RetireJapan

RetireJapan wrote: ↑Tue Mar 29, 2022 10:13 am

Moneymatters wrote: ↑Tue Mar 29, 2022 9:15 am ideco is not tax free.

This is a very good point, especially for people who can pay in 68,000 yen a month.

Assuming you are able to claim the 'retirement bonus' allowance (退職金控除), the tax treatment is as follows:

Up to 15m yen is tax free (you build this allowance up 400,000 yen per year for the first 20 years, and then 700,000 yen a year for the next ten, for a maximum of 15m tax free)

For any amount above the allowance, half is tax free and the rest is taxed as income.

Because you can decide when to cash out iDeCo, doing so in a year when you don't have much income otherwise would also help soften the blow of this tax.

Very useful to know, thanks! So long as I know in advance and have worked out what I want to do, the pain should be manageable At some point over the next 20 years I'm hoping to get full-time work in which case the final iDeCo amount will be quite a lot less - though so will the tax-free allowance I guess. Anyway, thank you again.

ap21 wrote: ↑Wed Mar 30, 2022 12:06 am
I think it's a very sensible strategy Thank you! I have to be a bit more conservative with the NISA (that's likely to be used before retirement for - ideally - a down payment on a mortgage or on part of a child's education, but may be needed before even those) but have already changed my iDeCo back to stocks

Good stuff. Yes, of course, if you need some of your money before retirement, then the asset allocation should be different.
I have a similar challenge. Teenage children will presumably want to go to university, and in Japan it seems to be 'the done thing' to cover all costs associated with tertiary education

So I am trying to balance the desire for growth with the need to pay some bills as well. I started grudgingly buying this bond fund: eMAXIS Slim 先進国債券インデックス about a year ago. It is up a tiny amount over the past year. It is not hedged, so will not protect me from FX risks. Anyway, I drip a bit of money in there when I have it.

beanhead wrote: ↑Wed Mar 30, 2022 9:00 am I have a similar challenge. Teenage children will presumably want to go to university, and in Japan it seems to be 'the done thing' to cover all costs associated with tertiary education

Not necessarily. Ours got loans, and we now give them money from time to time but that is quite a different dynamic

RetireJapan wrote: ↑Wed Mar 30, 2022 9:20 am

beanhead wrote: ↑Wed Mar 30, 2022 9:00 am I have a similar challenge. Teenage children will presumably want to go to university, and in Japan it seems to be 'the done thing' to cover all costs associated with tertiary education

Not necessarily. Ours got loans, and we now give them money from time to time but that is quite a different dynamic

I don't want to derail this thread but you mentioned education and loans.
This is something I am interested in. I am wondering if this is something another thread might be useful, or a blog post.
Because I too have saved for my kids education, and the crunch is coming next year, but I don't want to hand all that money over to a university, because maybe my kids want to goof off for a few more years and study "ENGLISH" ( yep they said that) or can't be bothered to consider what's the purpose of uni, or god forbid, decide to leave uni mid way, then that wipes out millions on yen.

Depending on the interest rate on the loan, is keeping the savings still stashed away worth it, then if they graduate pay it off?
( personally I would rather let them pay off the loan, and when they decide to buy a house maybe give them it then)

Could you give us some information on how to apply for student loans in Japan, how much, rules etc.

Great post idea

I'll have to do some research though.

Moneymatters wrote: ↑Tue Mar 29, 2022 9:15 am ideco is not tax free.

Neither is NISA...

For iDECO, 401k, etc.,
The contributions are made with Pre-Tax Earnings - Tax Free.
Either, your company makes the adjustment in your Year End Nenmatsu Chosei or you file the Kakutei Shinkoku to have the iDECO, 401k, etc, Contributions deducted from your Taxable Income, meaning that they are not taxed on that income, so the Gov has effectively paid (Whatever Your Marginal National Tax Rate is) % and 10% Residents' Taxes of that contribution into your Retirement Account.

Once the funds are in the Wrapper, any switching of Instruments is done Tax Free.
You do not have to pay Capital Gains Tax, Dividend Taxes or Interest Taxes on the gains in the Wrapper, so they grow Tax Free.

You only have to pay taxes at a very favourable rate when you take distributions out of the Wrapper in retirement, either as a Lump Sum, or as a Pension Income Stream.


iDECO, 401k, etc. - Not taxed on the way in - Taxed on the way out.


On the other hand, NISA (Like Roth IRA in the US)
The contributions are made with Post-Tax Earnings, meaning that the Gov has already taxed the contribution money on the way in at your Marginal National Tax Rate) % and 10% Residents' Taxes.

Once the funds are in the Wrapper, any switching of Instruments is done Tax Free.
You do not have to pay Capital Gains Tax, Dividend Taxes or Interest Taxes on the gains in the Wrapper, so they grow Tax Free.

As the funds were taxed on the way in, distributions are Tax Free.

NISA - Taxed on the way in - Not taxed on the way out.

Good point, but there is no way to switch funds in a NISA account.

Tkydon wrote: ↑Wed Mar 30, 2022 3:35 pm iDECO, 401k, etc. - Not taxed on the way in - Taxed on the way out.

NISA - Taxed on the way in - Not taxed on the way out.

This is a great way of putting it. In addition to the caveat mentioned by RetireJapan: NISA is a one-off purchase allowance. One you sell a NISA asset, you get the gains tax free, but after that it's taxable, you can't re-use the allowance.

It's also worth mentioning that iDeCo - taxed on the way out - is far superior because the larger untaxed amount can compound, and for longer.

Bubblegun wrote: ↑Wed Mar 30, 2022 1:22 pm
Could you give us some information on how to apply for student loans in Japan, how much, rules etc.

Hear, hear! RetireJapan's comment about loans came as a relief: the idea that as a parent I'd be expected here to pay for all of my kid's/s' university costs - when in my 60s and near the end of a not-especially-remunerative career - is not a pleasant one. On the other hand, I don't want to expose my kid to a gouging regular bank loan either.

I read something a while ago saying that Japan was considering an Australian-style student loans scheme but haven't seen anything on the subject since; I benefited from the UK version of this and would welcome a Japanese version as manna from heaven. I'm sure many others would, too.

ap21 wrote: ↑Thu Mar 31, 2022 4:03 am

Bubblegun wrote: ↑Wed Mar 30, 2022 1:22 pm
Could you give us some information on how to apply for student loans in Japan, how much, rules etc.

Hear, hear! RetireJapan's comment about loans came as a relief: the idea that as a parent I'd be expected here to pay for all of my kid's/s' university costs - when in my 60s and near the end of a not-especially-remunerative career - is not a pleasant one. On the other hand, I don't want to expose my kid to a gouging regular bank loan either.

I read something a while ago saying that Japan was considering an Australian-style student loans scheme but haven't seen anything on the subject since; I benefited from the UK version of this and would welcome a Japanese version as manna from heaven. I'm sure many others would, too.

It certainly doesn't enthrall me that as I head to the big 60, Ive got take out another mortgage to pay for uni.

I think the idea of thinking young people can be so heavily indebted in the UK, Pay the debt back, expect to save a deposit, and try to buy a house all at the same time, having credit cards etc push seems to be a debt nightmare. Seems that England, encourages that debt and most graduate jobs, aren't even worth it.

I'm not even sure its even worth it in Japan either, as it seems to be just a reason to be a s.a.l.a.r.y.m.a.n. and really nothing to do with what they actually studied. Is the actual investment worth it?