NISA change proposals

[zeroshiki]

Blog post about the new system: https://www.retirejapan.com/the-new-eternal-nisa/

Comments/corrections welcome!

One small comment regarding the lifetime limit is the reporting on the news that regular NISA had a 6M lifetime limit. It does if you only invest in it for 5 years. On the 6th year, you'd have invested 7.2M total already (obviously the amount from year 1 would need to be rolled over or switched to taxable). Its not a 1-1 comparison but the 18M limit is a negative and not a positive as they're making it out to be.

[RetireJapan]

One small comment regarding the lifetime limit is the reporting on the news that regular NISA had a 6M lifetime limit. It does if you only invest in it for 5 years. On the 6th year, you'd have invested 7.2M total already (obviously the amount from year 1 would need to be rolled over or switched to taxable). Its not a 1-1 comparison but the 18M limit is a negative and not a positive as they're making it out to be.

I don't understand. Regular NISA does have a 6m yen contribution limit. If you rollover, that is essentially keeping the initial 1.2m invested for longer (which the eternal NISA will also do, except not just for ten years but for decades). If you move the investments to a taxable account, they are no longer tax-exempt.

Or am I missing something?

[mikele3]

Blog post about the new system: https://www.retirejapan.com/the-new-eternal-nisa/

Comments/corrections welcome!

From the article:

The annual limits are much larger. You will be able to pay in up to 3.6m yen per year (1.2m yen in mutual funds, and 2.4m yen in whatever you want).

... so.. can I invest the 2.4m yen also in mutual funds? (I.e. eMaxi slim all countries) ... what would you do?

[RetireJapan]

... so.. can I invest the 2.4m yen also in mutual funds? (I.e. eMaxi slim all countries) ... what would you do?

That's my current understanding: 1.2m has to be in mutual funds, the other 2.4m can also be in mutual funds or ETFs, or stocks.

I will probably put everything into All-Country, because over decades the dividend reinvestment and diversification will really help.

[TokyoBoglehead]

One small comment regarding the lifetime limit is the reporting on the news that regular NISA had a 6M lifetime limit. It does if you only invest in it for 5 years. On the 6th year, you'd have invested 7.2M total already (obviously the amount from year 1 would need to be rolled over or switched to taxable). Its not a 1-1 comparison but the 18M limit is a negative and not a positive as they're making it out to be.

The Regular Nisa Rollover does not "give you more space". It extends the tax-free life of an existing 1 year tranche of Nisa investments for 5 year.

Rolling a regular NISA into a 新しい/NewNEw Nisa would use up space in the 新しい/NewNEw Nisa equal to the original contribution amount.

Existing Tsumitates and Nisas will continue to operate as normal, and we are assuming we can roll them into our 新しい/NewNEw Nisa. However, many 新しい/NewNEw Nisas may be full by that time, so they may be kicked back to our taxable.

Who knows? Perhaps there will be a 新新しい/NewNewNew Nisa in 20 years time.

[sutebayashi]

I rolled over my allowance for 2023 so technically I have nothing to invest in NISA next year.
I’m hesitating to keep the money or invest in a tokutei account next year.

I maxed my NISA previously and have been investing via tokutei account in recent years.

I plan to keep doing further investment in tokutei account in 2023.

As for the new tax break coming in 2024, I see the following options:
1) invest new money in NISA from 2024
2) sell old NISA account balances and invest them in the new NISA from 2024
3) sell old tokutei account balances and invest them in NISA from 2024

Not much wrong with option 1) if one has an extra 3.6 m to invest each year

Option 2) I am not sure about this yet, as it depends on what the story is for existing nisa balances. If they don’t get counted towards the lifetime limit then better to keep the old nisa.

Option 3) makes some sense if one can’t max out the new nisa with fresh money. But to do this, one may have to realize capital gains, thus reducing one’s capital in order to protect the remainder from capital gains taxes in future. It’s a one time hit though, if one does have capital gains. And hey, having capital gains and paying some tax means you were a winner anyway. Sooner or later, there will probably be capital gains to pay… depending on the investment I guess.
On the other hand, if one has an investment in the negative in a tokutei account, there is no tax to pay if selling, and if reinvested into the new NISA it will be tax free forever.

If I want to maximize gains in 2024, the best would be to not rollover and put the money in a tokutei account right? (Or sell)

Rolling over for 2023 seems like a good idea, no? That’s another year of tax free nisa before the new nisa starts from ‘24 so it seems the way to go to me.

(Edit: on the other hand it depends what you are rolling over - it depends on how much each thing in the nisa is worth, but if you were say, rolling over some low yielding bond fund, then yes I would not roll that over and invest the nisa tax free with equities funds instead)

As for extra funds in 2023, I still plan to invest in tokutei account in ‘23. At the end of the day, I am investing to earn returns, not to earn 100% tax free returns. So I don’t think people should get too distracted by nisa. I have realized some tokutei account profits in 2022 and that income is going to boost my furusato nozei limit! It all becomes very complicated, and a waste of productive time, so my stance is going to be “just do it (invest)”.

But if you can keep stuff tax free in 2023, I can’t see much benefit to giving that up an anticipation of the new nisa stuff from 2024?

[sutebayashi]

On this 18 million lifetime limit, I am unclear yet what it means.

The existing old nisa means you get to invest 1.2 million per year, up to a max of 6 million, but if you sell, you don’t get that chunk of your 6 million allocation back.

For the new system, on one hand, there are suggestions that rebalancing will be permitted - so that is wonderful. But will that be for the tsumitate part, or the whole shebang? I can see it makes sense for the tsumitate part, but does it for the growth part?
If one’s growth funds in year one go gangbusters and you turn 2 million into 20 million, is that your lifetime limit gone right there? Personally I think that should be it, no more. But here I am saying it should be on the value of the nisa funds, not how much has been invested initially. But nah that’s not what they are suggesting is it…?

[Moneymatters]

On this 18 million lifetime limit, I am unclear yet what it means.

The existing old nisa means you get to invest 1.2 million per year, up to a max of 6 million, but if you sell, you don’t get that chunk of your 6 million allocation back.

For the new system, on one hand, there are suggestions that rebalancing will be permitted - so that is wonderful. But will that be for the tsumitate part, or the whole shebang? I can see it makes sense for the tsumitate part, but does it for the growth part?
If one’s growth funds in year one go gangbusters and you turn 2 million into 20 million, is that your lifetime limit gone right there? Personally I think that should be it, no more. But here I am saying it should be on the value of the nisa funds, not how much has been invested initially. But nah that’s not what they are suggesting is it…?

With the current system you can release when you sell a whole year or don’t roll it over. So if you do sell you do get it back.

With the new system, I think it’s a contribution limit. So even if you go from 2 to 20 mil you’d still be allowed to contribute up to another 16 mil in line with the annual limits.

The commentators I’ve seen say the ability to free up space for more contributions will be available for both tsumitate and growth portions.

How you free up that space once maxed out I have no idea about. I suppose they would need to assume when you sell you sold the contribution. So just sell the contributions and leave any growth in there. But let’s be honest. That seems far too logical and simple..

[beanhead]

I maxed my NISA previously and have been investing via tokutei account in recent years.

I plan to keep doing further investment in tokutei account in 2023.

Option 3) makes some sense if one can’t max out the new nisa with fresh money. But to do this, one may have to realize capital gains, thus reducing one’s capital in order to protect the remainder from capital gains taxes in future. It’s a one time hit though, if one does have capital gains. And hey, having capital gains and paying some tax means you were a winner anyway. Sooner or later, there will probably be capital gains to pay… depending on the investment I guess.
On the other hand, if one has an investment in the negative in a tokutei account, there is no tax to pay if selling, and if reinvested into the new NISA it will be tax free forever.

I have been thinking along the same lines. Of course normally it would be better to leave your investments in the tokutei and invest with new money, but 3.6M a year is a lot of 'new' money. Add the wife/husband/partner and it is of course double.

If the investment period is long enough, I think in most cases it will make sense to sell what you have in tokutei and re-buy in the new NISA.
I am hoping to keep adding new money, tsumitate-style, each month, but also sell off some of what is in the tokutei to max out that 3.6M for a couple of years at least.

[KCLenny]

So what’s the current advice?
I have ¥200,000 in a tsumitate NISA (Rakuten - emaxis slim all country). I was assuming it’d just continue as normal, but is it better to change to the super new NISA now? Is tsumitate continuing? I only put ¥10,000 in a month, but was thinking of upping to ¥20,000 in 2023.
I know it’s only small change compared to most here but I just want to make sure I’m doing the best thing for my money/future.