When will you begin drawing your Japan state pension?
Posted: Sun Oct 24, 2021 3:30 pm
From April 2022 the age range from which you can begin taking the Japan state pension (Kokumin Nenkin, Kousei Nenkin, Fuka Nenkin, Kokumin Nenkin Kikin etc.) will widen to 60 to 75.
Electing to start drawing after 65 will see the pension annuity increase by 8.4% for every year. Going the other way, starting every year before 65 causes the pension annuity to decrease by 4.8% per year (this is an improvement on the current rule which is 6.0%).
This recent thread discussed the topic and got me wondering what people's plans are.
Pros of deferring the start date include:
- The pension is larger, and you will receive more overall if you live into late 80s and beyond.
- Higher annuities are an insurance against your other investments & income sources failing, or you losing your cognitive ability to manage them.
- Most foreigners in Japan will not have 40 years of contributions to receive the full state pension. Deferring beyond 60 means you can voluntarily pay Kokumin Nenkin longer (up to 65) to get more contribution years, or to pay Kousei Nenkin up to 70 (if you continue working!)
- Women have longer life expectancies and stand to benefit most from the higher deferred annuities.
Cons are:
- You may die before you start drawing and receive nothing.
- If you die earlier than the expected pay off date, you lose out compared to if you'd begun drawing earlier.
- Unless managed via a decent strategy, your income in later years will be higher, potentially meaning more has to be paid in income and residence taxes.
Pros of starting to draw the pension early are:
- With average male life expectancies, the total pension money you receive is expected to be higher.
- You can live on the money earlier, meaning you don't have to draw down your other investments from as early, meaning more profits from those as they are invested longer. This pushes the expected pay back ages even further into the future.
Cons:
- The annuity amount is smaller. It may not provide you with enough baseline income to guarantee a quality of life if other things turn bad.
Everyone's circumstances are individual so there is no universal right answer to which age is best. Note however this is not a annuity versus investment binary argument about which is best. Everyone receives an annuity here (presuming you live long enough), so it is more a question of how large an annuity do you need to remain comfortable.
Electing to start drawing after 65 will see the pension annuity increase by 8.4% for every year. Going the other way, starting every year before 65 causes the pension annuity to decrease by 4.8% per year (this is an improvement on the current rule which is 6.0%).
This recent thread discussed the topic and got me wondering what people's plans are.
Pros of deferring the start date include:
- The pension is larger, and you will receive more overall if you live into late 80s and beyond.
- Higher annuities are an insurance against your other investments & income sources failing, or you losing your cognitive ability to manage them.
- Most foreigners in Japan will not have 40 years of contributions to receive the full state pension. Deferring beyond 60 means you can voluntarily pay Kokumin Nenkin longer (up to 65) to get more contribution years, or to pay Kousei Nenkin up to 70 (if you continue working!)
- Women have longer life expectancies and stand to benefit most from the higher deferred annuities.
Cons are:
- You may die before you start drawing and receive nothing.
- If you die earlier than the expected pay off date, you lose out compared to if you'd begun drawing earlier.
- Unless managed via a decent strategy, your income in later years will be higher, potentially meaning more has to be paid in income and residence taxes.
Pros of starting to draw the pension early are:
- With average male life expectancies, the total pension money you receive is expected to be higher.
- You can live on the money earlier, meaning you don't have to draw down your other investments from as early, meaning more profits from those as they are invested longer. This pushes the expected pay back ages even further into the future.
Cons:
- The annuity amount is smaller. It may not provide you with enough baseline income to guarantee a quality of life if other things turn bad.
Everyone's circumstances are individual so there is no universal right answer to which age is best. Note however this is not a annuity versus investment binary argument about which is best. Everyone receives an annuity here (presuming you live long enough), so it is more a question of how large an annuity do you need to remain comfortable.