Paying Nenkin on behalf of kids in higher education

[Moneymatters]

Firstly, I'd like to declare this a safe space from "there won't be a pension once they get old" type comments.

So. The first nenkin payments are expected when someone turns 20.
If in higher education they can get an exemption to payments or chose to pay themselves.

Always thinking up new and exciting ways to spend our money, my partner says we, and by we I very much mean me, should pay their nenkin for them until they start work.

My wife then told me if (read "when") we we decide to pay it. We could get a tax benefit.

And sure enough you can.
https://money-bu-jpx.com/news/article019093/

Is anyone doing this/has done this?

If you happen to have a child so civic minded they wanted to pay from their part-time income. You could pay on their behalf and give them the financial benefit from your tax relief. They would know what your higher rate taxable income was as a result.

Also, I think the linked Financial advisor might want to take up wrting fiction.
子供に自分の年金保険料を負担させたい場合でも、学生の間は親が立て替えて、子供が就職してから返してもらうことを考えてみてはいかがでしょうか？

[RetireJapan]

If you are willing to do this for them you could also cram their iDeCo full of money and set them up for a very comfortable retirement (five decades of tax-free compounding!!!!!)

[adamu]

I don't have kids (primary school teacher: a kid is a baby goat!), but I have a weird obsession with understanding all of these systems.

Did I understand the article correctly?

Residents of Japan have to pay the Nenkin from age 20 onwards.
But students are allowed to defer payments. If they defer, they have 10 years to pay it back.
Or, parents can pay on their behalf, in which case they get a tax deduction that means the payments are gross of income tax.

So rather than sending your kids post-tax money, and the kids paying the pension, you pay it directly with pre-tax money.

It seems that the rational choice is: if you would have paid it anyway, it makes sense to get the deduction. If the kid is going to pay their own way, it doesn't.

The author seems to be saying: take the deduction, but then ask them to pay you back later. Maybe signing them up to Dad's tax avoidance loan for the sake of a few man when they're just trying to make their way in the world isn't the best strategy...

[Moneymatters]

@Ben
I was actually planning to first contribute to, then match their investments into tsumitate NISA to help them build saving habits.

But as ideco is locked to their retirement age that could be the smarter play. What would the monthly limit be whilst they were in fulltime education?

@adamu
I also agree the author is over achieving in the tax avoidance stakes. And even in a multiverse of infinite possibilities I find it hard to envisage one were I get something back except lip.

[RetireJapan]

@Ben
I was actually planning to first contribute to, then match their investments into tsumitate NISA to help them build saving habits.

But as ideco is locked to their retirement age that could be the smarter play. What would the monthly limit be whilst they were in fulltime education?

iDeCo is based on what type of nenkin you pay, not employment status (despite all the confusing govt explanations that talk about job types). So up to 68,000 yen a month. And yeah, it being locked up until at least 60 is probably a net positive IMO

[Bubblegun]

If you are willing to do this for them you could also cram their iDeCo full of money and set them up for a very comfortable retirement (five decades of tax-free compounding!!!!!)

That’s exactly what I was thinking.
Three or four large deposits for for years while at college.
In fact I’ve spoken to Baldrick, and our cunning plan is to get our kids to contribute say 10,000 yen a month to the family, however we hope to just move it, to their IDECO quietly.
So hopefully by the time their brain is engaged, they’ll appreciate the surprise. (Or not)

I never know how realistic this could be but dropping 500,000 yen, compounded at say 8%, with 5000 yen per month for the next 50 years equals 59 million yen.
https://www.thecalculatorsite.com/finan ... ulator.php

[Bubblegun]

If you are willing to do this for them you could also cram their iDeCo full of money and set them up for a very comfortable retirement (five decades of tax-free compounding!!!!!)

That’s exactly what I was thinking.
Three or four large deposits for for years while at college.
In fact I’ve spoken to Baldrick, and our cunning plan is to get our kids to contribute say 10,000 yen a month to the family, however we hope to just move it, to their IDECO quietly.
So hopefully by the time their brain is engaged, they’ll appreciate the surprise. (Or not)

I never know how realistic this could be but dropping 500,000 yen, compounded at say 8%, with 5000 yen per month for the next 50 years equals 59 million yen. Although it sounds a lot in today’s money, inflation will really devalue it.
https://www.thecalculatorsite.com/finan ... ulator.php

We can’t see the future but the historical inflation calculators can help to see how spending power may change.
100 pounds in the 1960s sounds a lot and would return 60,000 pounds in 2021. Not a lot.
That 100 pounds a month is actually 1500 pounds a month in today’s money. And I don’t think I could save 1500 pounds a month in today’s money.
If we did the calculation in 1967 would we think 60,000 would be enough..
10 pounds a month in1967 is the equivalent of 157 pounds a month today. 15X more.
Maybe someone could help me sort out my math thoughts on that, but even 300 pounds a month in today’s money seems so little in 50 years.
https://www.inflationtool.com/british-p ... sent-value

One million dollars in today’s money sounds a lot, but it 50 years, it won’t even be worth 300,000 dollars as inflation eats it away.

https://smartasset.com/investing/inflat ... uXjYKjk4eF

[TJKansai]

Saving money in your kids' names is probably a good move, with or without tax benefits, in order to limit inheritance tax hits.

So far I haven't seen much discussion on RetireJapan, probably because we are all too young .

{might be time for another heading "Inheritance/Estate Taxes"}

Still, if we manage to have the anticipated Nest Eggs in the poll, there will be a lot destined for the tax collector if we kick early.

We have a neighbor who said when her wealthy father passed away he had ¥10,000 in the bank. The rest had been (legally) spread amongst the family in the previous decades.

[RetireJapan]

Saving money in your kids' names is probably a good move, with or without tax benefits, in order to limit inheritance tax hits.

So far I haven't seen much discussion on RetireJapan, probably because we are all too young .

{might be time for another heading "Inheritance/Estate Taxes"}

Still, if we manage to have the anticipated Nest Eggs in the poll, there will be a lot destined for the tax collector if we kick early.

We have a neighbor who said when her wealthy father passed away he had ¥10,000 in the bank. The rest had been (legally) spread amongst the family in the previous decades.

I've already started doing this. Anyone in Japan can receive up to 1.1m yen a year tax-free in gifts, and my kids/grandkids will appreciate it/get more utility out of money now rather than in 30-50 years time.

We've been funding Junior NISA accounts for the grandkids and giving cash to the kids.