Dealing with uncertainty

[stump117]

Hi there,

I am new to this community and wanted first to thank you all for the very insightful information available here!

My new year resolution is to be a bit more careful with my money.

However, I am unsure how long I will stay in Japan. It could be a month, as well as I could end up retiring here. So I was wondering what you think makes more sense.

About my situation:
- In my 30s, EU citizen, married
- Have been in Japan for a year
- Earn about 2000man
- Likely to be in Japan for a little longer, but the nature of my job makes this very uncertain
- Have never invested anything, no debts, previous cash saving in account outside japan
- My employer pays for Japan pension as well a a portion of my wage in mutual fund
- No particular financial goal atm, but feel leaving my money in the current account is a waste

I was thinking to do the following:
- Max out Ideco/NISA
- Invest in 3rd party ETFs, such as Vanguard SP500/WW - to reach about 30% of my earnings
- Use anything left as principal for a different investment (e.g. real estate, or stock market bets)

But given the uncertainty, and that I am likely to not be in Japan in the short-run. Wondering a few things:
- What happens to my Ideco/Nisa/etc. if I were to leave Japan before retiring?
- Would it make more sense to send all the JPY abroad and invest from there?
- If I were to leave Japan, I understand I'd have to close my bank account, what happens to my hypothetical Rakuten broker account?
- Will I ever be able to get back my Japan pension if I leave
- Does it make sense to invest real estate? I was thinking to buy a mansion after having invested ~30% of my earnings in ETFs. But heard that Japan is pretty bad when it comes to making value out of real estate.

Would welcome any thoughts. Please be patient as I am still learning the ropes of personal finance.

[RetireJapan]

Would welcome any thoughts. Please be patient as I am still learning the ropes of personal finance.

Welcome to the forum! This is what it is for, so everyone will be nice

To answer some of your questions, if you leave Japan permanently you will likely be asked to close all your bank and broker accounts (sell everything and move the cash to your new country of residence).

The exceptions will be your nenkin and iDeCo.

If you pay in fewer than 120 months, you will be able to receive a refund of 3 (soon to be 5) years' worth of contributions when you leave. If you pay in 120 months or more you will be able to claim a pension from Japan when you reach pensionable age.

For iDeCo, you currently have to leave your account dormant until you reach age 60, then you can cash it out, but this seems to be changing so you will be able to also close it when you leave Japan.

[stump117]

Would welcome any thoughts. Please be patient as I am still learning the ropes of personal finance.

Welcome to the forum! This is what it is for, so everyone will be nice

To answer some of your questions, if you leave Japan permanently you will likely be asked to close all your bank and broker accounts (sell everything and move the cash to your new country of residence).

The exceptions will be your nenkin and iDeCo.

If you pay in fewer than 120 months, you will be able to receive a refund of 3 (soon to be 5) years' worth of contributions when you leave. If you pay in 120 months or more you will be able to claim a pension from Japan when you reach pensionable age.

For iDeCo, you currently have to leave your account dormant until you reach age 60, then you can cash it out, but this seems to be changing so you will be able to also close it when you leave Japan.

Thank you, very clear and helpful!

Regarding the Nenkin, I assume you mean the refund is of "up to" 3 or 5 years right?

Thanks!

[TokyoWart]

- Does it make sense to invest real estate? I was thinking to buy a mansion after having invested ~30% of my earnings in ETFs. But heard that Japan is pretty bad when it comes to making value out of real estate.

I think this kind of real estate investment is unlikely to work out well in Japan from a financial standpoint. I bought a home on land in the center of Tokyo in 2001 and my best estimate is that if I were to sell now I would get around the amount I paid (maybe less because it’s likely the purchaser would only buy for the land) after transaction fees.

[rasselbiluga]

- Will I ever be able to get back my Japan pension if I leave

It is important to check if your country has a pension agreement with Japan. For example, there is a "totalization agreement" between my home country and Japan. It means that even if I paid nenkin for less than 120 months, if my contribution to nenkin and my home countrie's pension sum up to more than 120 months, I would still get a pension from Japan upon retirement. For example, say I pay nenkin for 3 years, and pension in my home country for 8 years. In that case, I would get a pension corresponding to my 3 years contribution from Japan upon retirement. So for me it would not be a good idea to claim the lump sum (=refund mentioned by RetireJapan) when leaving Japan, since my totalised contribution is already more than 10 years now.
You can read about the lump sum withdrawal here and about pension agreements here.

[Ax6isB]

- Does it make sense to invest real estate? I was thinking to buy a mansion after having invested ~30% of my earnings in ETFs. But heard that Japan is pretty bad when it comes to making value out of real estate.

I think this kind of real estate investment is unlikely to work out well in Japan from a financial standpoint. I bought a home on land in the center of Tokyo in 2001 and my best estimate is that if I were to sell now I would get around the amount I paid (maybe less because it’s likely the purchaser would only buy for the land) after transaction fees.

We have a pet and found buying made a lot of financial sense as the markups that were added for pets in rentals were 2-3X. That was 8 years ago though so maybe times have changed.

The housing market here still baffles me. My understanding is that the house is essentially worth zero and the land is the only value. Realtors tell me this time and again and I keep looking at them like they’ve grown another head. Conversely, my Japanese wife can’t figure out the US model.