Early Retirement In Japan - Mandatory Costs

[futureplanner]

Hi all,

Does anyone on the forums have experience with how much nenkin + health insurance payments are for an early-retiree here in Japan?

I used the nenkin site (nenkin.co.jp) and NHI site (http://www.kokuho-keisan.com/) to calculate costs using a self-employed salary of ~3,500,000yen annual.

This came out to the following monthly totals:

Nenkin ¥16,340.00/mo = 196,080/year
Health Insurance ¥15,000.00 = 180,000/year

However early retirement probably most likely means living off capital gains, which I'm not sure how that would actually be qualified when doing these calculations. I am a US citizen, so probably would have some strategy along the lines of harvesting capital gains each year to stay within the 0% tax bracket as much as possible, then paying the appropriate capital gains tax on that here in Japan.

Does anyone have experience with how ~3.5-4million yen per year in capital gains "income" would be fit into the nenkin / health insurance calculations? I've mostly been basing the planning off a nice round start at 40 years old. Would be good to get information based on Single and Married if there are multiple points of view on the forums.

Are there any other necessary "mandatory" costs besides nenkin and health insurance that I missed? Are those costs actually mandatory?

These are my other budget categories for reference (the totals are very rough estimates)

Rent -¥150,000.00
Cell Phone -¥3,000.00
Utilities -¥15,000.00
Home Food -¥45,000.00
Personal Trains -¥12,000.00
Entertainment -¥50,000.00
Vacation Cash savings -¥30,000.00

[RetireJapan]

The nice thing about living off investments is that I believe you appear to have 0 income on paper -you don't pay income tax but rather capital gains tax and dividend tax.

So your health insurance should be very low from the second year (as it is calculated on previous year's income), and you can get an exemption from nenkin if you choose (pay nothing, get a partial credit).

Anyone else? Is that correct?

[futureplanner]

With 0 income the NHI (for my area in Tokyo) looks like it would come down to 56,400yen/year or 4,700 yen / month so that's a nice change.

I also did not know about the nenkin exemption thank you for pointing that out!

[Beaglehound]

With 0 income the NHI (for my area in Tokyo) looks like it would come down to 56,400yen/year or 4,700 yen / month so that's a nice change.

I also did not know about the nenkin exemption thank you for pointing that out!

Bear in mind that pension exemption is granted according to household income, not personal, so if your spouse was still earning exemption may not be granted.

[Beaglehound]

The nice thing about living off investments is that I believe you appear to have 0 income on paper -you don't pay income tax but rather capital gains tax and dividend tax.

So your health insurance should be very low from the second year (as it is calculated on previous year's income), and you can get an exemption from nenkin if you choose (pay nothing, get a partial credit).

Anyone else? Is that correct?

Wow, that seems like a rather handy system for those with assets. Not all income is equal it appears!

[RetireJapan]

I'm not 100% sure about this. I remember reading a couple of early retirement blogs in Japanese, and they mentioned pension and health insurance going to zero or minimal after the first year.

[futureplanner]

@BeagleHound - Thank you for the reminder on that will keep that in mind when planning

[RetireJapan]

And personally I am planning to pay into kokumin nenkin just to have access to 68,000 yen a month iDeCo. Along with generous expense deductions from my 'business' (Amazon ebooks? Flights when flying is possible again? Percentage of home utilities, etc.?) that should basically leave me almost destitute in the eyes of the government

[Kiro]

@futureplanner

It seems I'm almost in the same situation (except sadly I only found out about retirejapan at 40y/o so I'm basing the round start at 50y/o...).
These are indeed the only two I know of that you would have to pay if you reside in Japan.

I had looked into it before, and for kokuminnenkin yes, you would need to pay that 16k amount, although as some were saying you can ask for exemption (25%, 50%, 75% or 100%), which may not be granted if your wife still works, as someone was saying, and makes above a certain revenue threshold.
If you are single and your income is 0 or very low, then it should be granted.
Also, my understanding is that if you get granted full exemption (100%) the State will still pay for 50% of that nenkin amount (so that people don't get 0 nenkin in the future). Can anyone confirm??

Health insurance year 1 will be based on previous year salary so it may still be high, but it should become quite low from year 2 if your income is 0 or close to 0 (Until they start wondering how you can live with 0 income and they change the law to add capital gains into the calculation).

Also, if you had paid into employment insurance, and apply to Hello Work after you quit, you can get special exemption of kokuminnekin as well reduction of health insurance price to 30% of what it was the previous year (I benefited from it when unemployed in the past), so rather than pay 100% based on the previous year, I would look into getting the Hello Work paper and bringing it to the town hall.

[Tokyo]

@futureplanner

Just want to echo some of the earlier observations above.
Your 1st year kokumin hoken costs are likely to be the max but will reduce from your second year. For the same reason your shiminzei and kenminzei are likely to be very painful for a year.
As to share-based income, my Japanese accountant assures me that no declarations are needed since tax is automatically deducted at the source. Good news!
You don’t seem to have included kaigo hoken anywhere which you start paying after turning 40. Another 5,000-10,000 a month.
Also, 50,000 for entertainment and 30,000 for travel seems far too low for a healthy 40year old with 24/7 free time. I know everyone is different but the point of retirement is to reap the benefits of past skimping and saving, not to continue it.Good luck!