Getting close to retirement
A short, practical post for you today. A reader has kindly shared their nenkin statement with me and given me permission to put it on the blog. This person is closer to retirement than I am, so this gives us a more developed snapshot than my annual pension updates.
In section 2. in the image above we can see that our reader has made a total of 362 months of contributions to nenkin so far (36 months of kokumin nenkin, 17 months of kosei nenkin, 112 months of kyosai kosei nenkin, and 197 months of private school kosei nenkin).
In section 3. above, we can see projected payouts assuming current contributions continue until the age of 60.
From age 63, our reader can receive kosei nenkin worth just over one million yen a year. This is made up of the three types of kosei nenkin they have paid into.
From age 65, kokumin nenkin worth 573,000 yen a year will be added to that, providing a total pension of 1.645 million yen a year.
Now, our reader can choose to defer their kokumin nenkin for up to five years, which would increase it to 142% of the normal payment.
I am not sure if it is possible to defer kosei nenkin to increase the payouts. I am guessing that is not possible, so one strategy would be to live on kosei nenkin supplemented by savings or working while deferring kokumin nenkin to increase the eventual payments and raise your pension income floor.
Any thoughts? Does anyone know the definitive answer on the kosei nenkin deferral issue? How is your pension income looking?
*If anyone has a very different pension record and would be willing to share it anonymously on the blog I would love to hear from you.
Excellent post. Many thanks.
Thanks for the helpful post.
The card (I also just received mine) states that this is the amount you get if you continue working under your current circumstances until age 60. Is there any extra benefit to working longer?
Also on the back side of my card it has a box with my total (the Kokumin nenkin and just Ippan kosei nenkin in my case) and an additional note that seems to indicate that entire total could increase by as much as +42% by delaying until age 70.
The definitive answer to the question of whether rorei kosei nenkin (= kosei nenkin) can be deferred is YES, but…
Since your first year of eligibility (upon reaching 65) does not count toward increasing the payout, deferral can only be requested from the age of 66 (technically speaking, the day before your 66th birthday). Your pension benefit increases by the month from that point onward (for details, see the chart at https://www.nenkin.go.jp/service/jukyu/roureinenkin/kuriage-kurisage/20140421-05.html), beginning from a yearly increase of 8.4% if you take your pension at 66 years, 0 months, to a maximum increase of 42.0% from the age of 70 years, 0 months.
The same rates of increase apply to the regular rorei kiso nenkin (= kokumin nenkin), which can be deferred SEPARATELY from the rorei kosei nenkin (see Note 4 under the chart mentioned above or refer to the FAQ at https://www.nenkin.go.jp/faq/jukyu/seidokaisei/kurisage/20140421-02.html).
If you continue to work after reaching 65 in a position where you are still paying into the kosei nenkin system (this status is called zaishoku rorei nenkin; by this time you are no longer paying in to the kokumin nenkin system), rules come into play that, depending on your income, will result in a freeze on a portion of the amount of your kosei nenkin that is eligible for increases (basically, if part of your kosei nenkin pension would have been frozen because of continued employment, that portion will not count toward increased later benefits). This gets rather complicated, but see https://www.nenkin.go.jp/faq/jukyu/seidokaisei/kurisage/20140421-01.html for a short explanation and not-too-helpful graphic showing how it works. There is a better example at the bottom of the following page: https://kurassist.jp/nenkin_atoz/seido/zairou/zairou02.html. The relevant Japan Pension Service page (with the formula for calculating how much gets frozen) is https://www.nenkin.go.jp/service/jukyu/roureinenkin/zaishoku/20150401-01.html. As I understand it, if you make over 470,000 yen a month after turning 65 and still participate in the system, not only would a portion of your kosei nenkin be forfeit (if you are already taking it), but rate increases would not apply to that portion (if you are deferring). Given the complexity, you are best advised to actually go and talk to the pension-office people to find out what will happen in your particular case.
Other caveats with respect to eligibility etc. are listed under the chart mentioned above (there are 10 altogether; the similar chart at https://www.nenkin.go.jp/service/jukyu/roureinenkin/kuriage-kurisage/20140421-06.html for the kokumin nenkin pension has eight footnotes).
Perhaps not as definitive as might be ideal, but “it is what it is.”
Let me emphasize one point regarding the above explanation of the zaishoku rorei nenkin. The figure of 470,000 yen a month mentioned as the starting point for freezing the pension may sound comfortably high, but that’s only because the formula for calculating the zaishoku pension uses it as an exclusion. At lower salaries, the effect is to result in no reduction. At higher salaries, however, reductions enter into the picture.
An example will help (I’ve lifted the following case from an online site and applied it to the other example). Let’s say you have a nominal monthly kosei nenkin pension of 120,000 yen (1,440,000 yen annually), along with a monthly base earned income of 420,000 yen, derived from having an annual base earned income of 50,040,000 yen, of which 320,000 is monthly base salary and 100,000 monthly base prorated bonus (“base” is used here because the figure is not necessarily actual income but standardized income according to the relevant government scale, which maxes out at 620,000 a month for salary and 1,500,000 yen per bonus prorated across the year — you will usually find your actual figures in a special box on your payslip and they will also be listed in your online pension record). The formula for calculating the zaishoku rorei nenkin pension works as follows:
monthly pension amount-(monthly pension amount+monthly remuneration-470,000 yen) /2
[N.B. division is carried out before addition or subtraction at the same level]
So in this case:
120,000 – (120,000 + 420,000 – 470,000) /2
= 120,000 – 70,000 / 2
= 120,000 – 35,000
= 85,000
In other words, you actually receive only 85,000 yen of your nominal 120,000-yen monthly pension as your zaishoku rorei nenkin pension. The other 35,000 yen vanishes forever as long as you continue to work (or is not available for later pension increases).
Now, let’s increase your monthly base earned income to 600,000 yen, close to the maximum. The formula becomes:
120,000 – (120,000 + 600,000 – 470,000) /2
= 120,000 – 250,000 /2
= 120,000 – 125,000
= 0
Hey presto, no zaishoku rorei pension available for you, and no pension amounts are available for later pension increases. One argument in favor of this arrangement (whether you agree with it or not) is that high earners shouldn’t need the pension. The main arguments against it for those who are affected (lower income and loss of motivation) are obvious. One proposal in the most recent pension reform (now in the news — you may have seen it — due to be enacted in January) was to raise the exclusion amount for those over 65 to 620,000 yen. Under criticism for favoring the wealthy, that proposal was first lowered to 510,000 yen and finally returned to the original 470,000 yen. (Instead, the same 470,000 yen exclusion will now apply to those between 60-64, whereas currently it is significantly lower.)
As mentioned before, whether and how much of your zaishoku rorei nenkin actually gets cut depends on variables which must be considered at the individual level. In any case, I have to say that this little exercise has been as educational for me as it might be for anyone else out there. If I’ve managed to mangle something, please correct (but otherwise I plan to get in a little R&R).
Thanks for the insight.
From what I keep reading it appears to me most people are not making enough, or working too few years, and most definitely need to be saving.
As I mentioned before if you have no mortgage, you can easily live on ¥200,000 a month here with high monthly health insurance for two years until National kicks in at a much lower than and due to ¥11,000,000 a year rates with no car.
Very comfortable with taking in ¥300,000 a month with no mortgage and no car. You can actually save, but we are spending.
You can actually enjoy retiring in Japan. I am not rich nor want nor need to be, but fantastic place, great health care, safe and affortable.
Advice time: Look in your closets. Put simple markers with dates ….on things. Next year if there are still tags…get rid of the STUFF you do nit need nor use.
In my case, I’ll be looking at a pension of only 104,000 a month assuming things for me stay the shame, which I doubt will be the case, but it’s still pretty sad that I’ll get so little despite paying in 23,790 a month, which the company matches. However I started NISA in October and plan to start Ideco when I finished paying off my student loans. Hopefully I’ll get 30 years of maxed out Ideco contributions at 23,000 and many more years of NISA or whatever new systems come in the future to supplement my weak pension.
I’ll probably be leaving Japan after retiring at 60. I’ve heard you can claim a part pension from 60. What are your thoughts on this? I don’t know if it would be better to wait for the full pension at 65…
You can claim the pension early (up to five years in advance) or late (delay it by five years). If you can afford to, it is probably better to delay it in order to get a larger pension.
https://www.retirejapan.com/blog/when-to-start-taking-a-pension/
I’m Australian and not eligible for the Aussie pension until age 67. I was thinking if I were to leave Japan permanently after retirement, it would be sensible to claim the Japanese pension sooner than later. Does that make sense?
Your pension system and the Japanse pension system have a lawful agreement to blend them. Blend your Japanese pension into your Australian one.
Probably worth running the numbers before making a decision, but could be a good option!
Maybe. Going to depend on your circumstances and plans.
Would it be stretching the friendship too far if you asked the kind reader to also share how much they have made in contributions?
Clear as Mud knows his material.
I belonged to ShigakuKyosai (private schools health/insurance and benefits group) for 26 years. (312 months)
1. My Shigaku PMAC Kyosai Nenkin amounts to ~¥790,000 ( It is half due to divorce: Would have been 1,580,000. Divorce hurts your Kyosai Nenkin here unlike in America)
2. Kokumin Nenkin?Rorei Kiso Nenkin (Standard old age benefit…not touched by divorce) amounts to ~¥400,000.
3. Kakyunenkin (Nenkin received when your wife/partner is under age 65 and making under a certain amount) amounts to ~¥390,000 * I believe it is cut off when she/my wife starts collecting her own Kokumin Nenkin 13 years from now.
Grand Total for the year =~¥1,580,000 (Would have been ~¥2,370,000 if not for the divorce.
** If one can get in close to 40 years of working here making about ¥10,000,000 a year as I was making, you could do rather well with the pension. I cannot see it at meeting 50% but possibly 40%.
***The calculations I have made for years back suggest that being mortgage-free I would need to have a no-frills life but covering all daily life needs from food to medicines, insurance, utilities, etc. would amount to approximately ~¥2,400,000. So this might be a wake-up call for you younger people with the intent to stay in Japan after retiring. Start saving now seriously, or start with other good strong investments. (I am safe by the way. I put away for rainy days. Plus I do not own nor want/need a car.)
A message to Vikki: More than likely your country has a pension agreement with the Japanese government. Before you leave at age 60, get all the paperwork together and combine your Japanese pension with your home country pension and never have to worry about the Japanese end again? Start early. I had over a year-long roller-coaster ride to finally getting my pension payments coming through correctly. The second just arrived on the 13th of December and it was correct.
The above example looks pretty close to mine. I am 64 and took my nenkin from 62 even though I continue to work. I figured, why not? I might get hit by a bus tomorrow. I have not yet received any of the Kokumin nenkin of course which will start….gulp….next year so between the nenkin my wife gets, mine and other nenkin like investments we look to be OK….I hope. I had paid into the system for 38 years so enough is enough……get on with it……I figured.
Daniel–38 years is probably a record around here! Congrats on the persistence! (and stability?)
Go for 40 Daniel and receive the Gaijin Salary Man Award of a lifetime of grueling commutes. :@)
(and it’s nice to see another former PCV around here)
PCV? Pipe plastic material? What do you mean?
Peace Corps Volunteer. I was a K-31 (31st group in Korea), from ’74-’76. Tho I was in health/TB, not ESL.
Some more information to add, this time in connection with the originally posted image. The explanation of section 3 in the image needs to be amplified somewhat (as mentioned earlier, pension matters are devilishly complicated).
The pension amount listed under the “From age 63” column is, technically speaking, “tokubetsu shikyu no rorei kosei nenkin.” The “tokubetsu shikyu” (“specially provided” is the English term used on the Japan Pension Service website) is there because it refers to a transitional system (put into place in 1986 when the age of pension eligibility was raised from 60 to 65) for individuals born on or before either April 1, 1961 (male), or April 1, 1966 (female). Such individuals are deemed eligible to receive part of their kosei nenkin BEFORE the age of 65 (the exact proportion and age depends on gender and date of birth; the posted image suggests that the person who supplied it, if male, was born between April 2, 1957, and April 1, 1959).
Note that this is NOT considered an election for early benefits; eligibility is automatically conferred and the pension received AS LONG AS the necessary paperwork is submitted and the usual conditions regarding length of payments and age are satisfied. The pension service does send postal notification to eligible individuals, but it is the individual’s responsibility to submit the forms, and there is a five-year statute of limitations in place for claiming the pension (that’s five years from the date of first eligibility, so it’s important to be on the lookout for the notification). It’s also vital to understand that neither kuriage (taking the pension early) nor kurisage (deferring the pension) is possible for tokubetsu shikyu no rorei kosei nenkin (this is may be what caused the initial confusion over whether deferral of kosei nenkin is possible). In other words, when individuals receiving tokubetsu shikyu no rorei kosei nenkin turn 65, that pension ends and they become newly eligible for the regular rorei kosei nenkin. AT THAT POINT they decide anew whether to take or defer the regular rorei kosei nenkin (the necessary forms will arrive from the pension office through the mail; remember that deferral proper starts at the age of 66 — if you plan to defer, DO NOT actually start taking your regular kosei nenkin at 65). To repeat: there are NO benefits to deferring tokubetsu shikyu no rorei kosei nenkin because legally it CANNOT be deferred — you will simply miss out.
As if that weren’t complicated enough, if the person eligible for tokubetsu shikyu no rorei kosei nenkin remains employed between the ages of 60 and 65 (meaning up to that person’s 65th birthday), zaishoku rorei nenkin limitations come into effect (discussed above in connection with the regular rorei kosei nenkin), and because the exclusion used in the formula for calculating the pension is (currently) set at 280,000 yen, the odds are good that the pension will be reduced or even completely eliminated (this is why some older employees arrange to leave their seishain positions and become contractors: income limitations don’t exist if you’re not paying into the system). With the upcoming pension reform, it looks like this limit, at least, is going to be relaxed a bit; but the reduction is a potential downer.
In any case, the moral of the story is clear enough: eventually you will need to go to the pension office yourself to find out what conditions apply in your particular case. General descriptions are helpful (and the reports you receive from the pension office generally accurate), but nothing beats the printout that they can provide for you on the spot. It would be a good idea to pay a visit when the age of 60 looms into view.