Popochi wrote: ↑Mon Sep 05, 2022 4:19 am
thank you.. i was thinking of going back to my country after 10-15years and since im in a kosei nenkin right now, i thought that 3years of kokumin nenkin wouldn’t add much to my pension.. cheers
You'll be able to tax deduct those back payments.
I think it reduces your income tax and resident tax burdens.
So you must first calculate the net cost of paying them back.
Then use a compound interest calculator to see from when you pay them back to age 65 what you might alternatively gain by investing that money privately instead.
Then deduct capital gains tax on any growth.
Then decide how you want to use that money, e.g. safe withdrawal rate.
Now compare that amount to the expected pension of 3 years kokumin nenkin contributions. 3/40ths of the full amount.
Just for fun, cos this counts as fun right?, let's assume you'll gain 15% though tax deductions.
So about net 500,000 for 3 years back payment.
And you'd have the equivilant usd net amount to invest if you took that approach instead.(let’s ignore that 15% opportunity cost through choosing to pay the tax.)
So.. 500,000 equates to $3,571 and let's say you are age 30. So that 35 years.
at 5% interest you'd have approx $19,700
https://www.investor.gov/financial-tool ... calculator
But you'd pay, let's assume 20% gains on the growth so $19,700 - $3,571 = $16,129. Which is $3,225 so a net of $16,475
3 years of kokumin nenkin currently provides approx 58,500yen annually.
4% withdrawal on $16,475 = $659 or 92,260yen annually. (But you carry ALL the risk with that withdrawal.)
But why does this look quite easy to beat the pension? Great question and I’m glad you asked.
Because each monthly contribution into kokumin nenkin is treated equally.
Month 1 and Month 480 have equal bearing on the amount you recieve.
So obviously diverting some early months (as a lump sum) could potentially seem more attractive.
Loads of assumptions and guesstimations in my post, as usual.
And I can already hear the finger exercises from the folks lining up to correct me..