Regular NISA and Tsumitate NISA

[RetireJapan]

No guarantees, but I think it's likely that current NISA accounts will end up giving more than 5 or even 10 years tax shelter. Somebody let me know if this is just wishful thinking!

Current ordinary NISA will roll over into the new ordinary NISA, but I am guessing it will stop there and only the mutual fund portion of the new ordinary NISA will be able to roll over into tsumitate NISA once that system ends at the end of 2028.

https://money-bu-jpx.com/news/article027896/

[zeroshiki]

NISA: 1.2M invested, 5 years tax free, next 15 years with tax, compunded 5% annually = ¥2,847,524.66
T-NISA 1.2M invested broken up as 400k T-NISA and 800k normal account, full 20 years = ¥1,061,319.08 tax free + ¥1,324,526.72 (after tax) = ¥2,385,845.80

In this case, just regular NISA wins because of the compounding interest on the large initial amount. This doesn't even take into consideration the extra 5 years you get from rolling over regular NISA which would make it win even more in this comparison.

You mention the rollover, but it might be more powerful than just an extra 5 years. Ben or someone who knows better might correct me here, but I don't think there has been any indication that rollovers will be limited to once time only (extra five years). I think the general expectation is that NISA accounts will probably be allowed to be rolled over until further notice, or until regular NISA is discontinued, in which case regular NISA will likely be allowed to be rolled over into T-NISA. No guarantees, but I think it's likely that current NISA accounts will end up giving more than 5 or even 10 years tax shelter. Somebody let me know if this is just wishful thinking!

The current articles about New NISA is that it will only be in effect until 2028 so if you start now you'll only be able to do 1 rollover (in 2027). Obviously, if the government keeps NISA going forward you can keep rolling over but doing a rollover actually blows your current NISA allowance for the year so I'm unsure whether this is advantageous or not.

Making an assumption that you can do infinite NISA rollovers and assuming you invest 1.2M a year over a 20 year span, it seems like infinite NISA does win out over tsumitate + specific



I'm not a financial expert, just a dude with Excel so maybe I made a mistake somewhere. NISA with only 1 rollover loses out to tsumitate because the NISA allowance 5 years from now gets used up and you have to use a specific account for your 1.2M for that year.

[Kanto]

NISA: 1.2M invested, 5 years tax free, next 15 years with tax, compunded 5% annually = ¥2,847,524.66
T-NISA 1.2M invested broken up as 400k T-NISA and 800k normal account, full 20 years = ¥1,061,319.08 tax free + ¥1,324,526.72 (after tax) = ¥2,385,845.80

In this case, just regular NISA wins because of the compounding interest on the large initial amount. This doesn't even take into consideration the extra 5 years you get from rolling over regular NISA which would make it win even more in this comparison.

You mention the rollover, but it might be more powerful than just an extra 5 years. Ben or someone who knows better might correct me here, but I don't think there has been any indication that rollovers will be limited to once time only (extra five years). I think the general expectation is that NISA accounts will probably be allowed to be rolled over until further notice, or until regular NISA is discontinued, in which case regular NISA will likely be allowed to be rolled over into T-NISA. No guarantees, but I think it's likely that current NISA accounts will end up giving more than 5 or even 10 years tax shelter. Somebody let me know if this is just wishful thinking!

There is no indication that the FSA will allow Regular/New Nisas to be rolled over more than once. I think you need to assume they will not, and be presently surprised if they do.

[zeroshiki]

What would be more interesting is to find out if they will allow regular -> tsumitate rollovers with the base acquisition price being from when you bought it instead of present value. (e.g. 400k acquired in 2022 in NISA will be rolled over to T-NISA at 400k instead of 2027 present value of 510k)

In that scenario, going with NISA until it runs out then rolling over into TNISA seems to be the optimal strategy.

[Butterball]

I guess infinite regular NISA rollovers isn't exactly what I meant, but rather regular NISA rollovers until the end of that program, and then regular -> tsumitate (fund portion) rollovers. I certainly agree that it's best to assume the worst, but I feel like the conventional understanding of the NISA programs is that there's no "one rollover only" rule because funds that have been rolled over into year X are considered identical to funds that were newly purchased in year X:

viewtopic.php?f=4&t=1333&p=13390&hilit=roll#p13375

adamu

tokyolights wrote: ↑

Mon Apr 12, 2021 3:19 pm
Also, another question. What happens in 2031? I assume I am not allowed to roll over assets that have already been rolled over before, so I am forced to move them into a taxable account at that point. Is this correct?

No. As far as I understand, there is no rule that prevents re-rolling over. You can roll it over again. What rolling over does is prevents you investing new money the following year by up to the amount you rolled over.

Although by 2025 we will have the New NISA system which is even more complex, with tier 1 and tier 2... but you will still be able to roll over.

and:
viewtopic.php?f=4&t=1614&start=10&hilit=roll#p14713

RetireJapan

If you have an expiring ordinary NISA account you can also choose to roll some or all of the investments over into your new ordinary NISA account.

What you have done or not done in the past has no bearing on your NISA account in the current year.

...

I get the feeling that we will be allowed to roll over the fund portion (only) of the new ordinary NISA into tsumitate when the time comes.

...

Rollevers now can go over the annual limit (this year I rolled over 2.5m into my ordinary NISA) but the new ordinary NISA only has a 200k fund limit, so we'll see if anyone can get that over 400k in five years

Hope I didn't misrepresent anyone's thoughts there.

So my understanding is that it's expected to play out like this:

2019-2023: expiring regular NISA years can be rolled over into current year,
2024-2028: expiring regular NISA (old system) can be rolled over into current year's regular NISA (new system)

• I don't know how rollovers from the old NISA will work with the new NISA's 2-level structure, but it sounds to me from Ben's blog post at https://www.retirejapan.com/blog/nisa-changes/ like the 200k tsumitate-portion can be filled with rolled-over funds, assuming they qualify of course

2029-2033: expiring regular NISA (new system) tsumitate-fund portion can be rolled into current-year tsumitate NISA; remainder of regular NISA gets kicked out into taxable account.
2034~: no remaining regular NISA years to roll over; start contributing new funds to current year T-NISA like a regular Joe

[zeroshiki]

I guess infinite regular NISA rollovers isn't exactly what I meant, but rather regular NISA rollovers until the end of that program, and then regular -> tsumitate (fund portion) rollovers. I certainly agree that it's best to assume the worst, but I feel like the conventional understanding of the NISA programs is that there's no "one rollover only" rule because funds that have been rolled over into year X are considered identical to funds that were newly purchased in year X:

viewtopic.php?f=4&t=1333&p=13390&hilit=roll#p13375

adamu

tokyolights wrote: ↑

No. As far as I understand, there is no rule that prevents re-rolling over. You can roll it over again. What rolling over does is prevents you investing new money the following year by up to the amount you rolled over.

Although by 2025 we will have the New NISA system which is even more complex, with tier 1 and tier 2... but you will still be able to roll over.

and:
viewtopic.php?f=4&t=1614&start=10&hilit=roll#p14713

RetireJapan

If you have an expiring ordinary NISA account you can also choose to roll some or all of the investments over into your new ordinary NISA account.

What you have done or not done in the past has no bearing on your NISA account in the current year.

...

I get the feeling that we will be allowed to roll over the fund portion (only) of the new ordinary NISA into tsumitate when the time comes.

...

Rollevers now can go over the annual limit (this year I rolled over 2.5m into my ordinary NISA) but the new ordinary NISA only has a 200k fund limit, so we'll see if anyone can get that over 400k in five years

Hope I didn't misrepresent anyone's thoughts there.

So my understanding is that it's expected to play out like this:

2019-2023: expiring regular NISA years can be rolled over into current year,
2024-2028: expiring regular NISA (old system) can be rolled over into current year's regular NISA (new system)

• I don't know how rollovers from the old NISA will work with the new NISA's 2-level structure, but it sounds to me from Ben's blog post at https://www.retirejapan.com/blog/nisa-changes/ like the 200k tsumitate-portion can be filled with rolled-over funds, assuming they qualify of course

2029-2033: expiring regular NISA (new system) tsumitate-fund portion can be rolled into current-year tsumitate NISA; remainder of regular NISA gets kicked out into taxable account.
2034~: no remaining regular NISA years to roll over; start contributing new funds to current year T-NISA like a regular Joe

Yeah, assuming this is possible (NISA-TNISA at base NISA acquisition price), this actually wins out based on my calculations.
¥40,895,503 over 20 years versus ¥40,465,630 for just TNISA + specific.

Even if it weren't and you just start a new TNISA account in 2029 with a fresh 400k + 800k specific, the difference is minimal (100k or so). Anything less than a 18 year period for investment actually makes the NISA -> TNISA strategy win.