RetireJapan

zeroshiki wrote: ↑Tue Apr 26, 2022 6:48 am

MBK wrote: ↑Tue Apr 26, 2022 6:09 am Thank you very much for all your replies. Appreciate all the information shared.

The Yen rate finally at least stopped increasing, so hopefully it will be first step towards stabilization.

I have one more question. I have started my iDeco, though do not have an open NISA account yet.

Tsumitate NISA allows to invest only 400,000 JPY, so it would not be relevant, but I`m intrigued with NISA`s 1,200,000 JPY limit since it`s closer to the lump sum I`m thinking to invest.

I know there is dedicated NISA forum, but since the conversation is already ongoing, let me ask here about how much shall I consider using NISA for potentially using the full limit to invest in index funds. What would be merits and demits to this?

Regular NISA - 1.2M limit 5 years tax free
Tsumitate NISA - 400k limit 20 years tax free

Because of the incredibly long time you can hold onto your funds tax free with Tsumitate, the results are quite close. Regular is better with some rollovers and only if you can fill it up immediately.

Thank you for the reply. Just to follow up, if making the first investment is using a NISA/Tsumitate Nisa a no brainer or is there some situation where investing without utilizing them might be beneficial (lump sum, I imagine, though hard to foresee long term benefit)?

MBK wrote: ↑Sat Apr 30, 2022 7:10 am Just to follow up, if making the first investment is using a NISA/Tsumitate Nisa a no brainer or is there some situation where investing without utilizing them might be beneficial (lump sum, I imagine, though hard to foresee long term benefit)?

401k and iDECO allow you to invest Tax-Free Income (Income before Taxes) so is tax free on the way in, and will therefore grow from a higher input, but the distributions after retirement are taxable.

NISA and Tsumitate NISA allow you to invest Income after Taxes so the input is lower, but all gains within the NISA are Tax Free, so there are no taxes due on the distributions when you finally withdraw the money.

If you want to make a Lump Sum Investment, you can work out if you have any unused allowances:
for iDECO or 401k, and maximize your annual contributions
for NISA, and maximize your annual contribution
and then invest the rest in a regular account, where you will invest post-tax income, and you would be liable for Dividend and Interest Taxes, and Capital Gains Taxes every time you make any switches
You can choose a Tokutei Account and leave the Tax reporting to the financial institution, or a regular account and do your own tax reporting yourself.

If makes sense to try to use tax-advantaged accounts first, and then regular accounts for the rest.

MBK wrote: ↑Sat Apr 30, 2022 7:10 am

zeroshiki wrote: ↑Tue Apr 26, 2022 6:48 am

MBK wrote: ↑Tue Apr 26, 2022 6:09 am Thank you very much for all your replies. Appreciate all the information shared.

The Yen rate finally at least stopped increasing, so hopefully it will be first step towards stabilization.

I have one more question. I have started my iDeco, though do not have an open NISA account yet.

Tsumitate NISA allows to invest only 400,000 JPY, so it would not be relevant, but I`m intrigued with NISA`s 1,200,000 JPY limit since it`s closer to the lump sum I`m thinking to invest.

I know there is dedicated NISA forum, but since the conversation is already ongoing, let me ask here about how much shall I consider using NISA for potentially using the full limit to invest in index funds. What would be merits and demits to this?

Regular NISA - 1.2M limit 5 years tax free
Tsumitate NISA - 400k limit 20 years tax free

Because of the incredibly long time you can hold onto your funds tax free with Tsumitate, the results are quite close. Regular is better with some rollovers and only if you can fill it up immediately.

Thank you for the reply. Just to follow up, if making the first investment is using a NISA/Tsumitate Nisa a no brainer or is there some situation where investing without utilizing them might be beneficial (lump sum, I imagine, though hard to foresee long term benefit)?

Putting aside iDECO, there is no scenario where a taxable account is more benficial than NISA/TNISA. Its literally tax free gains. Unless you have insider info on a company that will bottom out in a few months and then go up for the next 5+ years, there is no point waiting to put money into NISA.