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How much do we need for retirement... in Japan?
Posted: Fri Nov 16, 2018 3:49 am
by inaka_rob
(and yes I have permanent residency)
So there is a article floating out there by Fidelity (I think) about how much you need to retire in the USA. I think there was an updated version for other countries around the world. But I can't find it. The rule of thumb for the USA was 10x your last paycheck should be saved retirement.
So I have few questions about this:
1. What about Japan? Ben got asked this question on Tofugu and replied that its not so simple to just name a number. But for the sake of this post, what is the rule of thumb for Japan? I like to have a number to aim for.
2. For example sake, lets say 10x. Last paycheck will be, 8,000,000 yen. So I need 80,000,000 million to retire. Does this number include nenkin? Does this include equity? Land? What about a house?
3. Speaking of houses. How do we adjust this number if we have a house, or still are renting?
4. Is my math right? I am putting away privately around $12,000 a year into mutual funds. 5% annual interest rate assumed, over 30 years is about 850,000$. Pretty darn close to that 80 million yen from #2.
5. Do these estimates include tax? When they say 10x your last paycheck. Pre or post tax. Cause 8 million post tax is more like 5.5 to 6 million! Thats a HUGE difference.
6. This is kinda embarrassing, but how much do I adjust for my wife? I have always been saving for the both of us. We have no kids, we split just about everything. The difference in our income pretty much is what goes into retirement/saving. She is making more this year so also putting extra into retirement, so for example this year is more like 15,000$, not 12. There will probably be more 15k years down the line. But just because there is two us, surely we don't need 160,000,000 yen to retire. Its not a simple 2x in needs. One house/apt. At 65, share one car. Cooking and utilities for 2 are not a straight a 2x cost. Does this make sense?
7. This is all assuming FULL retirement by 65. I want to retire by 60 (lol, I said want). How do I adjust this number. 5 years early is 45,000,000 less in pay checks (assuming an 8 million yen income. What if I want to retire at 70 or retire at 65 but work part time. I can't wrap my head around how to adjust for these scenarios.
Re: How much do we need for retirement... in Japan?
Posted: Fri Nov 16, 2018 5:35 am
by RetireJapan
Thanks for the question, I love it
So I have
a lot to say on this topic, but I'd like to do it as a blog post if you don't mind... next Thursday.
We should get more feedback in comments/on Facebook that way too, and all learn from the wisdom of crowds.
Anyone else?
Re: How much do we need for retirement... in Japan?
Posted: Fri Nov 16, 2018 6:05 am
by goodandbadjapan
The X times final salary always seems silly to me as it sort of assumes we need most of our final salary to live on. For someone with a final salary of say 10 million, then ten times that might work, but it likely won't give much of a retirement for someone on a 3 million salary! And it will only work in the first case if the person isn't a huge spender. Much better is just to figure out your rough yearly expenditure and use that as a basis for calculation. Most people seem to say 25 times yearly expenses will likely see you through retirement, but it's always better to play safe and go for a bit more.
My house is paid off but personally I don't include it in my net worth. Two reasons - first, it is in Japan and so is very hard to know what I would get for it and that amount is likely falling every year anyway. Secondly, I need to live somewhere and so would need to buy or rent elsewhere if it was sold! So I don't include it in my net worth, but neither do I need to figure in rent or mortgage payments into what I might need to retire.
I also don't include government pensions and just see them as an added bonus.
That all said, if you are looking for hard figures, I think I could live a comfortable enough retirement on 4 million yen a year and the paid off house. Like you I don't have kids so I am not worrying about leaving anything behind! So, by my reckoning, 100 million would be enough, but I probably want a bit more than that just to be sure.
It's all down to the individual, though, and these are really just very, very rough speculations!
Re: How much do we need for retirement... in Japan?
Posted: Fri Nov 16, 2018 7:13 am
by Ori
I think the number is different for everyone and depends more on their spending habits rather than on income.
Just calculate it based on the lifestyle you intend to have after retirement. I got smth around $800,000 for my spouse and I for financial independence, and $1,200,000 for freedom.
Personally, I don't care about that number much, because who knows what will happen in the next 30-40 years, with global warming and everything.
I just aim to save above 50-60%, avoid consumerism and unnecessary spendings while still enjoying life. But I'm frugal by nature and nurture, so it is easy for me to live like that.
Re: How much do we need for retirement... in Japan?
Posted: Fri Nov 16, 2018 7:26 am
by RetireJapan
I've always said 3m to survive for my wife and me (paid off home), 4m to be comfortable, and 5m to live very well. I'll go into more detail in the blog post
Re: How much do we need for retirement... in Japan?
Posted: Fri Nov 16, 2018 7:51 am
by RetireJapan
Re: How much do we need for retirement... in Japan?
Posted: Fri Nov 16, 2018 9:36 am
by goodandbadjapan
RetireJapan wrote: ↑Fri Nov 16, 2018 7:26 am
I've always said 3m to survive for my wife and me (paid off home), 4m to be comfortable, and 5m to live very well. I'll go into more detail in the blog post
Presume that is yen per year rather than dollar total!
Re: How much do we need for retirement... in Japan?
Posted: Fri Nov 16, 2018 12:46 pm
by captainspoke
inaka_rob wrote: ↑Fri Nov 16, 2018 3:49 am
...
So I have few questions about this:
1... 2... 3... 4... 5...6... 7...
You have so many questions and hypotheticals, with criteria that are all over the place, that an answer is impossible. Your "burn" is also completely unclear.
Hire Ben to give yourself and your wife a once over. I think you could benefit from a second pair of eyes over your shoulder.
Re: How much do we need for retirement... in Japan?
Posted: Fri Nov 16, 2018 1:00 pm
by RetireJapan
goodandbadjapan wrote: ↑Fri Nov 16, 2018 9:36 am
RetireJapan wrote: ↑Fri Nov 16, 2018 7:26 am
I've always said 3m to survive for my wife and me (paid off home), 4m to be comfortable, and 5m to live very well. I'll go into more detail in the blog post
Presume that is yen per year rather than dollar total!
Mais bien sur! Yen per year there...
Dominated in dollars, any kind of millions would be enough
Re: How much do we need for retirement... in Japan?
Posted: Thu Nov 22, 2018 2:57 am
by RetireJapan
inaka_rob wrote: ↑Fri Nov 16, 2018 3:49 am
(and yes I have permanent residency)
So there is a article floating out there by Fidelity (I think) about how much you need to retire in the USA. I think there was an updated version for other countries around the world. But I can't find it. The rule of thumb for the USA was 10x your last paycheck should be saved retirement.
So I have few questions about this:
1. What about Japan? Ben got asked this question on Tofugu and replied that its not so simple to just name a number. But for the sake of this post, what is the rule of thumb for Japan? I like to have a number to aim for.
2. For example sake, lets say 10x. Last paycheck will be, 8,000,000 yen. So I need 80,000,000 million to retire. Does this number include nenkin? Does this include equity? Land? What about a house?
3. Speaking of houses. How do we adjust this number if we have a house, or still are renting?
4. Is my math right? I am putting away privately around $12,000 a year into mutual funds. 5% annual interest rate assumed, over 30 years is about 850,000$. Pretty darn close to that 80 million yen from #2.
5. Do these estimates include tax? When they say 10x your last paycheck. Pre or post tax. Cause 8 million post tax is more like 5.5 to 6 million! Thats a HUGE difference.
6. This is kinda embarrassing, but how much do I adjust for my wife? I have always been saving for the both of us. We have no kids, we split just about everything. The difference in our income pretty much is what goes into retirement/saving. She is making more this year so also putting extra into retirement, so for example this year is more like 15,000$, not 12. There will probably be more 15k years down the line. But just because there is two us, surely we don't need 160,000,000 yen to retire. Its not a simple 2x in needs. One house/apt. At 65, share one car. Cooking and utilities for 2 are not a straight a 2x cost. Does this make sense?
7. This is all assuming FULL retirement by 65. I want to retire by 60 (lol, I said want). How do I adjust this number. 5 years early is 45,000,000 less in pay checks (assuming an 8 million yen income. What if I want to retire at 70 or retire at 65 but work part time. I can't wrap my head around how to adjust for these scenarios.
I wrote that blog post:
http://www.retirejapan.info/blog/how-mu ... e-in-japan