Simple Q&A - iDeCo

[beanhead]

3. Can I use these fees to lower my taxes?

4. What's the probably of these fees going up and by how much?

3. Tax reduction on the fees for a tax-advantaged account?
Nice try, but...er...no

4. Over a long period of time, yes they will probably increase.
But who knows?

Other questions, I am not sure.
It does seem that you are focusing a large amount of energy on a monthly fee of less than $1.50. It is less than the cost of a cup of coffee or a soft drink at most places.

[TokyoBoglehead]

171 Yen is not too trivial, about 0.7% of 23,000 Yen. So every time putting money in, one has to pay the equivalent 7 years worth of index fund management fee (assuming 0.1% fee).
According to Rakuten site, if I understand correctly, if not paying in, the monthly fee is 66 Yen per month, as the pension fund fee is not charged. https://dc.rakuten-sec.co.jp/service/commission/

It's trivial for medium - long term investments, as the tax free capital gains and tax reduction benefits are hugely advantageous.

However the fees should be scaled imo.

I pay in 68,000 monthly. I probably should pay more fees than someone who puts in 5000 yen.

[RetireJapan]

171 Yen is not too trivial, about 0.7% of 23,000 Yen. So every time putting money in, one has to pay the equivalent 7 years worth of index fund management fee (assuming 0.1% fee).
According to Rakuten site, if I understand correctly, if not paying in, the monthly fee is 66 Yen per month, as the pension fund fee is not charged. https://dc.rakuten-sec.co.jp/service/commission/

Ah, but the fee is a flat fee. So it is 0.7% of 23,000 yen, and 0.35% of 46,000 yen, and 0.175% of 69,000 yen, and....

quickly becomes less than a rounding error. I have over a million yen in my iDeCo account (from investing 12,000 yen a month as a kyosai member) so 171 yen a month does not bother me at all

[beanhead]

It's trivial for medium - long term investments, as the tax free capital gains and tax reduction benefits are hugely advantageous.

Yes. This.

[Wilbur]

3. Tax reduction on the fees for a tax-advantaged account?
Nice try, but...er...no

4. Over a long period of time, yes they will probably increase.
But who knows?

Other questions, I am not sure.
It does seem that you are focusing a large amount of energy on a monthly fee of less than $1.50. It is less than the cost of a cup of coffee or a soft drink at most places.

Haha, sounds like your on my wife's side. She is saying the same thing to me. In my defense, I just want to know everything about the fees. When I was in my twenties I bought mutual funds in Canada and the management fees were/still are 2%. The funds are a balanced fund, knowing what I know now, I should have invested in an index fund and could have made more money for me and less for the Management company. But doing what I did wasn't so bad because I still averaged 4.6% (including fees) return over 20 years.

Hopefully I can do at least the same with my future IDeCo.

171 Yen is not too trivial, about 0.7% of 23,000 Yen. So every time putting money in, one has to pay the equivalent 7 years worth of index fund management fee (assuming 0.1% fee).
According to Rakuten site, if I understand correctly, if not paying in, the monthly fee is 66 Yen per month, as the pension fund fee is not charged. https://dc.rakuten-sec.co.jp/service/commission/

Thanks for the link, I'm glad I could learn about the 440yen per withdrawal fee. When withdrawing at retirement might be a good plan to do it yearly not monthly.

171 Yen is not too trivial, about 0.7% of 23,000 Yen. So every time putting money in, one has to pay the equivalent 7 years worth of index fund management fee (assuming 0.1% fee).
According to Rakuten site, if I understand correctly, if not paying in, the monthly fee is 66 Yen per month, as the pension fund fee is not charged. https://dc.rakuten-sec.co.jp/service/commission/

It's trivial for medium - long term investments, as the tax free capital gains and tax reduction benefits are hugely advantageous.

However the fees should be scaled imo.

I pay in 68,000 monthly. I probably should pay more fees than someone who puts in 5000 yen.

Let's not give the government any ideas.

171 Yen is not too trivial, about 0.7% of 23,000 Yen. So every time putting money in, one has to pay the equivalent 7 years worth of index fund management fee (assuming 0.1% fee).
According to Rakuten site, if I understand correctly, if not paying in, the monthly fee is 66 Yen per month, as the pension fund fee is not charged. https://dc.rakuten-sec.co.jp/service/commission/

Ah, but the fee is a flat fee. So it is 0.7% of 23,000 yen, and 0.35% of 46,000 yen, and 0.175% of 69,000 yen, and....

quickly becomes less than a rounding error. I have over a million yen in my iDeCo account (from investing 12,000 yen a month as a kyosai member) so 171 yen a month does not bother me at all

Yeah, that does make it pretty insignificant.

171 Yen is not too trivial, about 0.7% of 23,000 Yen. So every time putting money in, one has to pay the equivalent 7 years worth of index fund management fee (assuming 0.1% fee).
According to Rakuten site, if I understand correctly, if not paying in, the monthly fee is 66 Yen per month, as the pension fund fee is not charged. https://dc.rakuten-sec.co.jp/service/commission/

Ah, but the fee is a flat fee. So it is 0.7% of 23,000 yen, and 0.35% of 46,000 yen, and 0.175% of 69,000 yen, and....

quickly becomes less than a rounding error. I have over a million yen in my iDeCo account (from investing 12,000 yen a month as a kyosai member) so 171 yen a month does not bother me at all

For 12k, every time you pay in, you pay 1.4% in fees about 14k over time for the one million.
At 3% annual return, you basically start losing half a year of returns every time you pay in 12k. That does impact the compounded yield.
It’s still beneficial, but again, in terms of fees it’s pretty high. In comparison it is 14x the annual fee of the cheapest funds.

Good point.

It's trivial for medium - long term investments, as the tax free capital gains and tax reduction benefits are hugely advantageous.

Yes. This.

Yeah, and this also. I'm not going to not do IDeCo because of this fee. I'm surprised how much cheaper fees of mutual funds are in Japan and was wondering what is the catch. Now I feel better informed about it. Thanks everyone.

[beanhead]

Yeah, and this also. I'm not going to not do IDeCo because of this fee. I'm surprised how much cheaper fees of mutual funds are in Japan and was wondering what is the catch. Now I feel better informed about it. Thanks everyone.

No catch. As you probably realized, iDeCo also reduces your taxable income as well. It is only a little for me as I pay the "salaryman" rate of 23,000 per month, but every little helps.
This tax reduction is the other reason why I, and many others, don't fret about the 171yen per month.
If you plan to be here long-term, it seems to be a no-brainer for me.
For this who are considering leaving, NISA first is probably a better strategy.

[Tkydon]

Everyone needs to be paid...

The iDECO provider gets paid by the 171 yen monthly admin fee.

The Salesman who sells the Mutual Fund gets paid by the Load (Upfront One-Time Entry Fee)

The Mutual Fund Manager gets paid by the Fund Management Fees.


Mutual Funds split up into:

Load and No-Load Funds - Those that pay a commission to the Salesman and take a bite out of the money on the way in, and those that don't... Guess which ones the Salesman is going to recommend...

Managed and Unmanaged Funds - Those that employ Fund Managers to try to beat the Market and charge a High Management Fee, and Unmanaged Index Funds, for which a Skilled Fund Manager is not necessary as the Fund is just structured the same as the Index to which it is linked, and which charge a very low Management Fee.

In theory, you should get better returns on Managed Funds, which should justify the higher Management Fees...

In practice, very few Managed Funds consistently beat the market, so Unmanaged Index Funds generally out-perform due in part to their lower Management Fees not syphoning off a big chunk of the profits...

Hence the recommendation than No-Load Index Funds are the way to go for maximum long-term gain... (not 'No-Road'...)

On top of that, there are Domestic Funds (for Japan, Japanese Bond and Equity Funds that invest Yen in Yen Denominated Assets - No Foreign Exchange Risk) (for the US, US Bond and Equity Funds that invest USD in USD Denominated Assets - No Foreign Exchange Risk), and Overseas / International / Global Funds.

Overseas / International / Global Funds may be denominated in another currency (USD, AUD, GBP, EUR, etc.), or in Local Currency (For Japan JPY).
Either, you convert the cash to Foreign Currency before you put the money in, or they convert the funds to Foreign Currrency before buying the overseas assets. (They usually get a better conversion rate than we do...)
And, they convert the funds back to Local Currrency (JPY) after selling the overseas assets, before they pay the money out to you, or you convert the cash after you take the money out and receive foreign currency. (They usually get a better conversion rate than we do...)

Overseas / International / Global Funds may be Hedged or Un-Hedged.
In Un-Hedged Funds, you are naked - openly exposed to the Foreign Exchange Risk (Gain or Loss) when Exchange Rates change.
In Hedged Funds, the Fund Manager (attempts to) Hedge(s) out all or most of the Foreign Exchange Risk (Gain or Loss) when Exchange Rates change, leaving only the gain or loss of the underlying assets, such that the value in Domestic Currency (in Japan's case, JPY) moves in lock-step with the price fluctuation of the underlying asset in its denominated currency (say USD).

There may be times when you do not want to be hedged, and want to take full advantage of a change in Exchange Rates, when you local currency is weakening, and there may be times when you do want to be hedged, and want to protect yourself against Exchange Rate Risk, when you local currency is strengthening.

[Wilbur]

No catch. As you probably realized, iDeCo also reduces your taxable income as well. It is only a little for me as I pay the "salaryman" rate of 23,000 per month, but every little helps.
This tax reduction is the other reason why I, and many others, don't fret about the 171yen per month.
If you plan to be here long-term, it seems to be a no-brainer for me.
For this who are considering leaving, NISA first is probably a better strategy.

Definitely here for long-term. So will do IDeCo and maybe some NISA.

Everyone needs to be paid...


Mutual Funds split up into:

Load and No-Load Funds - Those that pay a commission to the Salesman and take a bite out of the money on the way in, and those that don't... Guess which ones the Salesman is going to recommend.
Hence the recommendation than No-Load Index Funds are the way to go for maximum long-term gain... (not 'No-Road'...)

In Hedged Funds, the Fund Manager (attempts to) Hedge(s) out all or most of the Foreign Exchange Risk (Gain or Loss) when Exchange Rates change, leaving only the gain or loss of the underlying assets, such that the value in Domestic Currency (in Japan's case, JPY) moves in lock-step with the price fluctuation of the underlying asset in its denominated currency (say USD).

There may be times when you do not want to be hedged, and want to take full advantage of a change in Exchange Rates, when you local currency is weakening, and there may be times when you do want to be hedged, and want to protect yourself against Exchange Rate Risk, when you local currency is strengthening.

Thanks for the detailed reply. Will a No-load fund always have "No-load" in the fund name? For example, in this link, Tawara No-load Whole World is the only No-load fund.

If the eMaxis Slim All Country is loaded where do I see this loaded fee? I get a Japanese pdf with the fund fees but my Japanese reading ability is pretty weak.

As for Hedged, will this always be in the fund name? So as in the link, none of the funds are hedged? Any recommendations for reading about the forecast for the yen/Us dollar?

[Tkydon]

Thanks for the detailed reply. Will a No-load fund always have "No-load" in the fund name? For example, in this link, Tawara No-load Whole World is the only No-load fund.

No, you would have to read the description or the fee structure.

If the eMaxis Slim All Country is loaded where do I see this loaded fee? I get a Japanese pdf with the fund fees but my Japanese reading ability is pretty weak.

eMaxis Slim All Country is a No-Load Fund

As for Hedged, will this always be in the fund name? So as in the link, none of the funds are hedged? Any recommendations for reading about the forecast for the yen/Us dollar?

Again, you would have to read the description.
Most funds will be Un-Hedged unless otherwise stated. You can look for words like:

Hedged:
Hあり
H有
ヘッジあり
ヘッジ有

Un-Hedged:
Hなし
H無
ヘッジなし
ヘッジ無

[Adamakin86]

I currently use Monex for my NISA account. Is it okay to use a different broker, such as Rakuten, for my iDeco? Do I need to do any special application?