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Re: Switching from tsumitate NISA and if it's worth it
Posted: Mon Nov 15, 2021 7:26 am
by zeroshiki
Viralriver wrote: ↑Mon Nov 15, 2021 7:20 am
This is... really interesting, and more proof I think I didn't understand it as well as I originally thought I did. So there is no overall limit to how many years we can have a NISA account, and no limit to how much we can invest overall? The limits are just yearly limits, but over my lifetime I could have as many year/accounts as I want? I made my original decision thinking I had only 5 years or 20 years of tax-free investments so went with tsumitate, but if this is the case I can't see any benefit for the tsumitate if you are able to place 1.2m JPY in. Am I thinking correctly?
Technically NISA exists only until 2028 and we don't know if they will extend it or not (or just steer everyone into TNISA and nothing else) but you have everything else right.
The argument of whether NISA or TNISA is "better" is something we've discussed quite extensively on this site. The fact that TNISA has 20 years tax free versus only 5 years for NISA despite the large yearly limit makes it "safer" for most people. I've done some back of the envelope math and it comes out that NISA only "wins" over TNISA if you're able to invest 1.2M directly every January. In most other cases, putting 400k into TNISA and 800k into a taxable account comes out as more optimal.
Re: Switching from tsumitate NISA and if it's worth it
Posted: Mon Nov 15, 2021 7:30 am
by beanhead
Viralriver wrote: ↑Mon Nov 15, 2021 7:20 am
This is... really interesting, and more proof I think I didn't understand it as well as I originally thought I did. So there is no overall limit to how many years we can have a NISA account, and no limit to how much we can invest overall?
Correct. You can often see discussions of 1.2M x 5 years vs 0.4M x 20 years but it is slightly more subtle than that.
IF you have the funds to max the regular NISA each year, then regular NISA x 5 years, rollover until 2028, then from 2028 each year use the tsumitate is probably the optimal choice.
As discussed elsewhere, the difference between doing this and just doing tsumitate from the start and investing an extra 800k each year in taxable is negligible. If you don't have 20 or 25 years until retirement, however, and you can invest the 1.2M in full, the regular NISA will usually be the better choice.
Re: Switching from tsumitate NISA and if it's worth it
Posted: Mon Nov 15, 2021 7:52 am
by Viralriver
Thanks everyone for the help - definitely making more sense now.
Is it always worth rolling-over if you've made a bit of profit in a year?
For example, assume 1.2m JPY investment into a 2022 NISA, by Dec 2022 it's now reached 1.5m JPY. If I were to roll this over to the 2023 NISA it's true I get a slightly higher tax free investment limit (1.5m JPY over 1.2m JPY), and this remains tax free for 5 years, but I've also just 'lost' the initial 2022 account. If I were to put 1.2m JPY fresh into a new 2023 NISA, I would then have 1.5m JPY being invested tax-free for 4 more years, and 1.2m JPY starting its 5 year tax-free journey. Obviously the correct comparison is to also dump a 1.2m JPY in January 2023 into a standard investment account, but is my thinking here correct? Do I need to take into account these 'lost tax-free' years when deciding to roll over or not? I'm fine doing the calculations, just want to make sure I'm approaching this correctly. Thanks!
Re: Switching from tsumitate NISA and if it's worth it
Posted: Mon Nov 15, 2021 9:28 am
by beanhead
Viralriver wrote: ↑Mon Nov 15, 2021 7:52 am
Thanks everyone for the help - definitely making more sense now.
Is it always worth rolling-over if you've made a bit of profit in a year?
For example, assume 1.2m JPY investment into a 2022 NISA, by Dec 2022 it's now reached 1.5m JPY. If I were to roll this over to the 2023 NISA it's true I get a slightly higher tax free investment limit (1.5m JPY over 1.2m JPY), and this remains tax free for 5 years, but I've also just 'lost' the initial 2022 account. If I were to put 1.2m JPY fresh into a new 2023 NISA, I would then have 1.5m JPY being invested tax-free for 4 more years, and 1.2m JPY starting its 5 year tax-free journey. Obviously the correct comparison is to also dump a 1.2m JPY in January 2023 into a standard investment account, but is my thinking here correct? Do I need to take into account these 'lost tax-free' years when deciding to roll over or not? I'm fine doing the calculations, just want to make sure I'm approaching this correctly. Thanks!
Hmmm...Your 2022 NISA is tax-free for 5 years, so until Dec 2026. If it is at 1.5M at that point, growth will have been a bit anaemic. Your decision is then for 2027, roll over or not. It is not an all or nothing decision either. You can choose to roll over just the products which have gained the most, assuming you have bought more than one product in the NISA. Move the not so profitable products into tokutei or sell.
2022 does not roll over into 2023. 2022 rolls over into 2027. 2023 rolls over into 2028, etc.
Each year is an independent account, tax-free for up to 5 years, or 10 if you roll it over.
(this of course ignores the complications caused by the new NISA from 2028).
Re: Switching from tsumitate NISA and if it's worth it
Posted: Mon Nov 15, 2021 9:33 am
by RetireJapan
Viralriver wrote: ↑Mon Nov 15, 2021 7:20 am
Am I thinking correctly?
Yes and no.
Ordinary NISA will end soon and be replaced with new NISA. This is almost the same. It will end in 2028. It may be replaced (seems unlikely).
Tsumitate NISA will run until 2042 at least.
Each year you can have one or the other. I don't think it makes a huge difference which one you choose as long as you invest in reasonable things and leave them to grow for decades.
My thinking on tsumitate is here, and my wife and I will switch to tsumitate next year (her) and soon (me -I want to roll over my ordinary NISA next year):
https://www.retirejapan.com/blog/on-tsumitate-nisa/
Re: Switching from tsumitate NISA and if it's worth it
Posted: Mon Nov 15, 2021 10:10 am
by adamu
I think at this point we are just repeating ourselves and going back and having a re-read of page one might be worthwhile.
The real problem is that the system is far too complicated. It's impossible to know in advance what strategy will work out best, so the best option for most is to make a simple plan (the simplest being Tsumitate NISA) and stick to it.
Re: Switching from tsumitate NISA and if it's worth it
Posted: Mon Nov 15, 2021 1:25 pm
by Viralriver
Yep thanks everyone, I think I have as good an understanding as I think I can possibly have now! Will do some calculations and then make the decision on what to do from there!
Re: Switching from tsumitate NISA and if it's worth it
Posted: Mon Dec 27, 2021 4:40 am
by bryanc
just to jump in here-I and wife are lumpsumming the NISA but considering changing to tsumitate..
I recvd the form to change over a while back but never actually submitted as was/am unclear whether to change to tsumitate or not...
looks like wont have enough money to go with the lumpsum so will prob change at least my wifes one..
i understand it is now too late to submit the form -however can i change in 2022 if I havent started using the lumpsum allowance?
monex info seems to indicate its poss but need to phone..is this a difficult process??
thanks
Re: Switching from tsumitate NISA and if it's worth it
Posted: Mon Dec 27, 2021 5:45 am
by EmaxisSlim Cultist
bryanc wrote: ↑Mon Dec 27, 2021 4:40 am
just to jump in here-I and wife are lumpsumming the NISA but considering changing to tsumitate..
I recvd the form to change over a while back but never actually submitted as was/am unclear whether to change to tsumitate or not...
looks like wont have enough money to go with the lumpsum so will prob change at least my wifes one..
i understand it is now too late to submit the form -however can i change in 2022 if I havent started using the lumpsum allowance?
monex info seems to indicate its poss but need to phone..is this a difficult process??
thanks
If you have not contributed, you can change. From what I understand the process is not difficult, just slow.
You should apply for the Monex card when you`re waiting. in 2022 you can start contributing to Tsumitate with it, and earn 1% points.
Re: Switching from tsumitate NISA and if it's worth it
Posted: Mon Dec 27, 2021 6:08 am
by bryanc
thanks for the tip!