How much will ¥100,000 in 2017 be worth in 2050?!

[prn]

I know this is an incredibly difficult question to answer bearing in mind everything that could happen in the next 30 years or so, but it seems to me that it is necessary to have a rough idea in order to make any meaningful plan for retirement.

At the moment Japan's inflation rate is at 0.7%. If we assume that it stays around 1% for the next 30 years (a huge assumption), that means that the value of money will decrease by 1% every year. So ¥100,000 in ¥2017 money will only be worth ¥70,000 in 2050 money. Is my math correct here?

So if, for example, I calculate that I need ¥100,000 a month to survive in 2050, I will actually need to save around ¥143,000 a month (¥143,000 - 30% = approx. ¥100,000). Is my math correct here?

Alternatively, is there a savings plan that is guaranteed to at least match inflation?

It's like my current 35-year-old self wants to send money directly to my retired 65-year-old self, but there is a charge to send money into the future (inflation). What is the best way to send this money while incurring the smallest charge? Is there a way to send the money and actually make a profit on the transfer?

[RetireJapan]

That is a wonderful question.

I'm not sure what the answer is.

One thing to keep in mind is that the official rate of inflation might not be a good way to look at cost of living. It includes everything that the government assumes a typical household buys, including TVs (price drop) as well as food (price increase). If you don't buy TVs then your personal rate of inflation might be higher than the official rate.

Generally speaking the stock market and rents tend to stay ahead of inflation. Bonds don't and cash doesn't.

So one thing you could do is to make sure you have stocks and rental property in your portfolio.

[Jamo]

is there a savings plan that is guaranteed to at least match inflation?

Well, nothing is guaranteed, but historically stocks and property have outperformed inflation. And if we're talking about inflation of around 1%, you should be able to outperform it pretty comfortably with even the most conservative portfolio.

[Neil]

Irrelevant, except you were talking about inflation, but 2 years ago, well before I became interested in investing, we started paying into the JP Kampo scheme…which now sounds crap, in a ‘forced savings’ kind of way. It’s 10 yearly payments of about 490k. Then a wait of 5 years. Then we get back ¥5m plus inflation plus dividends/interest. Obviously no gain on the capital, though it is inflation-linked. And no idea on the divs/interest. Perhaps we’ll be lucky and they invest in stock indexes…

[RetireJapan]

Irrelevant, except you were talking about inflation, but 2 years ago, well before I became interested in investing, we started paying into the JP Kampo scheme…which now sounds crap, in a ‘forced savings’ kind of way. It’s 10 yearly payments of about 490k. Then a wait of 5 years. Then we get back ¥5m plus inflation plus dividends/interest. Obviously no gain on the capital, though it is inflation-linked. And no idea on the divs/interest. Perhaps we’ll be lucky and they invest in stock indexes…

Ouch. On the other hand, you'd be happy to have this if there is a stock market crash just before you redeem. As part of a balanced portfolio it could make sense...

[Jamo]

Irrelevant, except you were talking about inflation, but 2 years ago, well before I became interested in investing, we started paying into the JP Kampo scheme…which now sounds crap, in a ‘forced savings’ kind of way. It’s 10 yearly payments of about 490k. Then a wait of 5 years. Then we get back ¥5m plus inflation plus dividends/interest. Obviously no gain on the capital, though it is inflation-linked. And no idea on the divs/interest. Perhaps we’ll be lucky and they invest in stock indexes…

This sounds like something my wife joined before we met, although her yearly payment is only around 54,000 and she's only got a few years left to pay, so I figured she might as well finish it. But then I think we have to wait until she's 60 until it matures.

[Neil]

This sounds like something my wife joined before we met, although her yearly payment is only around 54,000 and she's only got a few years left to pay, so I figured she might as well finish it. But then I think we have to wait until she's 60 until it matures.

I'll be 65 when ours matures, so it fits in nicely with the whole retirement thing. Not that I'll retire at 65, but it will be time to take things a bit easier, at least. I looked at the penalty figures for cancelling and they are severe. So looks like, as RJ said, I'll just consider it part of our diversified portfolio, along with the various insurances, mutual funds (a whole other thread...), iDeCo, J and UK pensions. Oh, and my 100 wonderful Apple shares

Anyway, sorry to hijack the thread.

[RetireJapan]

This sounds like something my wife joined before we met, although her yearly payment is only around 54,000 and she's only got a few years left to pay, so I figured she might as well finish it. But then I think we have to wait until she's 60 until it matures.

I'll be 65 when ours matures, so it fits in nicely with the whole retirement thing. Not that I'll retire at 65, but it will be time to take things a bit easier, at least. I looked at the penalty figures for cancelling and they are severe. So looks like, as RJ said, I'll just consider it part of our diversified portfolio, along with the various insurances, mutual funds (a whole other thread...), iDeCo, J and UK pensions. Oh, and my 100 wonderful Apple shares

Anyway, sorry to hijack the thread.

I think the Apple shares make up for the Kampo thing

[captainspoke]

I'll be 99 in 2050.

Or dead before that.

[prn]

Hi everyone, thanks for your replies.
I guess at the most basic level, I just want to know the answer to the following question:

How much do I have to save per month for the next 30 years in order to have an income of 200,000 a month in 2050 money?
Assuming I live to the average age of 85 and retire at 65.

Again, very hard to predict precisely, but rough estimates would be welcome.