Retirement planning

[Roger Van Zant]

I bet the Japanese state pension won't be that much more than it is now.... How pensioners manage to live on 64,000 yen a month, I don't know.

I just looked online at my Japanese pension forecast.
117,000 yen per month. That'll be for thirty years paid in (kosei nenkin).
Scandalous.

I wonder how much that would be if you had just taken the money, and put it into the s&p500. Although you will never ever run out. I wonder what the break even point is.

Erm, it would be illegal for me NOT to pay in to the Japanese pension though....

[Roger Van Zant]

I just looked online at my Japanese pension forecast.
117,000 yen per month. That'll be for thirty years paid in (kosei nenkin).
Scandalous.

I wonder how much that would be if you had just taken the money, and put it into the s&p500. Although you will never ever run out. I wonder what the break even point is.

Erm, it would be illegal for me NOT to pay in to the Japanese pension though....

[Tkydon]

iDeCo

The problem with iDeCo is that you have to do annoying paperwork every time your situation changes. And it requires a maintenance fee even if you want to stop paying into it. A few too many strings for me to easily recommend it over NISA to people, anyway.

Sure, but the advantage with regards to the grandkids is that they can't cash it out

The Benefit of iDeCo is the large Tax Deduction. Tax Free Money In, Taxable in Retirement

You pay with Pre-Tax Yen, but if you have already paid tax on that Yen due to Withholding, then you get that tax refunded at the end of the year.

refund = iDeCo Contributions / (1 - Marginal Tax Rate and Reconstruction Tax) - iDeCo Contributions

e.g. 12,000 x 12 / (1 - 0.33693) - 12,000 x 12 = 73,171 Yen Tax Refund

or 23,000 x 12 / (1 - 0.33693) - 23,000 x 12 = 140,245 Yen Tax Refund

So the National Government pays nearly half of the iDeCo Contribution.

When you receive the tax refund you can put it straight in to NISA Tax Free....

[YouMeWeThem]

Sounds so nice to not be a US Person

[RetireJapan]

Sounds so nice to not be a US Person

Join this group, lobby for change: https://www.americansabroad.org/

[Roger Van Zant]

The problem with iDeCo is that you have to do annoying paperwork every time your situation changes. And it requires a maintenance fee even if you want to stop paying into it. A few too many strings for me to easily recommend it over NISA to people, anyway.

Sure, but the advantage with regards to the grandkids is that they can't cash it out

The Benefit of iDeCo is the large Tax Deduction. Tax Free Money In, Taxable in Retirement

You pay with Pre-Tax Yen, but if you have already paid tax on that Yen due to Withholding, then you get that tax refunded at the end of the year.

refund = iDeCo Contributions / (1 - Marginal Tax Rate and Reconstruction Tax) - iDeCo Contributions

e.g. 12,000 x 12 / (1 - 0.33693) - 12,000 x 12 = 73,171 Yen Tax Refund

or 23,000 x 12 / (1 - 0.33693) - 23,000 x 12 = 140,245 Yen Tax Refund

So the National Government pays nearly half of the iDeCo Contribution.

When you receive the tax refund you can put it straight in to NISA Tax Free....

I dutifully submit the postcard I get from the iDeCo people along with my 年末調整 forms from my company each year in November.
However, I have never gotten a refund anywhere near the above 73,171 yen you mentioned above (I pay in 12,000 per month from my bank account).
Usually I get a refund of about 10,000 yen the following January or February, just as I used to get before starting iDeCo....
Any ideas as to why?

[Tsumitate Wrestler]

Sure, but the advantage with regards to the grandkids is that they can't cash it out

The Benefit of iDeCo is the large Tax Deduction. Tax Free Money In, Taxable in Retirement

You pay with Pre-Tax Yen, but if you have already paid tax on that Yen due to Withholding, then you get that tax refunded at the end of the year.

refund = iDeCo Contributions / (1 - Marginal Tax Rate and Reconstruction Tax) - iDeCo Contributions

e.g. 12,000 x 12 / (1 - 0.33693) - 12,000 x 12 = 73,171 Yen Tax Refund

or 23,000 x 12 / (1 - 0.33693) - 23,000 x 12 = 140,245 Yen Tax Refund

So the National Government pays nearly half of the iDeCo Contribution.

When you receive the tax refund you can put it straight in to NISA Tax Free....

I dutifully submit the postcard I get from the iDeCo people along with my 年末調整 forms from my company each year in November.
However, I have never gotten a refund anywhere near the above 73,171 yen you mentioned above (I pay in 12,000 per month from my bank account).
Usually I get a refund of about 10,000 yen the following January or February, just as I used to get before starting iDeCo....
Any ideas as to why?

That is because your employer is adjusting your taxes to match the iDeco. You are getting the tax benefit immediately.

[Bubblegun]

I just looked online at my Japanese pension forecast.
117,000 yen per month. That'll be for thirty years paid in (kosei nenkin).
Scandalous.

I wonder how much that would be if you had just taken the money and put it intohough you will n the S&P500. Altever run out, I wonder what the break-even point is.

Erm, it would be illegal for me NOT to pay in to the Japanese pension though....

Well, yes, we understand that we must legally pay into it. There was a point when they wanted me to pay for 30 years and then say, "You didn't pay the full 40. "So sorry! You get Jack. "It wasn't worth it. At least they made it easier and more financially logical to follow the law. If they had their way, i wasn't going to get anything until I was 80 years old. But it does make us wonder.

[RetireJapan]

There was a point when they wanted me to pay for 30 years and then say, "You didn't pay the full 40. "So sorry! You get Jack.

That is not quite accurate.

The period to vest (become eligible to receive a pension) used to be 25 years until it was reduced to 10. Foreign residents could use the '空期間' rule to count the time between them turning 20 and coming to Japan as eligible years towards this limit (would not have increased the amount of pension, but would have allowed people to claim it).

Agree that the current 10 year/120 month vesting period is fairer and easier for pension payers.

[Tkydon]

Sure, but the advantage with regards to the grandkids is that they can't cash it out

The Benefit of iDeCo is the large Tax Deduction. Tax Free Money In, Taxable in Retirement

You pay with Pre-Tax Yen, but if you have already paid tax on that Yen due to Withholding, then you get that tax refunded at the end of the year.

refund = iDeCo Contributions / (1 - Marginal Tax Rate and Reconstruction Tax) - iDeCo Contributions

e.g. 12,000 x 12 / (1 - 0.33693) - 12,000 x 12 = 73,171 Yen Tax Refund

or 23,000 x 12 / (1 - 0.33693) - 23,000 x 12 = 140,245 Yen Tax Refund

So the National Government pays nearly half of the iDeCo Contribution.

When you receive the tax refund you can put it straight in to NISA Tax Free....

I dutifully submit the postcard I get from the iDeCo people along with my 年末調整 forms from my company each year in November.
However, I have never gotten a refund anywhere near the above 73,171 yen you mentioned above (I pay in 12,000 per month from my bank account).
Usually I get a refund of about 10,000 yen the following January or February, just as I used to get before starting iDeCo....
Any ideas as to why?

The formula shows

Amount of Annual iDeCo Contributions / (1 - Marginal Tax Rate and Reconstruction Surtax Rate) = Value of the Pre-Tax Money used to pay the iDeCo Contributions

Amount of Annual iDeCo Contributions / (1 - Marginal Tax Rate and Reconstruction Surtax Rate) - Amount of Annual iDeCo Contributions = Amount of Money due back, just based on this single calculation.

Either, you are not in the 33% Tax Bracket, or tax is not withheld on iDeCo Contributions, or you have other tax shortfall that absorbs some of the refund...

Assuming you are in the Education Sector, and your monthly iDeCo Contribution is currently 12,000 per month...

12,000 x 12 / (1 - Tax Rate and Reconstruction Surtax) - 12,000 x 12 = Yen Tax Refund

144,000 / (1 - Tax Rate and Reconstruction Surtax) - 144,000 = Yen Tax Refund

For Different Tax Bands

144,000 / (1 - 0.05105) - 144,000 = 7,746 Yen Tax Refund
144,000 / (1 - 0.1021) - 144,000 = 16,374 Yen Tax Refund
144,000 / (1 - 0.2042) - 144,000 = 36,949 Yen Tax Refund
144,000 / (1 - 0.33693) - 144,000 = 73,171 Yen Tax Refund
144,000 / (1 - 0.4084) - 144,000 = 99,407 Yen Tax Refund
144,000 / (1 - 0.45945) - 144,000 = 122,395 Yen Tax Refund