Need advice for a friend (iDeCo vs. tsumitate-NISA)

[Tkydon]

I think she should do both, AND Insurance.

Insurance - She should consult with a Insurance Specialist regarding Term Life Insurance, and Long Term Disability Insurance to protect herself and her kids if she was to become disabled or die, as she is only in her early 40s and her kids will probably be dependent on her for at least the next 5-10 years.

iDECO is for after Retirement and is Tax Deductable = payed with Pre-Tax Income on the way in, but taxable on the way out when received in retirement. She will get a Tax Refund at the end of the year through Nenmatsu Chosei or Kakutei Shinkoku for iDECO contributions.
But, it is not available if she needed money between now and retirement...
She will probably need some money for her teenage sons, so should probably not lock it all up in iDECO...

NISA / T-NISA can be accessed before retirement.
Contributions are paid with Post Tax Income, so taxed on the way in, but Tax Free on the way out.
The money can be taken in 5 years, 10 years... or any time really with some penalties.
She will probably need some money for her teenage sons...

If, say, she is investing Y20,000 per month into the Mutual Funds and can spare an additional Y10,000 to Y20,000, then (if she can) she should allocate
some to Insurance protection
Maybe 40% to iDECO
and the rest, maybe 40%, to Tsumitate NISA

iDECO - She would probably be eligible to contribute up to a max of Y23,000 per month - She does not have to use the max...
She may be eligible to contribute a max of Y68,000 per month or Y0 depending on her situation with other pension contributions.
She will need to confirm with the National Pension people and adjust as appropriate.

T-NISA - She would be eligible to contribute a max of Y400,000 per year, or Y33,333 per month - She does not have to use the max...
She would have to make monthly contributions to get the money into the T-NISA
She would also be able to use Bonus contributions for one-time injections if she has any unused allowance to the max of Y400,000 per year.
She could use this to move some money from the Mutual Funds to the T-NISA...
or
NISA - She would be eligible to contribute a max of Y1,200,000 per year, or Y100,000 per month
She can pay money into NISA at any time, up to the last day of the year, up to the max of Y1,200,000 per year.

We would need more information about the Mutual Funds she is holding.
Which Mutual Funds?
Are they held in a Tokutei Account or a regular Account?
How much is she putting in to the Mutual Funds every month?
What are her current holdings?

Just because the fees may be higher, may not mean that she did not/will not make a good return on the investment...
Some Japanese Mutual Funds made similar gains to Global Mutual Funds through the Bull Market 2009-2021...
The fact that she was making the investment was much better than most Japanese, who don't make any investment at all...

If she is grossing Y400,000 per month, after taxes she probably takes home around Y300,000 per month
She should probably maintain a cash balance of about 6 x Y300,000 = about Y1.8M for her emergency fund.
Some would say she can use Credit Cards for her Emergency Fund and invest the cash. This depends on her risk tolerance and her Credit Cards.

[Roger Van Zant]

I think she should do both, AND Insurance.

Insurance - She should consult with a Insurance Specialist regarding Term Life Insurance, and Long Term Disability Insurance to protect herself and her kids if she was to become disabled or die, as she is only in her early 40s and her kids will probably be dependent on her for at least the next 5-10 years.

iDECO is for after Retirement and is Tax Deductable = payed with Pre-Tax Income on the way in, but taxable on the way out when received in retirement. She will get a Tax Refund at the end of the year through Nenmatsu Chosei or Kakutei Shinkoku for iDECO contributions.
But, it is not available if she needed money between now and retirement...
She will probably need some money for her teenage sons, so should probably not lock it all up in iDECO...

NISA / T-NISA can be accessed before retirement.
Contributions are paid with Post Tax Income, so taxed on the way in, but Tax Free on the way out.
The money can be taken in 5 years, 10 years... or any time really with some penalties.
She will probably need some money for her teenage sons...

If, say, she is investing Y20,000 per month into the Mutual Funds and can spare an additional Y10,000 to Y20,000, then (if she can) she should allocate
some to Insurance protection
Maybe 40% to iDECO
and the rest, maybe 40%, to Tsumitate NISA

iDECO - She would probably be eligible to contribute up to a max of Y23,000 per month - She does not have to use the max...
She may be eligible to contribute a max of Y68,000 per month or Y0 depending on her situation with other pension contributions.
She will need to confirm with the National Pension people and adjust as appropriate.

T-NISA - She would be eligible to contribute a max of Y400,000 per year, or Y33,333 per month - She does not have to use the max...
She would have to make monthly contributions to get the money into the T-NISA
She would also be able to use Bonus contributions for one-time injections if she has any unused allowance to the max of Y400,000 per year.
She could use this to move some money from the Mutual Funds to the T-NISA...
or
NISA - She would be eligible to contribute a max of Y1,200,000 per year, or Y100,000 per month
She can pay money into NISA at any time, up to the last day of the year, up to the max of Y1,200,000 per year.

We would need more information about the Mutual Funds she is holding.
Which Mutual Funds?
Are they held in a Tokutei Account or a regular Account?
How much is she putting in to the Mutual Funds every month?
What are her current holdings?

Just because the fees may be higher, may not mean that she did not/will not make a good return on the investment...
Some Japanese Mutual Funds made similar gains to Global Mutual Funds through the Bull Market 2009-2021...
The fact that she was making the investment was much better than most Japanese, who don't make any investment at all...

If she is grossing Y400,000 per month, after taxes she probably takes home around Y300,000 per month
She should probably maintain a cash balance of about 6 x Y300,000 = about Y1.8M for her emergency fund.
Some would say she can use Credit Cards for her Emergency Fund and invest the cash. This depends on her risk tolerance and her Credit Cards.

Thank you. Very useful.
She already has life insurance.
I will check the details of her current mutual fund with her. She only puts in 10,000 yen per month.

[Roger Van Zant]

One can choose to do iDeco or chose to opt into the full pension scheme.

Not sure what you mean here. If someone is self-employed, their only option is to pay kokumin nenkin and then use one of the supplementary schemes (like iDeCo or kokumin nenkin kikin).

The only way to get kosei nenkin is to incorporate or work for an employer.

What is kokumin nenkin kikin? Is this just for self-employed people who want to increase their final pension? Or can anyone join this?

[RetireJapan]

What is kokumin nenkin kikin? Is this just for self-employed people who want to increase their final pension? Or can anyone join this?

It's basically a supplementary pension scheme that uses the same allowance as iDeCo. Blog post coming soon. Only available to kokumin nenkin payers.

For most people iDeCo will be better, but more conservative people or US citizens might want to check out kokumin nenkin kikin.

[Haystack]

What is kokumin nenkin kikin? Is this just for self-employed people who want to increase their final pension? Or can anyone join this?

It's basically a supplementary pension scheme that uses the same allowance as iDeCo. Blog post coming soon. Only available to kokumin nenkin payers.

For most people iDeCo will be better, but more conservative people or US citizens might want to check out kokumin nenkin kikin.

Forgive me, I forgot this scheme was materially different.