sorry if this is discussed elsewhere ( i i did read bens post on this dated last dec-titled on tsumitate nisa) but i am trying to work out which is better to go for..the nisa or tsumitate nisa.. personally i like the larger lumpsum i can invest compared to the tsumitate but see the drawbacks of it only being for 5 yrs...
i see also that the rules will change in future so confused on which to go for..
nisa lumpsum or tsumitate nisa
Re: nisa lumpsum or tsumitate nisa
Good question and one I've been wondering myself.
I did some very rough calculations using a compound interest calculator. Somebody please correct me if I'm wrong.
===============================================
Tsumitate NISA: 400k per year for 20 years.
Let's use a conservative 3% return compounded annually.
Compounded, that's 11M over 20 years, for a total of 8M invested. Approx return of 37%.
NISA: 1.2M per year for 5 years.
Compounded that's 6.4 Million
But then we have another 15 years of no new additions, still earning interest at 3%
Produces a total of 10M, for 6M invested. Approx return of 67%.
NISA pays about twice as much as Tsumitate NISA.
===============================================
Let's up the interest to 8%:
Tsumitate:
Invest 8M, end up with 18M, approx return 125%
NISA:
Invest 6M, end up with 22M, approx return 260%.
NISA pays double again.
===============================================
So unless I've made a massive miscalculation, NISA's ability to get more invested quickly and thus compounding for longer means you earn about twice as much return than you would maxing out a Tsumitate over the same period.
Of course this depends on the NISA system lasting for 20 years...
Edit to add spreadsheet from below, for the TLDR people.
I did some very rough calculations using a compound interest calculator. Somebody please correct me if I'm wrong.
===============================================
Tsumitate NISA: 400k per year for 20 years.
Let's use a conservative 3% return compounded annually.
Compounded, that's 11M over 20 years, for a total of 8M invested. Approx return of 37%.
NISA: 1.2M per year for 5 years.
Compounded that's 6.4 Million
But then we have another 15 years of no new additions, still earning interest at 3%
Produces a total of 10M, for 6M invested. Approx return of 67%.
NISA pays about twice as much as Tsumitate NISA.
===============================================
Let's up the interest to 8%:
Tsumitate:
Invest 8M, end up with 18M, approx return 125%
NISA:
Invest 6M, end up with 22M, approx return 260%.
NISA pays double again.
===============================================
So unless I've made a massive miscalculation, NISA's ability to get more invested quickly and thus compounding for longer means you earn about twice as much return than you would maxing out a Tsumitate over the same period.
Of course this depends on the NISA system lasting for 20 years...
Edit to add spreadsheet from below, for the TLDR people.
adamu wrote: ↑Sun Feb 21, 2021 4:11 am I created a 20 year simulation spreadsheet here where you can change the interest rate:
https://retirewiki.jp/wiki/File:NISA_vs ... _NISA.xlsx
The numbers are different yet again, but the conclusion the same: NISA performs better than Tsumitate over the same 20 year period with a constant interest rate if you max them both out ASAP.
Last edited by adamu on Mon Feb 22, 2021 12:47 am, edited 1 time in total.
Re: nisa lumpsum or tsumitate nisa
This is a great question.===============================================
Let's up the interest to 8%:
Tsumitate:
Invest 8M, end up with 18M, approx return 125%
NISA:
Invest 6M, end up with 22M, approx return 260%.
NISA pays double again.
===============================================
I am starting to question my own approach.
The regular Nisa will end in 2023, and the New Nisa will end in 2029. A lot of sites seem to suggest it will not be renewed and is designed to be transitional. So those calculations may not pan out.
How would things change if the New Nisa does end in 2029 as scheduled?
My Question: I assumed I would only be able to save 816,000 for ideco and 400,000 for Tsumitate a year. However, last year I managed to save around 120man in my taxable. I am starting to think I made the wrong choice.
Should I consider switching to the regular NISA in 2022?
Re: nisa lumpsum or tsumitate nisa
This calculator https://www.interestcalc.org/ is a lot nicer. But the results are the same, double return for NISA (150% vs 300%).
It does seem that while Tsumitate allows a larger investment, that's irrelevant because NISA performs better, so is actually superior. You get more for less. At least according to these figures.
Sort of in awe that 8% interest turns into a 300% return though
Yeah, NISA running out of time is the biggest issue. Not sure how to factor that into the calculations. We could project 8 years to see how they compare to the end of 2029. Using the new calculator at 8%:
Tsumitate: Invest 3.2M, get 4.6M. 43%ROI.
NISA: Invest 6M, get 9.5M. 58%ROI.
NISA still wins (but not by double).
It does seem that while Tsumitate allows a larger investment, that's irrelevant because NISA performs better, so is actually superior. You get more for less. At least according to these figures.
Sort of in awe that 8% interest turns into a 300% return though
Yeah, NISA running out of time is the biggest issue. Not sure how to factor that into the calculations. We could project 8 years to see how they compare to the end of 2029. Using the new calculator at 8%:
Tsumitate: Invest 3.2M, get 4.6M. 43%ROI.
NISA: Invest 6M, get 9.5M. 58%ROI.
NISA still wins (but not by double).
Re: nisa lumpsum or tsumitate nisa
Hmmm Assuming I could only make 10 man monthly payment to a regular NISA it still seems to be a better deal. But, not by as much.adamu wrote: ↑Sat Feb 20, 2021 6:49 am This calculator https://www.interestcalc.org/ is a lot nicer. But the results are the same, double return for NISA (150% vs 300%).
It does seem that while Tsumitate allows a larger investment, that's irrelevant because NISA performs better, so is actually superior. You get more for less. At least according to these figures.
Sort of in awe that 8% interest turns into a 300% return though
Yeah, NISA running out of time is the biggest issue. Not sure how to factor that into the calculations. We could project 8 years to see how they compare to the end of 2029. Using the new calculator at 8%:
Tsumitate: Invest 3.2M, get 4.6M. 43%ROI.
NISA: Invest 6M, get 9.5M. 58%ROI.
NISA still wins (but not by double).
I suppose I should switch next year.
Ideco at 68,000 and Nisa at 100,000 a month might be a bit steep, but I think I can do it.
Live and learn I guess...
Re: nisa lumpsum or tsumitate nisa
I created a 20 year simulation spreadsheet here where you can change the interest rate:
https://retirewiki.jp/wiki/File:NISA_vs ... _NISA.xlsx
The numbers are different yet again, but the conclusion the same: NISA performs better than Tsumitate over the same 20 year period with a constant interest rate if you max them both out ASAP.
https://retirewiki.jp/wiki/File:NISA_vs ... _NISA.xlsx
The numbers are different yet again, but the conclusion the same: NISA performs better than Tsumitate over the same 20 year period with a constant interest rate if you max them both out ASAP.
Re: nisa lumpsum or tsumitate nisa
I am not sure how accurate this is as you may need to start paying capital gains on the Regular/New nisa after the 10 year period.adamu wrote: ↑Sun Feb 21, 2021 4:11 am I created a 20 year simulation spreadsheet here where you can change the interest rate:
https://retirewiki.jp/wiki/File:NISA_vs ... _NISA.xlsx
The numbers are different yet again, but the conclusion the same: NISA performs better than Tsumitate over the same 20 year period with a constant interest rate if you max them both out ASAP.
...
Roughly math might look more like this.
Nisa Lumpsum* - 21,618,366
Nisa Monthly* - 20,101,000
Tsumitate Lumpsum - 19,769,000
Tsumitate Regular - 18,304,603
* Assuming 5years w/ Rollover (Ten total) + 10 years of capital gains following.
Re: nisa lumpsum or tsumitate nisa
Whenever this question comes up, I've always wondered why not just do normal NISA till whenever it runs out, and switch to tsumitate NISA then?
Is there some kind of time limit to signing up for tsumitate that I'm not seeing?
Is there some kind of time limit to signing up for tsumitate that I'm not seeing?
Re: nisa lumpsum or tsumitate nisa
For many, a lumpsum payment of 1,200,000 yen may just be not possible. The advantages of the regular Nisa diminish if you do not do a lumpsum payment.
Also, there is the added benefit of point accumulation and credit card use with the Tsumitate Nisa.
Re: nisa lumpsum or tsumitate nisa
This thread is about a lump sum, so I did the calculations assuming that.
For others, it depends on the situation. The Tsumitate is guaranteed to be tax free for 20 years, but the NISA is uncertain and probably going to be discontinued. So for people that can't or don't want to invest more than 400k a year, Tsumitate gives the best tax protection.
Many blogs point out (and I used to echo) that Tsumitate allows you to invest more, 8M tax free, rather than 6M for NISA. But that seems to be massively missing the point if in most situations NISA's 6M will overtake Tsumitate's 8M over the same period, due to the fact it gets started quicker and thus more is compounding for longer.
Of course the market could move against you and investing more early could backfire. It's statistically less likely, but not unlikely. So attitude to risk should also be considered in addition to potential gains.
For others, it depends on the situation. The Tsumitate is guaranteed to be tax free for 20 years, but the NISA is uncertain and probably going to be discontinued. So for people that can't or don't want to invest more than 400k a year, Tsumitate gives the best tax protection.
Many blogs point out (and I used to echo) that Tsumitate allows you to invest more, 8M tax free, rather than 6M for NISA. But that seems to be massively missing the point if in most situations NISA's 6M will overtake Tsumitate's 8M over the same period, due to the fact it gets started quicker and thus more is compounding for longer.
Of course the market could move against you and investing more early could backfire. It's statistically less likely, but not unlikely. So attitude to risk should also be considered in addition to potential gains.