Advice: Keep investing on Nisa or not

[pfdsa]

Hello everybody

Context:
I'm from Europe, been living here for about 7 years and my plan was to stay in Okinawa until the end. My wife and I always wanted to buy a house due to our hobbies and what we enjoy in life, but houses here just keep on getting more expensive and smaller, and are completely out of our reach, even second hand. With the development that is planned for the next years it will increase again eventually

Plan:
Due to the above, we came with a plan. For the next 5 years we would stash my wife's salary and live from my salary. After those 5 years, we would live for 1 year on my country, and if my wife enjoys it then we would buy a second hand house or modular house there.
If she don't like it we would come back to Okinawa.

Question:
We have an emergency fund for 6 months for both of us, and I have around 1,000,000 yen invested on Nisa. Since it is up for around 27%, I was wondering if I should just withdraw everything now, stop investing, and just put this money and future money on the bank for these 5 years. Afraid that in 5 years will loose money when withdrawing if I keep it invested on Nisa. What do you guys think?

Edit: The fund I'm investing on Nisa is emaxis slim all country. The house will have to be bought in euros.

[RetireJapan]

Question:
We have an emergency fund for 6 months for both of us, and I have around 1,000,000 yen invested on Nisa. Since it is up for around 27%, I was wondering if I should just withdraw everything now, stop investing, and just put this money and future money on the bank for these 5 years. Afraid that in 5 years will loose money when withdrawing if I keep it invested on Nisa. What do you guys think?

This depends entirely on your preferences.

If you take the money out of NISA and put it in the bank, in five years time you will have 1m yen + 5x your wife's salary.
If you leave the NISA money invested and save your wife's salary in the bank, you have have 0.5-2m yen + 5x your wife's salary.
If you leave the NISA money invested and also invest your wife's salary into NISA every month, you will have (1m yen + 5x your wife's salary) x0.5-2

It also kind of depends on how much your wife's annual salary is compared to 1m yen.

I know what I would do, but that is of no use to you becasue we have different situations/preferences.

Anyone else?

[Tkydon]

If you put some of your wife's salary in iDECO to the max she can contribute, she will get a big tax refund at the end of the year, at

(1 / (1-Marginal Tax Rate)) -1 x Total Annual iDeCo Contributions refund.

And save Residents' Taxes in the following year (not a refund, but reduced bill, so would have had to be paid, so add it to the above)

(1 / (1-Marginal Tax Rate)) x Total Annual iDeCo Contributions x 10%.

and save about another 10% in Household Health Insurance Premium (depending on provider, etc.) in the following year (not a refund, but reduced bill, so would have had to be paid, so add it to the above)

(1 / (1-Marginal Tax Rate)) x Total Annual iDeCo Contributions x 10%.


She can then reinvest all those savings into NISA.

iDeCo disbursements will be taxable in retirement.

Put the remaining Salary into NISA to a max of Y3.6M per year (Y1.2M Tsumitate and Y2.4M Growth Portion)

NISA disbursements will be Tax Free, and you don't need to wait until retirement. You can take them anytime.

Put any remaining Salary into a regular Investment Account Tokutei Account.

Any disbursements (gains) will be Taxable, but you don't need to wait until retirement. You can take them anytime.

[sutebayashi]

Question:
We have an emergency fund for 6 months for both of us, and I have around 1,000,000 yen invested on Nisa. Since it is up for around 27%, I was wondering if I should just withdraw everything now, stop investing, and just put this money and future money on the bank for these 5 years. Afraid that in 5 years will loose money when withdrawing if I keep it invested on Nisa. What do you guys think?

Nisa just means you can sell out and pay no taxes.

I’ll assume you are invested in some stock fund.

If you really want the money in 5 years, there is a chance your fund might go down in value prior to that time.

Therefore you might from some point do an inverse tsumitate - gradually shift those nisa assets into something lower risk, month by month. If you want to buy a house in foreign currency you might focus on shifting assets to that currency, or a global bond fund perhaps.

(There is also a chance that the stock market will be higher five years from now too.)

[pfdsa]

Thank you all for the replies. Very insightful.
Added some extra context. I'm buying emaxis slim all country and would need to pay the house in euros.

Nobody knows if the exchange rate will improve in the next 5 years, but I'm feeling tempted to let the money sit on the Nisa account, and then withdraw everything if the exchange rate improves. The additional savings would be the problem. Sitting on the bank means losing money to the inflation, so maybe buying bonds on Nisa could be a some what safe option?

[sutebayashi]

Yeah, as you get closer to the target date you might switch some equities into bonds.

Maybe you could switch 20% from your eMAXIS slim all country to eMAXIS slim 先進国債券 each year, so you eventually have 100% in the bond fund come the target year.

You might start now at Y-5, or you could wait until say Y-3 and do 33% shift each year.

(It’s an interesting twist that you need Euros. If the Euro were to strengthen relative to peers that might set you back, but in the other hand if the Euro were to weaken versus peers, it’d work more in your favour. But guessing the forex situation next week is tough, let alone 5 years out)

[Beaglehound]

A target date fund aimed at 2030 (assuming they exist for such a short time frame) might take the legwork out of it for you. Such funds will automatically shift asset allocation towards less risk as the target date approaches. Though a DIY approach would likely work out cheaper in terms of management fees.