20million pot

[bryanc]

Apologies if there is another thread on this..
regarding the Japanese government research which is stated as a target on here from time to time that 20million yen in savings on top of pension
is reqd to have a comfortable retirement..

this seems a dreadfully low number to me-is this really a credible number to target?

[beanhead]

this seems a dreadfully low number to me-is this really a credible number to target?

Yes, it is low. No, it is not credible. Aim higher!

Details of the calculations are here:

https://www.nippon.com/en/japan-data/h0 ... -woes.html

It is based on spending 264,000 per month for a married retired couple.
If you think you need more than that, then the 20M will not suffice.

Caveat: this is based on 30 years so living until 95. Optimistic...?

[captainspoke]

1) Do you have a good pension? (not just kokumin, but that plus kosei-nennkin)
2) Zero debt?
3) Do you own your home? (paid off)
4) Are you in a lower cost of living part of the country?
5) Kids grown and gone, no longer in need of support?

If your answers are all "yes", then pension alone may be enough to scrape along on.

We would. Our common/shared budget (which does exclude some things that we each spend on independently) for the last three months:

July -- 148,297
Aug -- 171,208
Sept -- 282,219

The last month there includes a house insurance payment (yearly), and we had some visitors for silver week and paid for a nice meal out, also splurging on home food while they were here.

Those totals include summer electricity use for a/c, which is not at all bad, really. The totals do not show winter heating bills, which may add about ¥1000/day for the peak months (Dec-Jan-Feb, a guesstimate), a little less for now-Nov, and March+.

**
These couple pandemic years have been cheap--no travel, no eating out. If that style of living is okay/adequate, then a 20M buffer would be fine. If you'd want to do more, then you'd be using that 20M along the way, so reconsider accordingly.

[ClearAsMud]

To amplify on the preceding two posts, the "you'll need 20 million yen in retirement" controversy was ignited by a 2019 report -- based on 2017 statistics -- prepared by a Financial Services Agency (金融庁) working group that was distorted somewhat by the media. Finance Minister Taro Aso subsequently disavowed the report, although a variety of experts eventually weighed in to point out the distortions, calming things down a bit even though a very real problem is involved.

Without going into detail (difficult for me to do anyway), the main problem was that people took the report to mean that the public-pension scheme couldn't be relied on, and everyone needed to have 20 million yen in savings at the time of their retirement to be able to afford living expenses for another 30 years, based on a projected monthly "deficit" of 55,000 yen. (By the way, the projected monthly "deficit" in 2021 based on the same method of calculation is 1,541 yen, for a total of 550,000 yen over 30 years, a consequence of a reduction in discretionary spending as a result of the pandemic.)

As for the very real problem, the Japan Institute of Life Insurance estimates that the average unemployed Japanese couple needs a minimum of 221,000 yen per month in retirement, with 361,000 yen per month necessary to maintain a "comfortable" lifestyle (yutori aru rōgo seikatsu). These are 2019 figures; documentation (all in Japanese) will be found at https://www.jili.or.jp/research/chousa/1320.html. By way of reference, the Japan Pension Service estimates the average Kousei Nenkin pension for a married couple to be about 220,000 yen per month: https://allabout.co.jp/gm/gc/461640/). If you want more than a basic -- but possibly sufficient -- lifestyle, it seems pretty clear that savings, investments, or a longer period of pre-retirement work will be needed, although again, actual average savings for a Japanese household headed by someone 60 or older in 2020 come to 17,250,000 yen (against liabilities of 8,000,000 yen). The relevant survey can be downloaded in Japanese from the Statistics Bureau of Japan: https://www.stat.go.jp/data/sav/sokuhou/nen/index.html.

[bryanc]

thanks all!
i was actually very interested in captainspokes comment below about electricity bills-does it really add that much ?
I know mine does-but i thought that was just our family using too much...

The totals do not show winter heating bills, which may add about ¥1000/day for the peak months (Dec-Jan-Feb, a guesstimate), a little less for now-Nov, and March+.

seems very expensive-is it the same experience for everyone? -i might post this somewhere else as a different topic..

edit;found bens thread on electric bills in spending and frugality so added in there..

[EmaxisSlim Cultist]

The truly scary thing is how many Japanese couples balked at the idea, thinking it too high a number.

I think this is a number you would want to hit by your 50s personally. (5万 monthly for 20 years @ 5% -> ￥20,000,000).

However, I am sensitive to how difficult this is for many.

[captainspoke]

thanks all!
i was actually very interested in captainspokes comment below about electricity bills-does it really add that much ?
I know mine does-but i thought that was just our family using too much...
...

We heat mainly with kerosene, city gas would be second, so costs for that energy--and not electric--was what I was referring to in my winter cost comments. Our living room (~10 mat?) has a Hotman heater system (outdoor unit burns the kerosene, heats via tubing that comes in thru the wall to an interior unit).

Once it gets cool/cold enough, this runs 24/7, probably for most of the three coldest months. It's usually locked on low, and I think it burns .25 or .3 liters an hour like that. It doesn't keep up when outdoors is cold, but it does seem to warm the house a little overall, and when getting up in the middle of the night or early in the morning, it's starting from a higher temp than if it had been off overnight.

The adjoining room is the kitchen (8 mat), and using the Hotman keeps these both a little warmer (on the coldest nights we close the door to the kitchen). But when we get up and come downstairs, we turn on the kitchen heater--city gas. this one is on for breakfasts and dinners, and often later until we go upstairs to bed. It's hard to separate out the cost of the gas heater, since we also cook with gas (and cook more oven stuff in the winter), and we also have a gas clothes dryer (which gets used much more in the winter, but gosh, having it is a true luxury!).

My wife does use a/c for some heat in an upstairs room when she's doing something there, that's probably a couple few hours thru an evening, and not every day. But otherwise our sleeping room is unheated (electric blankets).

*
Since the Hotman is old, and has been repaired a couple times, this past summer when we replaced the a/c unit in the living room we got a bigger/stronger unit. It's supposed to be good at heating, and some re-wiring was included as a part of the deal. It's a new 200v Daikin, which so far is (will be) our fall back heater if the Hotman goes kaput. The Hotman has been discontinued, but there are some new versions--Corona makes one, also another company called Sunpot. If the Hotman goes, it'll be decision time: switch completely to the Daikin unit, or replace the Hotman.

[Tokyo]

That ¥20 million recommendation rears its ugly head again… As others have pointed out, it was to be used as a guide for retirement purposes. For many Japanese sararimen in major corporations and public servants, a retirement bonus of around ¥20 million is received for long service. But it is based on past circumstances so I believe it is certainly misleading for future retirement purposes, in addition to being lowball.

Why is it low? Firstly, people are expected to live longer. Secondly, pensions such as Kosei nenkin have been falling over time - unfortunately this trend is unlikely to change unless something dramatic occurs. Thirdly, the retirement scenario assumed a very basic retirement lifestyle without any foreign travel which for most gaijins with family and friends living overseas is not a luxury but a necessity.

Perhaps ¥20 million is useful in that it provides a concrete savings target for people with insufficient retirement income to aim at. But it would be a lot better if people worked themselves into a situation in which their total retirement income covers all living expenses. Then there is no pressure to build up a large nest egg in the first place.

[sugus]

To amplify on the preceding two posts, the "you'll need 20 million yen in retirement" controversy was ignited by a 2019 report -- based on 2017 statistics -- prepared by a Financial Services Agency (金融庁) ... it seems pretty clear that savings, investments, or a longer period of pre-retirement work will be needed, although again, actual average savings for a Japanese household headed by someone 60 or older in 2020 come to 17,250,000 yen (against liabilities of 8,000,000 yen). The relevant survey can be downloaded in Japanese from the Statistics Bureau of Japan: https://www.stat.go.jp/data/sav/sokuhou/nen/index.html.

Your username doesn't check out (just kidding). The comment was crystal clear, and very helpful. Thank you.

--

In regards to the original question, circumstances are different for each person. Company employees will generally have a higher pension than freelancers or sole-traders for example, so the 20 million buffer suggestion won't certainly be good for everyone, and I dare say for almost no one, relying only on pension and no other sources of income (investments, etc.).

I think a good calculation could be, how much are you currently spending monthly, including everything (mortgage/rent, groceries, utilities, etc.), multiply that by 12 months, and adding an extra buffer for the unexpected so you can have an idea about the money needed after retirement.

For example, let's say a married couple, kids living on their own (already grown up), spend 3 million yen a year. That couple might be able to reduce their expenses as they get closer to retirement, let's say, to 2.5 million yen. Multiply that for 25 years (from 65 to 90 years old), and that would be 62.5 million. It's a scary thought, and a lot of money but having a clear vision about how you much you need after retirement will make it easier to reach that target (or at least, that's what I like to think...)

[captainspoke]

...
For example, let's say a married couple, kids living on their own (already grown up), spend 3 million yen a year. That couple might be able to reduce their expenses as they get closer to retirement, let's say, to 2.5 million yen. Multiply that for 25 years (from 65 to 90 years old), and that would be 62.5 million. It's a scary thought, and a lot of money but having a clear vision about how you much you need after retirement will make it easier to reach that target (or at least, that's what I like to think...)

But assume/add in pension of ¥2M/yr, and 62.5 becomes 12.5.