Re: Retirement planning
Posted: Fri Nov 08, 2024 12:08 pm
Personal Finance for Residents of Japan
https://retirejapan.com/forum/
I wish I had had the benefit of all the Great Posts here by all the Gurus more than 10 years ago too!captainspoke wrote: ↑Fri Nov 08, 2024 12:08 pmI wish I had had the benefit of your posts from about 10yrs before I retired.
Now you mention it....it does ring a bell. 25 years was a long time to ask someone to pay into the system and get nothing back. That was the main reason I didn't. We planned to return when the kids hit junior high school, and financially, it wasn't worth it, but our plans changed. I can see why my friends and I didn't pay because they didn't know what they would be doing in 10 or 15 years. I have never really understood why the Japanese government didn't force every company to take a deduction from every employee's pay packet. So I was glad when they changed it to 10 years. But I would prefer if they deducted contributions directly from the pay packet instead of the convoluted, administratively difficult banking system. Hopefully, they'll force employers to do that with the MY NUMBER system.RetireJapan wrote: ↑Fri Nov 08, 2024 7:16 amThat 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.
I see. Thanks.Tsumitate Wrestler wrote: ↑Fri Nov 08, 2024 12:58 amThat is because your employer is adjusting your taxes to match the iDeco. You are getting the tax benefit immediately.Roger Van Zant wrote: ↑Thu Nov 07, 2024 11:57 pmI 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.Tkydon wrote: ↑Thu Nov 07, 2024 7:51 am
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....
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?
This can't be right. I am also on track to pay in "only" 30 years out of the maximum 40, but I will still get a pension of about 117,000 yen per month in retirement.Bubblegun wrote: ↑Fri Nov 08, 2024 6:29 amWell, 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.Roger Van Zant wrote: ↑Thu Nov 07, 2024 7:05 amErm, it would be illegal for me NOT to pay in to the Japanese pension though....
I am not in the education sector. I work for a regular Japanese company. I pay in 12,000 yen per month, yes.Tkydon wrote: ↑Fri Nov 08, 2024 9:28 amThe formula showsRoger Van Zant wrote: ↑Thu Nov 07, 2024 11:57 pmI 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.Tkydon wrote: ↑Thu Nov 07, 2024 7:51 am
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....
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?
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
Eh? Every employer I have had in Japan has deducted my pension contributions directly from my pay packet....Bubblegun wrote: ↑Sun Nov 10, 2024 7:29 amNow you mention it....it does ring a bell. 25 years was a long time to ask someone to pay into the system and get nothing back. That was the main reason I didn't. We planned to return when the kids hit junior high school, and financially, it wasn't worth it, but our plans changed. I can see why my friends and I didn't pay because they didn't know what they would be doing in 10 or 15 years. I have never really understood why the Japanese government didn't force every company to take a deduction from every employee's pay packet. So I was glad when they changed it to 10 years. But I would prefer if they deducted contributions directly from the pay packet instead of the convoluted, administratively difficult banking system. Hopefully, they'll force employers to do that with the MY NUMBER system.RetireJapan wrote: ↑Fri Nov 08, 2024 7:16 amThat 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.
A lot of English language schools didn't use to. They classified all native teachers as part-time workers.Roger Van Zant wrote: ↑Mon Nov 11, 2024 7:52 am
Eh? Every employer I have had in Japan has deducted my pension contributions directly from my pay packet....
sadly! Some employers never deducted contributions or never bothered to enrol us. I always thought ( just of the boat) they were automatically deducted from the PAYE system. But I realised just because they do in the UK and other countries doesn't mean Japan does. I'm not sure how it works, but if you worked under a certain number of hours, maybe they didn't need to enrol you, tell you, or deduct anything. I worked for 3 companies, and not one of them ever paid it. It seemed a lot of people I know were never enrolled. It is such a convoluted system that it must be an administrative nightmare. For all parties. To be honest, I was shocked they didn't even have a National insurance number system. My kids work and again, nothing is every deducted from their pay cause they don't have enough hours. IMHO, I think it is irresponsible of the Japanese government.Roger Van Zant wrote: ↑Mon Nov 11, 2024 7:52 amEh? Every employer I have had in Japan has deducted my pension contributions directly from my pay packet....Bubblegun wrote: ↑Sun Nov 10, 2024 7:29 amNow you mention it....it does ring a bell. 25 years was a long time to ask someone to pay into the system and get nothing back. That was the main reason I didn't. We planned to return when the kids hit junior high school, and financially, it wasn't worth it, but our plans changed. I can see why my friends and I didn't pay because they didn't know what they would be doing in 10 or 15 years. I have never really understood why the Japanese government didn't force every company to take a deduction from every employee's pay packet. So I was glad when they changed it to 10 years. But I would prefer if they deducted contributions directly from the pay packet instead of the convoluted, administratively difficult banking system. Hopefully, they'll force employers to do that with the MY NUMBER system.RetireJapan wrote: ↑Fri Nov 08, 2024 7:16 am
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.
There is a lot of nuance in 'Pension Deductions'.Roger Van Zant wrote: ↑Mon Nov 11, 2024 7:52 am Eh? Every employer I have had in Japan has deducted my pension contributions directly from my pay packet....