nisa lumpsum or tsumitate nisa

[fools_gold]

I've made a spreadsheet to work out the most tax-efficient option for a given amount and investment horizon.

Basically, if you're looking at expected returns of 7% over 20 years then it seems that there is little difference between putting 1.2million yen in a regular NISA with a rollover and putting 400k in a Tsumitate NISA and 800k in a taxable account.

The simulation treats the Tsumitate investment as a lump sum to keep things simple. Interest is compounded yearly. I think the calculations are correct, but please let me know if anything is wrong. The spreadsheet only works for amount up to 1.2 million yen and investment horizons of up to 20 years.

Edit: Fixed excel file

[bryanc]

thanks all on this-i didnt realise quite how complex this was when i asked the question in the initial post!!

my wife and i have enough to do the lump sum asap -this is what our plan was and which you kindly suggest would be the best way forward if
funds available.
however,the one thing that gives me pause is that (as people say) im worried about it being time limited and thus vulnerable to a market dip
(not being invested for the length of time reqd for the law of averages to work)

[adamu]

vulnerable to a market dip

In the worst case: funds are lower when they get kicked out of the NISA than they were when they were put in (10 years before), you will have to pay tax on the subsequent gains. But if your investments are diversified then that is very unlikely over the 10 year period.

I do wish they would amend NISA so that if the asset is at a loss when it expires, CGT is calculated from the initial purchase price. It's the biggest flaw with the NISA system.

10 years comes from the fact that you can roll-over your investments.

2021: Invest 1.2M in a NISA until end 2025.
In 2024 the New NISA System starts.
In 2026, you can roll over your expiring 2021 NISA into a "New NISA" for another 5 years.

[Yossarian]

Interesting discussion - I'm in my 3rd year of tsumitate but financial situation has changed so have been thinking about switching to full NISA. I'll have a look at those links properly later.

[Kanto]

thanks all on this-i didnt realise quite how complex this was when i asked the question in the initial post!!

my wife and i have enough to do the lump sum asap -this is what our plan was and which you kindly suggest would be the best way forward if
funds available.
however,the one thing that gives me pause is that (as people say) im worried about it being time limited and thus vulnerable to a market dip
(not being invested for the length of time reqd for the law of averages to work)

Are you planning one Regular NISA, or one apiece?

If it is only 1 account, it might be better to do 2 Tsumitates each.

Which is another element we have not yet discussed.

...

fools_gold

I think General Nisa (5 Years, no rollover) Final Total is incorrect in your sheet.

I think your math is also missing the ability to utilize a Tsumitate Nisa after the general Nisa creating a larger total tax-free allowance.

[RetireJapan]

I feel like being able to open 21 tsumitate NISA accounts between now and 2042 (assuming they don't extend the program further), all of which are tax-free for 20 years, is pretty attractive.

[Yossarian]

What happens to your allowance for the year if switching from tsumitate to general?

[fools_gold]

I think General Nisa (5 Years, no rollover) Final Total is incorrect in your sheet.

Thanks. I've fixed that now. There was also an error in the Tsumitate NISA part. The conclusion seems to be the same though.

I've attached a fixed file. It only works for sums up to 1.2 million yen and periods of 10 to 20 years.

I think your math is also missing the ability to utilize a Tsumitate Nisa after the general Nisa creating a larger total tax-free allowance.

I made the spreadsheet on the assumption that I would continue investing a certain part of my income each year throughout the investment period and each year is treated as a separate slice.

However, I think it would be worth adding the new style NISA with its rolloverable portion of 20man and seeing how it compares to the combination of Tsumitate and taxable.

If it is only 1 account, it might be better to do 2 Tsumitates each.

I think 2 Tsumitates with any excess going into a taxable account is the best option. I'll be doing that once after my the rollover period ends on my wife's NISA.

[adamu]

If it is only 1 account, it might be better to do 2 Tsumitates each.

I think 2 Tsumitates with any excess going into a taxable account is the best option. I'll be doing that once after my the rollover period ends on my wife's NISA.

I hadn't considered adding taxable accounts to the mix to make the amount invested equal when comparing NISA/Tsumitate - that's a good idea. Will have to play with it.

What happens to your allowance for the year if switching from tsumitate to general?

I beleive you will continue Tsumitate this year, and from next year you will get a 1.2M NISA allowance.

[Yossarian]

I beleive you will continue Tsumitate this year, and from next year you will get a 1.2M NISA allowance.

I see - even if start the application now the change won't happen until the next calendar year. I thought I had read that but was not confident in my Japanese reading skills so thanks for the confirmation.