RetireJapan

The title says it all really. My retired (Japanese) father-in-law has a bit of money sitting in a regular bank account. It's basically his retirement savings. I assume he will probably begin drawing from it in the very near future--I imagine in the next five years or so.

My wife has asked me for advice with regards what he should do with this money, but I really don't know what would be good advice to give. It seems a bit of a waste to me to have it sitting in a regular bank account, but he will need it soon and he obviously can't do anything risky with it. Should he invest it somehow even for a short period? I'm wondering if any of the knowledgeable members here have any good ideas.

Any advice greatly appreciated! Thanks in advance.

First, be careful, and be slow. (also, do you mean ¥7,000,000?)

Second, if he needs it soon, that's another reason to be sure that he takes his time.

After that, for any advice to be useful, more information is needed--more than you might want to share here.

That money is sitting in a bank account--is that all he has, or is there some other money invested (and this just seems like too much to leave in the bank)?

Does he get pension--just 国民年金 or another one, too? How far does pension go toward his monthly/yearly living expenses--how much does he need beyond that? You don't mention her, but is your MIL still around? Then it'd be support for two.

Are there any other kids besides your spouse who might eventually be able to help out somehow? And would you be able/willing to? ( << So the stability of your situation might factor in, do you have kids, are you planning to, etc.)

How's his health? Does he have goals and things he wants to do, or is he content to live quietly and frugally?

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Apart from all that, I'd be careful giving advice. If you suggest something, and he follows your idea(s), then you'll kind of own it. Then what feelings might develop all round if something doesn't work out?

I'd be inclined to keep it in cash. Almost 70 is not the time to be learning about stocks and how you deal with them (I'm assuming he doesn't invest already).

Assuming he has a monthly pension and no debts, use the 7m to top up the pension or treat himself or his family. Make sure no one steals it from him in some stupid scam and allow him to enjoy retirement.

My in-laws have some money invested but I wouldn't dream of giving them advice beyond warning them about overly expensive or dangerous products.

I’d buy an annuity.

ricardo wrote: ↑Tue May 15, 2018 11:44 am I’d buy an annuity.

That might be a decent option. I wonder what the rates are like here...

Thanks for the replies so far!

captainspoke wrote: ↑Tue May 15, 2018 10:22 am First, be careful, and be slow. (also, do you mean ¥7,000,000?)

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Apart from all that, I'd be careful giving advice. If you suggest something, and he follows your idea(s), then you'll kind of own it.

Yes, I did mean ¥7,000,000—thanks for pointing out the typo.

As far as I know, the money is all he has in terms of his own savings. I’m pretty sure he has no investments--he is not financially savvy at all. His wife is still alive and working part time, but he is not and he receives a state pension. They own their own home.

They also have a son, but he lives far away and does not seem to see them so often. As far as us helping out, well, we are prepared to do that of course.

His health is fair for his age, he is the quiet frugal type (not “frugal” on purpose, but his wants and needs are fairly simple).

Point well taken about being careful with regards to giving advice—if I did give advice, it would have to be something with practically no risk involved.

RetireJapan wrote: ↑Tue May 15, 2018 11:41 am Make sure no one steals it from him in some stupid scam and allow him to enjoy retirement.

Yeah, this (or him just using the money unwisely) has been my wife’s prime concern so far. She has been keeping a close eye on him to try to ensure something like that doesn’t happen.

ricardo wrote: ↑Tue May 15, 2018 11:44 am I’d buy an annuity.

I don’t really even know what an annuity is (I’m a financial novice myself). I’ll look into it—thanks.

(Just personal opinion below. If someone want to explain that my math is wrong, please feel free to do so!)

Life expectancy in Japan for males is 80 years. How healthy is your father in law? Not to bring grim topics, but statistically, assuming average health, he has 13 more years to live.

Assuming he has "average" health, he could imagine withdrawing 500'000 yen a year from this stash and leave it as cash. (13 * 500'000 = 6'500'000)

conversely, if he goes for an investment, such as an annuity*, in order to get 500'000 a year, he'd need to find an annuity willing to offer more than 7% return (after fees!) in order for it to be worth it on average.

I haven't ever looked for annuities in Japan. I have no idea if 7% for a 67 year old is realistic at all, but statistics says this is what you should target at minimum.

Also, of course, nobody is ever "average". The benefit of the annuity is that it pays forever, so he might be willing to take an annuity even if it has a lower percentage, for more peace of mind.

(Also, I know we should never time the market, but given that we've been in the longest bull market ever, I don't think it would be the right move to suggest investing in a typical 50/50 stock/bond portfolio at his age, now)

* An annuity is: your father in law pays an insurance company a specific sum in cash (e.g. 7'000'000) upon signing the contract, and the insurance company in exchange commits to giving him a specific percentage of that sum, every year, until he dies (e.g. at 7%, they would give him roughly 500'000 yen per year until his death). If he outlives the expectation, he wins because they pay him more than he gave them. If he dies earlier than expected, they win because they paid him less than what he gave them.

StockBeard wrote: ↑Wed May 16, 2018 6:37 am I haven't ever looked for annuities in Japan. I have no idea if 7% for a 67 year old is realistic at all, but statistics says this is what you should target at minimum.

Thanks for all of that Stockbeard—very helpful.

I don’t know the first thing about annuities (except for what you kindly explained), but my gut is telling me that a 7% payout like you describe is probably not a realistic expectation. I’ll look into it though.

By the way, does anyone know what the Japanese term for “annuity” is? As far as I can tell it’s 年金保険 (nenkin hoken), but I don’t know, that seems to have a slightly different nuance to “annuity.”

Hello,

Two things I would suggest:

-Keep his money in cash. I personally wouldn't recommend anything to a 67 year old that has no experience with investing. Investing anything on stock market/mutual funds require risk, and given he is not an experienced investor, it is not wise to recommend, and it is definitely not wise to get advice from his bank who wants customers to invest in their mutual funds and might not be thinking about best case for the customer. This is not to say banks are "bad" but for an inexperienced investor, you don't know the benefits and limitations necessarily. Property purchasing for rental income, again with no experience, is risky.

-I would not suggest an annuity at his age. Annuities are great for people without set-pension plans, often people looking ahead and usually contributing slowly over time to build up a future pension for themselves. As someone mentioned stockbeard, you lose your remaining money if he dies early so for a 67 year old, it doesn't make much sense in my opinion.

I wish Japanese (overall - I know there are many exceptions) were more aware of investing and how to get into investing, as there are some bleak stories of poverty statistics for older Japanese folks. I am amazed how many of my Japanese friends (basically all) have no investments and/or no investment knowledge.

Thanks for that Kansaifolk--that all makes sense to me!

He has zero experience with investing. In fact, he is not money-savvy at all.

I guess that's actually something relevant that I didn't mention in my previous posts: He has something of a reputation of being "not so smart with money"--i.e. a pretty reckless spender. To be honest, that is also one of our concerns with regards to him having a chunk of cash on his hands...