RetireJapan

Beaglehound wrote: ↑Sat Aug 07, 2021 5:05 am

runmanTX wrote: ↑Sat Aug 07, 2021 2:59 am Could someone advise me on how, as a US citizen, I can open an Ideco account using cash only payments?

1. My understanding is that I must pay in for 10 years (now 53yo) so my "cash investments" could be withdrawn at age 63, correct?

2. Not sure of my Japan tax bracket, but lowering my tax would be basically the only reason to open an Ideco, right?

3. Would it be better to invest that money in my current route of ETF index funds in the US market?

Are there any other advantages / disadvantages of Ideco I am missing?


Thanks in advance.

There is no requirement to pay in for ten years. If you pay in until you are 60, for example, you would be able to withdraw at 62. See the age of eligibility table three quarters of the way down.

https://www.ideco-koushiki.jp/english/

Ok. I understand. Thanks. I guess I misread about the 10 year requirement.

Its an interesting question though. Does "saving" money tax-free this way advantageous over buying an ETF.

runmanTX wrote: ↑Sat Aug 07, 2021 5:49 am

Beaglehound wrote: ↑Sat Aug 07, 2021 5:05 am

runmanTX wrote: ↑Sat Aug 07, 2021 2:59 am Could someone advise me on how, as a US citizen, I can open an Ideco account using cash only payments?

1. My understanding is that I must pay in for 10 years (now 53yo) so my "cash investments" could be withdrawn at age 63, correct?

2. Not sure of my Japan tax bracket, but lowering my tax would be basically the only reason to open an Ideco, right?

3. Would it be better to invest that money in my current route of ETF index funds in the US market?

Are there any other advantages / disadvantages of Ideco I am missing?


Thanks in advance.

There is no requirement to pay in for ten years. If you pay in until you are 60, for example, you would be able to withdraw at 62. See the age of eligibility table three quarters of the way down.

https://www.ideco-koushiki.jp/english/

Ok. I understand. Thanks. I guess I misread about the 10 year requirement.

It only makes sense if this is part of your cash or "cash-like" allocation. For instance, an iDeco cash deposit might be an interesting alternative to a bond allocation.

zeroshiki wrote: ↑Sat Aug 07, 2021 6:21 am Its an interesting question though. Does "saving" money tax-free this way advantageous over buying an ETF.

I imagine you’d need to be on a high income tax bracket and even then only start using iDeco from age 50 or something.
And keep your “invested” annual contributions lower than the tax free allowance you’ll get when it’s time to withdraw. And ensure you don’t have to share that allowance with a retirement payment.

Very very rough maths. But if you did 10 years avoiding 40% income tax that’s similar to a consistent 6% growth if you invested from net income instead.
If you are only avoiding 20% income tax that’s similar to 3% growth over 10 years.

And there’s a high chance I’m wrong about some of this.

Established wrote: ↑Sat Aug 07, 2021 6:34 am

runmanTX wrote: ↑Sat Aug 07, 2021 5:49 am

Beaglehound wrote: ↑Sat Aug 07, 2021 5:05 am

There is no requirement to pay in for ten years. If you pay in until you are 60, for example, you would be able to withdraw at 62. See the age of eligibility table three quarters of the way down.

https://www.ideco-koushiki.jp/english/

Ok. I understand. Thanks. I guess I misread about the 10 year requirement.

It only makes sense if this is part of your cash or "cash-like" allocation. For instance, an iDeco cash deposit might be an interesting alternative to a bond allocation.

"Alternative to a bond allocation" Interesting thought as I was just about to buy a Bond ETF to add to my portfolio.

Moneymatters wrote: ↑Sat Aug 07, 2021 6:48 am

zeroshiki wrote: ↑Sat Aug 07, 2021 6:21 am Its an interesting question though. Does "saving" money tax-free this way advantageous over buying an ETF.

I imagine you’d need to be on a high income tax bracket and even then only start using iDeco from age 50 or something.
And keep your “invested” annual contributions lower than the tax free allowance you’ll get when it’s time to withdraw. And ensure you don’t have to share that allowance with a retirement payment.

Very very rough maths. But if you did 10 years avoiding 40% income tax that’s similar to a consistent 6% growth if you invested from net income instead.
If you are only avoiding 20% income tax that’s similar to 3% growth over 10 years.

And there’s a high chance I’m wrong about some of this.

The math is gonna drive me nuts! I was hoping for a simple, easy to apply, solution.
I wonder if there is a website where I could perhaps crunch the numbers (tax savings vs other options).

Is anyone actually putting cash allotments into their Ideco? I'd love to hear the experiences of others.

Ben (RetireJapan) has talked about iDeCo being an alternative for cash savings for US citizens because of the tax free nature. It won't make you alot of money but if you do think of it as low yield bonds (and that's the only type that exists in Japan anyways) then its not a bad investment.

Basically, the 80-20 thing with equity and bonds, you could substitute the 20 with iDeCO and think of them as bonds. You won't make alot of money on it but it brings stability to your portfolio.

runmanTX wrote: ↑Sun Aug 08, 2021 11:07 am The math is gonna drive me nuts! I was hoping for a simple, easy to apply, solution.
I wonder if there is a website where I could perhaps crunch the numbers (tax savings vs other options).

Is anyone actually putting cash allotments into their Ideco? I'd love to hear the experiences of others.

There's a good simulator here which will calculate the tax savings for you.

fools_gold wrote: ↑Mon Aug 09, 2021 1:13 am

runmanTX wrote: ↑Sun Aug 08, 2021 11:07 am The math is gonna drive me nuts! I was hoping for a simple, easy to apply, solution.
I wonder if there is a website where I could perhaps crunch the numbers (tax savings vs other options).

Is anyone actually putting cash allotments into their Ideco? I'd love to hear the experiences of others.

There's a good simulator here which will calculate the tax savings for you.

Ah, perfect! This is what I was looking for. I was just too lazy to do the research.
Thanks!!

Hey there, finally planning to start my Ideco/Nisa.

Regarding the Ideco allowance, is it retroactive? E.g. if I worked and paid taxes in Japan for a shortwhile before starting my Ideco, can I make a larger first payment than the max of my monthly allowance?

Also I hear everyone recommend Monex/Rakuten/SBI - but when I checked online here: https://www.dcnenkin.jp/search/commission.php
It doesn't seem they are the cheapest, or may have closing fees etc. Any reason to not do it through a large bank e.g. SMBC? Fees seem similar, I already have an account there, and it's more likely "too big too fail" than internet startups in the long run. Just wondering what are your takes on this.

Thanks!