Kojin Nenkin (private individual pension)

[Kanto]

If you put the same money into the stock market and get a 2% return (terrible by historical standards) you would end up with 7,972,085
With a 5% return (also low historically), you would end up with 11,878,893
With a 7% return (average), you would end up with 15,742,179
With a 9% return (good), you would end up with 21,081,375

Sorry I don't understand how you calculated those numbers... Could you please show how you calculated that?

I am thinking of this in addition to doing iDeCo (perhaps with kikin) and eventually NISA. But certainly not instead of them.

You asked about inflation. Yeah I guess it would be regardless of inflation but would presume the dividend would rise with inflation?

You can play around with the average rate of return. https://bit.ly/2JY9vAi

Here is an example of returns from MSCI ACEI World Fund -> Similiar to Emaxis Slim All Country http://www.lazyportfolioetf.com/etf/ish ... d%20yield.

[Gareth]

Thank you both for the links to the calculators. Very useful.

So it seems I am being wowed by big numbers such as 117.5% when actually it is a return of one and a bit percent if I used the calculator correctly. Hmmm...

[RetireJapan]

Exactly. You could probably do something much better with your money, unless what you are looking for is complete stability and a bit of a tax write-off.

But mostly these policies appeal to low-knowledge consumers who are easy marks for the salespeople.

[Gareth]

The missus reckons it's good to do this. She says it's better than keeping cash in a bank account. It's lower risk than iDeCo. It's guaranteed to increase, even if the rate is low. There are no fees. It's easy to set up and requires no management. I don't need to know about investing (which I am still struggling with). I can get a wad of cash when the policy matures that can tide me over if iDeCo is doing poorly in the year I want to retire which will see me right for a few years until it recovers. She sees no good reason to not do it in addition to iDeCo.

I'm at huge risk of analysis paralysis. The more opinions I get, the more confused I seem to be getting.

[Kanto]

The missus reckons it's good to do this. She says it's better than keeping cash in a bank account. It's lower risk than iDeCo. It's guaranteed to increase, even if the rate is low. There are no fees. It's easy to set up and requires no management. I don't need to know about investing (which I am still struggling with). I can get a wad of cash when the policy matures that can tide me over if iDeCo is doing poorly in the year I want to retire which will see me right for a few years until it recovers. She sees no good reason to not do it in addition to iDeCo.

I'm at huge risk of analysis paralysis. The more opinions I get, the more confused I seem to be getting.

The recipe for that is more in-depth reading IMO and less surface-level analysis.

It sounds like passive investing is the right approach for you.

Passive Investing -> https://en.wikipedia.org/wiki/Passive_management
Boglehead approach -> https://www.bogleheads.org/wiki/Getting ... _investors
Boglehead Japan -> https://www.bogleheads.org/wiki/Investing_from_Japan
Million Teacher -> https://www.amazon.co.jp/-/en/Andrew-Ha ... 0470830069

[RetireJapan]

On the other hand, compromise is good. My wife wanted a home, I didn't, we compromised and that was good. It's not all about maximising returns.

If your wife wants to do this and you'll be able to invest alongside it, it's not the end of the world to have 20,000 ten a month not really earning much

I would check on whether it includes inflation protection, and how easy it will be to cancel it or stop paying in if you change your mind later.

[adamu]

Interesting.

There are no fees.

I'm not sure, if you compare it to the market rates you get by self-investing, it seems the hidden fees AKA the difference they pocket, are colossal. There is no insurance with self-investing though, but that's what term life insurance is for, as Kanto mentioned.

This is the first time I've heard of Kojin Nenkin though, I think I need to learn more about it. I'm also completely unsure how that tax deduction you mentioned works, and how it doesn't conflate with the DC/DB/iDeCo deduction.

[Gareth]

This is the first time I've heard of Kojin Nenkin though, I think I need to learn more about it. I'm also completely unsure how that tax deduction you mentioned works, and how it doesn't conflate with the DC/DB/iDeCo deduction.

I'm self-employed. This is how I understand it. Not sure how it works for full-time company folk. iDeCo, Fuka and Kikin go in box 11 小規模企業共済等掛金控除 (small business mutual aid premium deduction) and Kojin goes in box 12 生命保険料控除 (Life insurance deduction) so the deductions are calculated separately.

[Kanto]

This is the first time I've heard of Kojin Nenkin though, I think I need to learn more about it. I'm also completely unsure how that tax deduction you mentioned works, and how it doesn't conflate with the DC/DB/iDeCo deduction.

I'm self-employed. This is how I understand it. Not sure how it works for full-time company folk. iDeCo, Fuka and Kikin go in box 11 小規模企業共済等掛金控除 (small business mutual aid premium deduction) and Kojin goes in box 12 生命保険料控除 (Life insurance deduction) so the deductions are calculated separately.

It is fairly standard to receive a tax deduction for life insurance premiums. This would no different from the deduction you would get from a standard term, or life policy though, correct?

Kojin Nankin seems to be essentially an annuity combined with life insurance. Like many Japanese products, including college saving schemes.

My wife (who is also Japanese) was only familiar with these types of investment products when we started our investment journey. After comparing, risks, returns and premiums we decided it was not a good deal.

Annuities are for the extremely risk-averse.

https://www.retirejapan.com/blog/annuities-in-japan/

Please correct me if I am wrong.

[adamu]

Ah, so it's a form of life insurance. Thanks for the explanation. Investments wrapped up as insurance products are generally a red flag. If you think about the two concepts:

1. Investments. You take a calculated risk for the chance of higher rewards.
2. Insurance. You take a known loss to protect against unlikely but costly expenses.

Technically, you can cover everything with 1). If you have enough investments, that is your insurance policy. Why pay somebody to cover something you've already covered? But for situations where the amount covered is either too expensive, or due to timing would cause you to take a loss by selling investments, then insurance is useful (honest insurance - where you pay a premium for a fixed amount of cover).

When you "invest" in an investment-based insurance policy, the risk from step 1 is transferred to the insurance provider, but your loss in step 2 becomes an unknown loss. Basically your unknown profit from 1 has been transferred to a prescribed profit, and the remaining profit (or loss) belongs to the insurance company. Given the long time periods involved, in most cases (which is all that matters for an insurer) it's a lucrative win for the insurer. The expected amount of profit the investments will produce will be far higher than the guaranteed return the insurer provides. I bet there are high cancellation fees too, because they can't make money from you unless you lock your money away for a long time, greatly increasing the chance of a healthy profit for the insurer (or, if you withdraw after a short term, they could end up out of pocket).