 years with plain NISA. That's a decade's worth of tax-free returns on 6 million yen worth of investment that is potentially foregone. Indeed, with tsumitate NISA you do get to invest another 2 million yen over the final 5 years of the 20-year period, but in my case I was able to build up to 6 million over 5 years, and am happy to have it invested already - the stock market has done nicely over that time. (I started NISA in 2014, maxed it out in 2016-2020, but had I been doing tsumitate NISA I believe it'd be 2029 before I can start investing the final extra 2 million, and I'd rather be invested than wait for tax-free benefits far in the future with no guarantee of profits when that time comes.

So for these reasons, personally I am happy with the vanilla NISA accounts, but I do think the tsumitate NISA scheme is good in that it does guide people into a safe form of long term investment, and the 400,000 annual allocation could be suitable especially for those in their early 20's, or otherwise only want to invest that amount each year anyway.

Yes, this is also my biggest doubt about Tsumitate NISA. The lower limit means it takes a long time to get going. Beats me which one works out better. It would be great if somebody with time and a spreadsheet could simulate what happens to 400k invested tax free over 20 years x 20 times vs 1.2M invested tax free 5 years x 5 times (note that the rollover is not guaranteed, they may not extend the system after 2028).

For new investors that are planning on being in Japan for the long term, Tsumitate NISA is probably the better choice over the old/regular NISA which is on the way out.

Is that so? I remember annual news reports each year about changes to the current NISA when tax system revisions are considered, but my guess is they will keep fiddling with it rather than completely eliminate it.

Of course it's just a guess. The New Regular NISA () has the two-tier system which includes a first tier with the same requirement as Tsumitate-NISA, and then the second tier which you can invest as you like. My suspicion is that they'll close Tier 2 in 2028, and just roll everyone's Tier 1 stuff into Tsumitate NISA.

The future of regular NISA is not clear now, but a combination of Tsumitate being 20 years over 5, and it seeming to be the preferred vehicle of the policy makers, is why I recommended it. Minako Takekawa also advises the same. Also just found this article but not had time to sit and read it yet. And another one.

Personally I use regular NISA, but that's because I don't know if I'll be in Japan in 20 years time, so decided to err on the side of maximum upfront tax-free investment. For long term investors in Japan, Tsumitate makes sense IMO