Personal Finance for Residents of Japan
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Correct. Tho that may depend how IDECO-like the pension option might be.
Thanks, this confirms my thought.captainspoke wrote: ↑Sat Oct 21, 2023 7:15 amCorrect. Tho that may depend how IDECO-like the pension option might be.
The other aspect is to consider with the lump sum is the returns you might make on it, such as 5%/yr, perhaps a little more. (minus any taxes on that, if in a taxable account)
At 60 you may have the option to continue working, eg some part time hours or contracted. You then may not need the pension option.
This of course depends on how much you would get over the 10 years vs the lump sum but my suspicion is that the pension option does not result in much of an increase because those annuity-like calculations are based on risk-free interest rates and interest rates are exceptionally low in Japan. The tax treatment of the lump sum in Japan is also amazing, especially in comparison to the higher tax brackets here in Japan.I can decide to take either the lump-sum taishoku payment or have it put in a pension scheme that pays out over 10 years.
I don't know yet what the pension option is going to look like, but assume that the cumulative gross payment (over 10 years) will be higher than the lump-sum. However, I don't expect much here. The issue I assume to exist is that with the lump-sum you get this special tax treatment, indicated in this thread, but with the pension option, I think this cannot exist. Of course, payout spread over 10 years probably leads to a lower annual tax amount, but most likely not as low as with the special tax treatment of the lump-sum payment. Any thoughts on this, from a tax point of view?
Take the lump sum at very low tax and funnel it in to NISA as quickly as possible so all future gains are completely Tax Free. Invest in Low Cost Global Equity Fund such as eMaxisSlim All World All Country Equity FundTokyoWart wrote: ↑Sun Oct 22, 2023 1:14 pmThis of course depends on how much you would get over the 10 years vs the lump sum but my suspicion is that the pension option does not result in much of an increase because those annuity-like calculations are based on risk-free interest rates and interest rates are exceptionally low in Japan. The tax treatment of the lump sum in Japan is also amazing, especially in comparison to the higher tax brackets here in Japan.I can decide to take either the lump-sum taishoku payment or have it put in a pension scheme that pays out over 10 years.
I don't know yet what the pension option is going to look like, but assume that the cumulative gross payment (over 10 years) will be higher than the lump-sum. However, I don't expect much here. The issue I assume to exist is that with the lump-sum you get this special tax treatment, indicated in this thread, but with the pension option, I think this cannot exist. Of course, payout spread over 10 years probably leads to a lower annual tax amount, but most likely not as low as with the special tax treatment of the lump-sum payment. Any thoughts on this, from a tax point of view?