Job Discussion Forums

[kzjohn]

[kzjohn]

[Vince]

Paying into the pension system is mandatory, regardless of whether you intend to collect. Last I heard, you can request to have those pension payments refunded if you leave before a certain number of years. It isn't your legal option to effectuate the future refund by not paying into the pension system. For those who stay past that refund threshold, your country's public pension system might credit you for what you paid into the Japanese system. I know the US has this kind of arrangement with Japan.

I agree that the US system is generous in its efforts to be sure that people aren't double-taxed, so I'm not worried about difficulties with them as long as I file properly. I don't know as much about the spirit of the Japanese tax system. Are they reasonable in what they tax and how they enforce it, or have they been known to be unreasonable or predatory?

Speaking of being reasonable: we can't expect to be treated reasonably on one hand, but be on this forum suggesting that we play dumb or ignore tax laws on the other hand. That some people get away with not paying taxes isn't justification. If only out of respect for this forum, we should address the letter of Japanese law and leave people to do what they want with that information.

[rxk22]

KZ, what kind of % rate do you pay on your US dividends? Most of my dividends are in an IRA or Roth IRA.

For all, this new tax is probably going to stink for us. Honestly, if I could I would opt out of the pension system. I don't believe, esp Japan's will be around when I retire. That said, I invest independently for my retirement, even if I do collect pension, it prolly won't be much. I think the regular pension here, which most of us pay into is like 7 or 8 万円 a month or so.
Make sure that you plan ahead people. Don't get caught at, say 55 with no savings and zero retirement outside of your pension contributions.

[kzjohn]

rxk22--for the U.S. and some kind of dividend tax rate, I'd have to go back and look (and also there are usually some year-end short/long-term gains, more or less, depending on a fund's turnover). My U.S. CPA just sends me the forms to sign/submit, and I don't look too hard. I do usually pay 1000-2000/year. Last year (2014 tax year) was a little less, so I didn't take the refund and the IRS has about $1000 on hand from then. It'll all work out.

Here in Japan, the div tax rate sucks, but I have agreed with myself to live with it. I think for 2015 dividends could bump me into the next higher tax bracket, but I have some one-off expenses to deduct this time so I'm hoping that won't happen.

I am well aware of the POV that dividends should be avoided, for the very reason that they are taxed as income here. And that a person like me should perhaps instead be choosing low-turnover funds (with low dividend payouts) so as to avoid taxes in the present. And there's a lot to be said for that--you could sell small lots later (only as much as you need to) and only pay taxes on gains then, as you take them. With dividends, you're taxed on them here as regularly as they're paid.

But, considering that 2015 was not a particularly good year in terms of gains (and also since 2016 started!), I see dividends as a counterweight to that.

I'm not a dividend junkie, but I've only got about a year till retirement, and have been buying a few of those (added some names over the last couple weeks). I'll remain in a high tax bracket here for 2016, but in 2017 I'll only have three months of income (and pension the rest of the year) so I'm sure taxes on dividends will then drop down to a lower, more acceptable, rate. Some div stocks have been on sale lately, so I bought a few.

There are obviously all sorts of continuing and unpredictable variables, but an example might be AT&T. Buy $20k of that, times 5% (div), times 120 yen/$, divided by 12, and you get an 'income' of 10k yen/month (pretax). Mix that with 5-10 comparable things, and it's a way of fattening up your pension. T is low beta, ratings are at least a little above average, so there could even be some upside in the price some years down the road. Tho they pay a little less, the same logic could apply to a dividend ETF, if you don't like gambling on a single company.

[rxk22]

Well if they are taxing dividends like income, I'd go with BDCs and REITs, as they are taxed higher in the US. Due to them not paying as much taxes at the corp level. MAIN and O are great div payers.

Japan does have the equivalent of a ROTH. Up to 20,0000,000 yen worth can be deposited, and it won't be taxed.

But thank you KZ. You def gave me a lot to think about. I am in my mid 30s, so I have a little more time until retirement than you. I am firmly in the invest and hold div stocks camp. I really am not good at shorting stocks, and I still don't yet under stand option trading enough to use them effectively.

BTW how much will you get from the Japanese pension system per month? My Father in Law gets like 22万 a month. But he was govt and has a cushy retirement package

[kzjohn]

Private part of pension will be 115,000/month, that's known for sure (私学共済, known to be cheap). Guesstimate for public is 45,000. Both are paid bimonthly.

Tho she's several years behind me, my wife has always worked (also uni teacher), so we've necessarily had separate financial lives for taxes/pensions, she's on her own track there.

(No reits, mortgage or otherwise, but a bit of both bx and bgcp were recent buys. )