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Retirement: Do-it-yourself? OR public pension?

 
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aodtohan



Joined: 09 Jan 2010
Posts: 28

PostPosted: Sun May 27, 2012 6:35 am    Post subject: Retirement: Do-it-yourself? OR public pension? Reply with quote

I'm contemplating my long term options as a potential lifer here in Japan, now that I am married with a Japanese wife and with a baby on the way.

To fellow expat teachers here in the forum, have you found good pension alternatives available to us here in Japan? Or would it be better to start contributing to the National Pension System here (a little less than 15,000yen monthly)?

I ask this because for most of us, especially on one-year term contracts, our companies tend not to cover for our pension payments.

I'd like to hear your thoughts or advice on this.
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steki47



Joined: 20 Apr 2008
Posts: 1029
Location: BFE Inaka

PostPosted: Sun May 27, 2012 7:23 am    Post subject: Reply with quote

I have a multi-pronged approach:

1. I pay into the Jpn pension.
2. Save like crazy on my own.
3. Stock investing with a focus on dividends.
4. A small internet side business that I can do when I am old and crazy.

My Jpn wife and I have discussed the idea of retiring in a cheaper Asian country as well. Still looking at our options as we are in our 40s and have some time.
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Inflames



Joined: 02 Apr 2006
Posts: 486

PostPosted: Sun May 27, 2012 7:31 am    Post subject: Reply with quote

The first thing to point out that joining the national pension is an obligation. The second thing is that reasonable companies enroll you in shakai hoken - the companies that don't should generally be avoided.

Where are you from? Are there any tax-advantaged retirement plans you can contribute to back home? If so, then you should absolutely contribute to those. I'm from the states and we have two kinds but it's pretty much impossible to contribute to them if you live overseas.

There are investment options in Japan but they're pretty poor - high fees and poor choices (and then you need to actually understand enough Japanese to understand the investment).
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Kionon



Joined: 12 Apr 2008
Posts: 226
Location: Kyoto, Japan and Dallas, Texas

PostPosted: Sun May 27, 2012 11:24 am    Post subject: Reply with quote

I like Steki's approach, and I agree with Inflames.

Inflames, are you talking about IRAs?
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Inflames



Joined: 02 Apr 2006
Posts: 486

PostPosted: Sun May 27, 2012 1:38 pm    Post subject: Reply with quote

Kionon wrote:
Inflames, are you talking about IRAs?


Yes. For those who don't know, in the US there are two kinds of IRAs (Individual Retirement Accounts) - traditional (where your contributions aren't taxed but distributions are) and Roth (where you contributions are taxed but distributions aren't).

The only way for an American to contribute to any IRA in the states is to either have earned income in the US, earn more than the cutoff for the foreign income exclusion or not claim the foreign income exclusion but claim the foreign tax credit instead (paying the difference, if any, to the IRS). If you didn't meet the maximum for the previous year you can contribute up to April 15th (and have it count for the previous year).

I invest both in the US and Japan. There's a lot more random funds to invest in than in the US but they're generally a ripoff. I always recommend starting with a simple index fund as it gets your toes wet - almost everyone loses money on their first few stocks and it can take a while to figure things out.
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G Cthulhu



Joined: 07 Feb 2003
Posts: 1373
Location: Way, way off course.

PostPosted: Sun May 27, 2012 5:07 pm    Post subject: Reply with quote

Inflames wrote:

The only way for an American to contribute to any IRA in the states is to either have earned income in the US, earn more than the cutoff for the foreign income exclusion or not claim the foreign income exclusion but claim the foreign tax credit instead (paying the difference, if any, to the IRS). If you didn't meet the maximum for the previous year you can contribute up to April 15th (and have it count for the previous year).


Not quite. You can choose to file the paperwork every year to declare tax residency in the US if you want. There are some strong tax benefits to doing so and it's only two extra bits of paper for the return you send to the IRS anyway. Declare residency for one month each year. That allows you to pay an entire year into an IRA of some sort (I like SEP Roth's because they're unlimited contributions) and only hits you for taxes on that one month of income. While it might sound counter-productive to have to nominally pay US taxes for that month month, you seldom end up paying much (if anything) because you also get a credit for the Japanese taxes you pay that month. Make it the month when you pay your residence taxes and your US taxes are likely to be nil. If you *do* pay US taxes for that month then not to worry: you can claim the tax paid back against your Japanese taxes, so in most instances, if you've timed it right each year, it's cost neutral.

In terms of investing, if you want individual investments then take a good look at NZ or Australian term deposits (CD's, for you Americans out there) which are running at 4-9% right now. In terms of a person in japan, you'd pay the witholding tax in NZ or Aus (upwards of 30%), but both countries have tax treaties with Japan and the US (& UK, for those of you from there wanting to play in those markets as well) so you can claim the tax back on wherever you declare your "local" return. Outside of individual investments (& I think you'd have to be a mug to try investing in individual stocks) then zero fee mutual funds or ETF's are the best options for "set & forget" investing.
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Glenski



Joined: 15 Jan 2003
Posts: 12844
Location: Hokkaido, JAPAN

PostPosted: Sun May 27, 2012 10:01 pm    Post subject: Re: Retirement: Do-it-yourself? OR public pension? Reply with quote

aodtohan wrote:
To fellow expat teachers here in the forum, have you found good pension alternatives available to us here in Japan? Or would it be better to start contributing to the National Pension System here (a little less than 15,000yen monthly)?

I ask this because for most of us, especially on one-year term contracts, our companies tend not to cover for our pension payments.
Doesn't matter if your employer dodges his legal responsibility to put you on shakai hoken. It's YOUR responsibility by law to sign up, as InFlames wrote. That means if you have to get kokumin kenko hoken for health insurance and kokumin nenkin for pension, you should do it. I'm surprised your Japanese wife has not been able to explain that to you.

If you want to supplement the J pension system beyond that, it's up to you, of course. Everyone will find different options.
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Kionon



Joined: 12 Apr 2008
Posts: 226
Location: Kyoto, Japan and Dallas, Texas

PostPosted: Sun May 27, 2012 10:30 pm    Post subject: Reply with quote

Glenski is being blunt but quite correct on this.

I signed up for Kokumin myself, and I even flew back in the middle of my MA to pay off what bit I still owed. My new position includes Shakai Hoken, I'm not sure if my rates will go up or down, however...
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