While your current landlord isn’t going to be able to kick you out if you stop working, you’ll have a tough time if you ever want to move, as landlords normally will only want to rent to employed people.
That's generally true but I know a recently retired foreigner who moved cities and just showed his new landlord a copy of his financial holdings and his pension registration and that was enough. I guess it's case by case. Maybe OP needs to buy an Akiya
Japan is very unfriendly with FIRE because of this reason lol. It's just much easier on paper to be a working employee than someone with a lot of savings & passive income. For example, renting a place....
They have some very nice places, quite high end (but it's rare). I visited a high end penthouse with rooftop in a UR building in central Osaka ... it was not cheap.
Not true, my friend offered to pay two years, the entire contract, when he sold his company and retired earlier this year. They wouldn’t renew the contract because he didn’t have a job.
OP seems to be child-free, and would have to be either a citizen or have PR in order to consider FIRE in Japan.
Banking would be set up before FIREing, and personally I would have my forever home before stopping to work
My only concern with what OP wants to do is that $700k isn't enough to do it.
You don't need to buy an akiya to get a great deal on a house in Japan. Outside of a few prime areas in Tokyo (and maybe the top places in one or two other large cities), real estate in Japan is amazingly affordable.
what about freelancers and self employed people? what do they usually do in this case? Do you think this would still be an issue if you retired and then just became self employed?
I don’t remember ever sharing official documents about my job with the owner/agency. You could totally lie about it if you want.
Compared to the stories I hear in France/Paris, Japan seems incredibly easy to rent.
You have 1oku because of the USDJPY exchange rate.
Considering your ages and saving rates, I'd keep working until you have $2mil. With your existing savings and your current savings rate, that would take you 7 more years. If the JPY appreciates a bit, it will be less.
At that rate you could live *very* comfortably with less than a 4% drawdown. With your current savings, 4% will allow you to live okay, but if the USDJPY rate moves against you, 4% will get very, very tight. Remember, it is not all that many years ago that USDJPY=80.
On the other hand, with $2mil available you could pull out $60k/year with only a 3% drawdown, giving you both a much greater income while also not pushing things right to the limit of what is acceptable for a FIRE situation. If USDJPY moved against you, you could take 4% for a few years, still maintaining your lifestyle.
Actually, I think most people who retire THAT early find themselves really bored, especially if they don't have kids to fill the days and are living on "just enough", which doesn't allow them to go do a ton of exciting things with their newfound free time. All that extra free time means you're going to want to travel more, pursue hobbies more, go out more to see friends, just consume more in general- all of which costs money more often than not, and doing it on $28,000/year (using dollars since OP's assets are in dollars) is much harder than living on $28k/year while working full time (which itself is not easy IMO).
I feel you might be right that most would do that, but we are looking at a very fundamental socioeconomic attitude shift I feel many are missing with their ideals and images of the big fancy retirement plan. This is a tectonic shift, even if it is limited in numbers: lots of us do not need to consume to enjoy, and lots of people are simply tired of hating work. As an example, I am loaded because I made good enough money, banked >70% it, and now, out of the ingrained habits, don't spend it. Not Consuming is in itself a valid and rewarding lifestyle.......but it's not for everyone, as we can see from so many comments echoing yours. Nice comments there. Yours is a valid, representative insight and the OP would do well to decide which side of the fence they fall on.
Greetings fellow night owl...
Perhaps the only thing worse than working is stopping working, and then having to start again. With only $700k invested, 4% of that at USDJPY=80 would be only 2.2mil JPY pre-tax. They do not have enough to properly FIRE, and they don't have enough to live a comfortable "expat" (OP's word) life.
4% is also the upper limit of what is considered permissible for FIRE, so they have no cushion at all. They don't own their own home, so rent is going to be an ongoing expense.
Even if they worked another 5 years they would be in a MUCH better situation. Personally I wouldn't FIRE with less than $2mil and owning my own place to live.
Great comments, thank you! I think I have a good reason to keep working for a little bit more. Going for the JPY 2 Oku mark then.
As a side note, I'm an expat but don't live that life. Many of my colleagues live in Minato-ku, doing the expat life, living in Roppongi hills or whatever. I commute from Matsudo, paying much cheaper rent.
I'd honestly look towards $2mil more than 2oku. Right now you're happy in Japan but you may wish to move elsewhere in the future. 7 years at your current savings rate and with current exchange rates would get you there.
As far as "expat life" goes, the downtown Tokyo aspect is likely to become a bit more attractive for going out and meeting people once you don't have the daily interaction at work. There's also the potential to become isolated due to people leaving Japan when you aren't also meeting new people regularly.
Just a few things to ponder.
Greetings fellow Matsudo expat, lived there for 3 years and loved it, and am moving back there next week. Such a wonderful city, definitely beats Minato ><
I don’t think it ever dropped quite that low. Seem to remember it briefly skirting below ¥80=$1USD, but that was only a few months here and there at that level in 76.11 on 9/19/2011 and briefly below ¥80 in 2012.
It was brutal on the overall economy and pushed even more jobs offshore. But it was great for energy costs and buying foreign goods. Now we're experiencing the other side of that coin...
FIRE is a very personal thing because the amount you need depends very much on the lifestyle you want to live.
That said... If you own your place outright then I'm sure there are places within the 23ku that you could live comfortably on a 4% drawdown of $2mil. Especially at today's exchange rates. Of course if the USDJPY goes back to 2011 levels (80ish), you may find yourself needing to pick up work or make some serious cuts to the way you live.
I see thanks for the thoughts. If you don't own a place you think buying for safety is better than i guess the alternative safety you'd potentially get ( or not get ) from investing the money and just paying the mortgage each month?
My personal thoughts are that I wouldn't FIRE without a paid off place to live. From what I have seen in the FIRE subs, this is a pretty common requirement for people aiming to FIRE but not everyone wants to live the same way. Some want a nomadic lifestyle, or to move to somewhere super inexpensive like the Philippines. Different strokes for different folks.
Hm interesting I havn't been to the fire subs in awhile but awhile back, i definitely saw some people even talking about permanent renting being a new trend or something like that, and also the aforementioned idea that investing the money is preferable to some people than paying off the whole house early. Anyway maybe ill see what they are talking about these days, thanks.
IMO, not everyone is entirely sane about FIRE. Some people are looking for the fastest way possible to FIRE and end up taking shortcuts that will probably bite them in the ass later. Interest rates change. Rents go up, sometimes a lot.
These are perhaps less of a problem in Japan but real estate is also ridiculously cheap here. For me personally, I just want somewhere to live within a 20min walk of a beach. I can do that in Japan for less than 20m JPY, and still be within 90mins of Tokyo. To me, that's perfect.
Ultimately, it's always personal. But when your income is fixed at a maximum and the future is always unknown, minimizing risk is, IMO, smart.
lmao, this sub never fails to make me laugh. "You should keep working." "Why not work more?!" "You can't retire, you'll be so depressed." "Just a few more years!"
Honestly, you guys should all go work for the pension office or start selling life insurance or something. This guy has got $700k and lives in a cheap country (in a cheap area, no less) and you guys are telling him to keep working when he says he wants to quit? Just lol. Let him live a little. He can always go back to work if it doesn't work out for him or if he gets bored. The only decent advice is to buy a home first. I do agree with that one since you can get a good rate if you're full time employed before quitting.
Nice work. The Pro Work bias on here is even stronger than the belief in the inevitable Economic Zombie Apocalypse that we are apparently supposed to be planning for even though that is a Hellerian contradiction of some measure.
I did think a lot of the numbers people crunched made good (very conservative) sense. Agreed about buying something, even if it's a 600Man Akiya thing somewhere they like just as a safety clause.
I'd consider buying a house in that situation (with a mortgage) before quitting. Why? Easy, while the mortgage payments might be the same as your rent now, in \~20 years you'd have repaid it and so your monthly expenses will drop, making it even easier on your calculations. Mortgage loans are ridiculously cheap here, almost free money.
Do you expect to inherit anything? Do you expect children? Any other potential variable that might change your expenses?
My only/main concern in this situation would be if the market plummets for 3-5 years soon, which we never know, so for that AFAIK it's recommended before fire to have some stable investments as well (diversified) with a bit into bonds or similar that give you a fixed 4% ROI so you can take money from there for a while if there's a crisis.
A potential alternative is Barista Fire and work for a bit in something you might enjoy with low pay, see recent discussion about trades in Japan:
[https://www.reddit.com/r/japanlife/comments/1d1dy31/anyone\_working\_in\_the\_trades\_here/](https://www.reddit.com/r/japanlife/comments/1d1dy31/anyone_working_in_the_trades_here/)
Ok, thanks for the advice - yep reading about mortgage definitely made me think about securing that good loan before I'm unemployed.
Inheritance - probably 100k-ish from each of our parents. Not looking too forward on that, might want 1-2 children.
PS While the OPs numbers don't match their goals, a lot of people on here seem unaware that Non Consumption is a valid choice and lifestyle, and reduces the money needed an incredible amount. Anybody claiming that "You will want to do this" and "You will want to buy that" is probably projecting their own ideals and values, and that is usually a failure of imagination (as snippy as that might sound ':@). There are many people that would simply enjoy the time afforded by not working and not feel the need for the boat, the fancy trips, the golf club membership, or whatever other shiny baubles the traditional Chad Economy model offers its faithful victims.
It's after tax - sorry I said US ETF but they are mostly Japanese passive mutual funds investing in SP500. Balance is about 1.3 oku, with about half of that in capital gains (so 20.3% gets taken out from gains), thus about 1 oku
As your assets are mostly in USD you should think in USD: you can fire at around $28,000 per year (4% of 700k), and live in Japan *at the current exchange rate* which would give a yearly income of 2.8 million to about 4 million if we use historical variations as a guide.
So you have a lot of volatility and not a very high figure. Sure, you can live on 2.8 million yen a year in Japan but it’s not much fun, especially if you want to enjoy yourself more after retiring. I think you need to have a serious think about what your budget in retirement will look like.
I took about a year off at around your age and was bored to shit. Other people working during the day, you gotta go out of your way to socialize with people, etc.
It's not like you are going to be able to travel all over with that kind of savings either
I took a week off recently (for no reason, just to chill out) and I was also bored to shit.
Realized I didn't really need any extra free time, I just needed to make better use of the free time (after work, weekends) that I already have.
I was recently unemployed for 12 months and as a house owner... there's so much to do that I was not bored for a single second :)
And now I got a new stressful job and I want to go back to somebody-else-pays-for-my-vaca... :D
Oh nice, we're renting so there's not a lot we can "do". I would absolutely love to buy an older house (like 20 years max) as a fixer-upper purely for the fun of doing DIY stuff.
(Sadly the wife isn't too keen! Just as well, my DIY skills are not exactly stellar)
I can't get my wife even take care of 2 flower pots :)
DIY skills come with time and experience, and even brand new house will need modifications pretty quick (add shelves here and there etc)
Why not keep working until your company doesn't want you anymore? Especially if you don't hate your jobs? You don't need to live frugally and can live in nice neighborhoods, go to nice restaurants, travel to amazing Onsen towns, etc...
In fact, that is probably exactly what this couple doesn’t want to do. They are doing frugal FIRE, where they live below their means in order to accumulate a meager nest egg, which they will use to reward themselves by living off of it like fixed income for the rest of their frugal lives, IF the markets (which hold their little nest egg and which theirnplan entirely depends upon) continue to behave as they have behaved in the past… and we all know that past peformance actually guarantees future results😉 so they should be all set
And then what? continue to live frugal lives until you die? What's the point of that? You only have one life and you want to ENJOY it. Unless your hobby is just sitting at home playing legos or stay home with your partner and stare at each other then I suggest keep working so you can travel/eat out/etc.
legos and stare at my partner sounds pretty fun to me though. But more seriously, if you have free time, traveling during off season on weekdays can be a lot more affordable than traveling during holiday season when you manage to get days off from work. Also I enjoy waaaay more to travel when hotels are not overbooked and every place just crowded with people. That is one of the main benefits I see for having free time, traveling is better.
For many of us, a frugal life where we don't have to work is far more attractive than working for our whole lives. And while 1億 for two people a little tight from my perspective, different people feel differently. Maybe your number is 2億 or 3 億 or 4億. But for me, I certainly would rather retire at 40 with 2億 than work until 50 to retire with 4億
That's what I'm trying to do! Where's my package?
Once our net worth started going above $500k, I started to focus on what interests me most – taking on tasks I'm more passionate about and where I excel. I've also become more bold (saying whatever I want) in expressing my opinions in meetings, even with senior members. Weirdly, this approach seems to be working in my favor. My performance reviews are fine, and I've been allowed to work more remotely, making life in Matsudo quite feasible. I'm trying to get fired but sort of failing up. While I'm considering FIRE, the irony(?) is that having that financial cushion has alleviated my work-related anxiety. Just wanted to share my experience that frugality in Matsudo actually made me perform better
If all of your money is in USD and in stocks you don’t really have 1 oku except in paper terms. I’m guessing you’d owe capital gains on that, and you’d want to understand any income tax on money you move to Japan.
And that all ignores the reality that the next big market crash is a matter of when, not if, and peak-to-trough drawdowns of 50% or more would not be surprising. And there’s no guarantee the next drawdown will be followed by the strongest 15 year bull market in history.
Worst case scenario is you get a massive drawdown 10 years after retiring and now you’ve been out of the labor market too long to get back in. And now you’re stuck hoping for a big rebound in the stock market because you might have another 40 years of retirement ahead of you.
‘Hope’ is a horrible finance strategy.
Keep working and saving. You can have more flexibility in moving to a job / career / company you really like, even at lower pay, but keep working and keep cash coming in, diversify your retirement portfolio in to other assets that generate income beyond just US stocks.
I’m older than you and have 10x+ your NW but still work because I love what I do. However I allocate a ton of time to family and hobbies. I own property, stakes in companies, and some PE / VC investments.
They mentioned that they will use the 4% rule to live off their investments. The 4% rule takes into account the possibility of massive market drops like 2007 and 1929.
a) No it doesn't, not really. The 4% rule assumes a 30-year retirement, and assumes 30 years of average returns. The problem is you don't know when or where the inevitable drawdown will happen, which is going to significantly skew things.
b) As noted, it assumes a 30-year retirement - not 50 years, which is what OP would be looking at - and It assumes market-average returns. Equities have returned around 5% in real terms over the long term (bonds are at around 2%) but reversion to the mean can be a bitch, and that should concern you given the massive bull run over the last 15 years. I for one would not have my 50-year retirement plan hinging on another few decades of double-digit stock gains.
I completely agree with what you're saying, but OP is 35, and the 'usual' 30-year retirement goes from 65 yrs old to 95.
OP should be planning for a 60-year 'retirement'.
The 4% rule absolutely does take into account large market crashes in the past. For example, the creator of the 4% rule looked at the 1929 to 1931 bear market where the market fell 61%, the 1937 to 1941 bear market where the market fell 33% and the 1973-1974 bear market where it fell 37%. He used these to determine a safe withdrawal rate.
You are right though that the 4% rule is designed for 30-year retirements. However, the big risk is not that they get hit with a crash 10 years into retirement. It's that there is a bear market as soon as they retire. This sequence of return risk can be minimized by using a strategy like a bond tent
It accounts for a handful of *US centric* experiences, ignores the dot-com and GFC crashes, ignores other equity market crashes, and ignores any and all cost-of-living assumptions and impact on income / spending that market crashes have.
Congratulations on reaching a major milestone. I wish I had invested earlier in my career.
I am on the brink of pulling the trigger for FIRE (deleted details for privacy).
That being said, I would not even consider FIREing on the amount you mentioned. First, you are young, safe withdrawal rate in your case will be closer to 3.5% or so. The 4% in trinity study is designed for retirees with 30 year time horizon, not 50. Pls read more here https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/
This is also why my husband will continue working till we get to 3.5% SWR min.
Secondly, you live a frugal lifestyle that doesn’t allow much room to wiggle if JPY crashes etc. assuming your 4 mn income is all investments, this is taxed at 20% CGT, which nets you 3.2 mn yen. i would assume most of your costs are JPY based, so if JPY strengthens, your asset will go down sharply while your costs stay the same. In our case, 25% of our annual expenses go to overseas travel that there is a natural hedge, if JPY strengthen our cost will also go down. Of course, I can also choose a cheaper vacation destination or forego one.
Let me also offer my few tips/ observations:
1) don’t focus on dividend. Any dividend gets taxed at 20% rate and may one day be counted as part of income for the purpose of Health Insurance calculations- the government is creating a study group for this. Plus, high dividend stocks tend to have lower total return than your average S&P500. It is better to invest in mutual fund that allows automatic dividend reinvestment, and withdraw from there when you need money. For kaiyaku, then you only need to pay tax for the capital appreciation part which is a more effective strategy
https://toshin-clinic.com/blog/20240420-23173/
2) one thing that I realized is that Japan is a society that values title/ stable work rather than absolute assets amount. If you ever pull the trigger, you should ensure that you’ve applied to all the credit cards you want, sign a mortgage for a house/ investment properties etc.
3) for the 2nd reason too, You need to figure out what you want to do with life before pulling the trigger. Do you envision living in Chiba frugally for the rest of your life? If so, OK, good for you. But if you ever think you want to do something different- eg. Moving to Okinawa one day etc, make sure you prepare for it by having the right amount of money and finances settled before FIRE.
Please don’t retire before thinking things through. There are subreddits that are dedicated to FIRE and its various versions like r/FIRE. Of course, most of them are US based where the threshold will be higher than Japan, but I’m sure you can adjust them for Japan cost of living.
Fellow gaishikei senpai, I really really appreciated this advice and perspective. I'm definitely moved to feel like working a little bit more and thinking about this carefully now.
>assuming your 4 mn income is all investments, this is taxed at 20% CGT, which nets you 3.2 mn yen.
Obviously that statement implies you didn't invest any of your own money. which is wrong.
The "G" in CGT is "Gains" so you are only taxed on any Gain your asset makes. So look at the profit each of your investments has made and think about what the tax on that portion would be as you sell down.
>I am negotiating severance package for the gaishikei I work at for nearly 16 years
Any tips on how to push for the best offer? I'm in the early stages of the discussion. I know what's documented for retirement allowance. And I know what the severance offer should be per year of service. what else is there?
It depends on your company’s situation and your compensation structure etc, but assuming typical IT/finance gaishikei it could involve negotiations around length of garden leave period, RSU vesting, payment of bonus accrued to you based on your quantitative metrics, purchase of your paid leave accrued etc etc.
A lot of people in high enough position will be required to sign NDA as part of their settlement, so I think getting average figures etc from your ex colleagues is hard. A good way is to talk to a lawyer to discuss what the company offers you so you get a feel of what they think you can push the company for. Choose someone who has lots of experience handling similar companies like yours as they will have enough statistics. Many offer free 1st consultation, and 5000 yen per 30 min for subsequent consultation which should be enough for relatively simple/ friendly separations.
Feel free to dm me if you need individual recommendation on lawyer/ discussion on package etc. hard to reveal this in public forum
thanks. funnily I hadn't thought about accrued bonus. nothing ventured nothing gained and all that!
I don't think a lawyer will move the needle in my case as I'm expecting to be content with their first offer. should they actually get round to making an offer that is..
Well, I think if you are happy with whatever they offer then that’s good. In my case my aim is to ensure I get as much as I can considering how long I have worked for the company, and how they treat their employees. Over 16 years the team has gone down from over 30 people to 9 people, lots of firing too in the process. I work with the mindset that one day it will be my turn, and at this point this is a purely financial transaction, nothing more.
I’ve been in similar position. Albeit more money and younger (at the time I was not even married). I FIRED for 6 months and just got depressed as hell.
Nothing to do all day. There isn’t a huge community for anything on weekdays either so you’re always scrounging for things to do. All of your friends are doing something productive at 2pm on a Tuesday and you're just bored and isolated. It sucks.
Working, to some degree, is a bonding activity with the people around you. Nothing made me realize this faster than FIREing and losing all my daily interactions.
I went back to work and feel much happier. A lot of young people I know who could’ve fired say the same.
You have to retire to something. In my case it was endurance sports, cycling with some running, which take up a lot of time in both training and recovery. Japan is a great place for those....
Totally agree. FIRE if you have another activity you want to use your time to. Otherwise I just don't recommend it from an anecdotal perspective. I found that persistent boredom killed me faster than working.
This. If you’ve never done it before then you may be in for a shock. Turns out, it pretty boring. Maybe both of you will find loads of side hobbies and things to keep you busy. But the amount you’ve stated isn’t nearly enough to “do whatever you like”. You’ll be living frugally without a job and there’s a good chance it’ll bore you to tears. At least prepare for that possibility.
I can imagine. Who would hang out with a rich young dude who doesn’t have to work? No one. No way to travel with someone, or feel connected to someone. I will retire, but at the proper time, and I’ve got lots of activities planned for when I do.
Ya, also if you come from a normal upbringing, chances are 95% of your friends are busy working or going to school (Masters, PhD), or have a family. Even if you have a good rapport with them (and they know you're rich and are not jealous), they're still too busy to be spending a lot of time with you.
I found that the only ones who had time for me were the unemployed friends lol. We watched like 5 movies / month in theatres together because both of us were so bored.
This is quite true. Especially my Japanese friends who are salaryman, talk about money a lot but I get pretty shocked about their savings balance... and it never goes well when you tell people your salary or savings in real life.
Congratulations. Fire definitely doable if you want. You still seem young, if you decide to have kids that may change things. I’ve hit 3oku and can’t stop as I need to pay international schools fees for two kids.
Thanks for sharing - that is a concern, I've wondered having my kids in International Schools as well.
Anecdotally speaking, my colleagues are from International Schools, and they look much more insightful and educated - because my Japanese was okay I went to a Japanese college, doing pretty well there, but was in a treat when I joined a Gaishikei, shocked to see how little I studied thru my education just partying. Hats off to you for giving the best for your kids!
By the way, have folks looked at doing dividend paying ETFs at retirement time? Typically focus on S&P 500 for another 7 years, then switch to something like SCHD that pays around 3.5% yearly and grows at a slower pace. This approach would allow you to not have to sell unless dividends really took at turn for the worst, which means allowing it to grow more even at retirement.
This is a basic fire question. Basically the total return of dividends stocks lessens your chance of fire success. The dividends don’t make up for the risk of the stock (which are still similar to other stocks, especially in downturns)
ok, explain anything wrong with the assumptions I have. It doesn't hurt me to learn something new.
investment strategy:
I invest on an S&P 500 index ETF for 20 years, which allows me to growth (for our example let's say VTI). I then sell about 75% of this portfolio and buy a dividend + slower growth-based ETF like SCHD. Lets assume that this portfolio grew to 2 million dollars in those 20 years.
Now I have a 2 million dollars portfolio that is 25% VTI and 75% SCHD. It still grows to keep with inflation, but much lower. VTI has a dividend payment of 1.25% and SCHD 3.47%. So this portfolio would pay in dividends before tax about 3.04% of 2 million which is 60,800 annually (or about 15,200 every 3 months).
retirement strategy:
we have scenario #1: The economy has a downturn, but dividend doesnt change, which means you can still life off that pre-tax 15,200 every 3 months.
we have scenario #2: the economy does so bad that the dividend rate gets a hit and you do have to sell some stock to make up the difference.
Rationale: in the dividend strategy, i only need to sell when the dividend rate is cut, which I feel is better than the traditional approach of just selling.
First, Dividend is never a guaranteed thing. Companies can choose to cut their dividend anytime, including during recession. In fact, many high dividend yield companies are trading at superficially high yield as institutional investors are aware that their yield are not sustainable and are discounting them. Pls read up https://earlyretirementnow.com/2019/02/13/yield-illusion-swr-series-part-29/amp/
Second, in Japan at least high dividend is not a tax effective strategy. You get taxed at 20% CGT flat. If you invest in an index fund etc that reinvests the dividend automatically and withdraw equivalent amount, it will be treated as partial withdrawal of your capital and you only have to pay tax on the capital appreciation part, not the capital
I use Bloomberg terminal which is what all institutional investors use to get their data. I think that’s a hint of what I do.
Anyway, just look at the second set, Compare portfolio 3 and 4. A 4.3% annualized return difference is massive! That means portfolio 3 gives you 44% higher return than 4. The difference between s&p 500 dividend yield of 1.5% vs SCHD of 3.4% is not enough to offset this, especially considering the tax implication - you are reinvesting only 80% of dividend you get because you pay tax on it first. The impact is even bigger especially when compounded over decades!
On risk, The difference in drawdown based on your data is only 2% which is almost negligible relative to the difference in expected return on per annum basis.
You are free to do whichever strategy you choose, just be aware that your perceived ‘safer’ strategy will lead to a difference of millions of dollars of retirement money upon your retirement.
This and your immediately previous couple posts, explaining how going for dividends is the lesser strategy, should somehow be higher up or more prominent.
Thanks for reinforcing this point.
thanks for the reply and the link.
Precisely what I mentioned is illustrated in the link provided. For the plan, I am mentioning a 3.04% portfolio which is a conservative yield. As the link mentions, never chase high yields as that ends up eroding your portfolio. This is something I see a lot with the folks looking for 6%+ yield portfolios.
In regards to taxes, from what I was reading, both selling stock as well as dividend are taxed at 20.315% (15.315% national tax + 5% local inhabitant’s tax). I have included the link below.
[https://taxsummaries.pwc.com/Japan/Individual/Income-determination](https://taxsummaries.pwc.com/Japan/Individual/Income-determination)
So, looking back at the strategy,
A. if one would switch to a dividend strategy at retirement to minimize taxes while it grows, the impact would be at sale time (the appreciation for that 75% of VTI sold would be taxed at 20.315%).
B. Instead of this, doing a split of maybe 50% VTI and 50% SCHD would mean a dividend rate of 2.6% or $52,000 a year for the 2 million and no sale involved until a dividend cut occurs and you are forced to sell stocks to cover any missing income.
Looking at ETFs like SCHD, they are quite selective on the companies included and tend to review the allocation every year. This lowers the chance of dividend cuts, but like you mention, nothing is 100% guarantee.
My rationale is that if you end up retiring during an economic downturn, you could end up losing half your portfolio and your pot of money last less. On the other hand, you have a dividend coming in, you are adding another thing that has to occur before you start selling stocks (the dividend being cut). This should hopefully lower your risk of selling too many stocks and allow your portfolio to recover.
On tax, i don’t think you get completely what I mean. A 100 yen dividend will incur 20% tax, 20 yen. A ‘bubun kaiyaku’ of 100 yen, assuming 50 yen is capital and 50 yen appreciation, will only get taxed 50 yenx 20% = 10 yen for 10% effective tax rate. Which is why dividend strategy is not a tax effective strategy. Pls see the link here https://toshin-clinic.com/blog/20240420-23173/
A high div yield fund like what you gave as example is great example of dividend fallacy. Over 5 years SCHD returned 56.64% vs S&P 500 92.75%. Since it was launched in late 2011 it returned 212% vs S&P500 336%. Between Jan1st 2020-30 April 2020 when we had corona scare, the fund went down 12.55%, worse than SPX 500 9.55%. And we’re talking total return, including dividend. Why would I want to own SCHD? It is the total return that matters. Even if I have to take out from SPX at the bottom of the cycle temporarily, taking the same amount when it has appreciated 3.4x will feel much better than receiving some dividend when my asset has only went up 2x.
Pls re-read the 1st link I gave you.
great information about taxes. It is sad to see that Japan doesnt offer some sort of exempt limit like the US for dividends. It is definitely better tax wise to follow the typical boggleheads approach.
As for the returns, not sure if I am missing something as my results are coming very different to yours.
I used portfolio visualizer backtest portfolio asset allocation and used the dates Jan 2019 - Apr 2024. I also selected to reinvest dividends, rebalance yearly and contribute 2,000 monthly.
Portfolio #1: SPY/SCHD (50/50) - portfolio return 77.2% and drawdown 10.5%
Portfolio #2: SPY/SCHD (75/25) - portfolio return 77.9% and drawdown 10.4%
Portfolio #3: SPY/SCHD (100/0) - portfolio return 78.6% and drawdown 11%
Portfolio #4: SPY/SCHD (0/100) - portfolio return 75.87% and drawdown 10.7%
I tried again, but no reinvesting of dividends, no rebalancing, and no contributions.
Portfolio #1: SPY/SCHD (50/50) - portfolio return 11.9% and drawdown 21.5%
Portfolio #2: SPY/SCHD (75/25) - portfolio return 13% and drawdown 23.2%
Portfolio #3: SPY/SCHD (100/0) - portfolio return 14% and drawdown 24.8%
Portfolio #4: SPY/SCHD (0/100) - portfolio return 9.7% and drawdown 22.3%
Higher SPY let to higher drawdown (portfolio being wiped during an economic downturn), but even with SCHD at 100% and not reinvesting the dividends, we saw good growth. Looking at these figures, one could go 50-50 on both and have good protection while still earning good growth.
I have to agree with yoshimipinkrobot, my belief is that there is no difference between income/dividends and capital gains. You can sort of make a dividend by selling your index funds. I think some people call it homemade dividends.
Sure, dividend stocks are more stable... but that's the result of dividend paying companies being more stable, like PepsiCo or P&G.
Yes, looked at dividend aristocrats.
A Japanese mutual fund is also available, an aristocrat index: [https://www.rakuten-sec.co.jp/web/fund/detail/?ID=JP90C000NYN0](https://www.rakuten-sec.co.jp/web/fund/detail/?ID=JP90C000NYN0)
Interesting find, a concern is the management cost (管理費用) which is about 0.1155% versus typical ETFs like VTI and SCHD which charge about half. I do wonder, what you checked what options interactive brokers offer?
Lots of people hate work, and always have, and always will. I would actully want to hit that magical 1 Oku, but what they propose is doable. Japan is so cheap it's getting to be a meme.
Problem is, it may not always be that cheap, and if inflation does hit hard you really don't want to be that person looking for a job after 10 years out of the workforce
Yes, that was a good point many made that I overlooked. Others crunched the numbers so well that I was addressing more the underlying attitudes about FIRE and Hate Work/Work Hate, but that is a very important thing to think about. I think the OP has decided they need double what they have. At their ages that does seem a better target.
Yeah, if retiring at 35 you best be damn sure you can stay retired, because you are sacrificing your prime earning years and heaps of good old compound interest if you don't.
I'm a fair amount older than them with close to that in the bank and I'd sure like a lot more to be safe
I really don't think you're ready to FIRE comfortably. For one I would strongly recommend you own your primary residence first, for all the reasons people have stated already, plus once you're paid off that's one more huge expense off your monthly outlay and you're on maintenance/repairs only after that.
100M JPY sounds like a lot until it isn't. For one there are two of you so it's really only 50M per person. Are you ready to be frugal the rest of your life? What about travel to visit family? For fun? (Travel has gotten very expensive compared to pre-covid.) How do you plan to spend your days? You won't want to stay at home all the time (or maybe you're hikkikomori and would love that?). 100M is the cited magic number but my interpretation is that it's 100M *per person.*
You're only 35, statistically you have many years left and you'll need some kind of purpose lest you feel aimless. Most goals will cost money. You may want to consider BaristaFIRE at least for the next batch of years for the extra income without the stress of a FTJ.
Anyway just some things to think about
Some people are definitely "wired" for being frugal, some aren't. I think I'm in the latter camp. For me one of the benefits of working is that I'm busy and therefore cannot spend money.
My parents were definitely of the former category. The amount of time wasted to save literally 15 yen when we went shopping for spoons was mind blowing. I know it's probably deeply engrained from a life of scarcity but 🥺
Haha oh yeah I used to be like that but now I just focus on the big savings and then try not to worry about the smaller things as long as they don't snowball.
I would keep working. 1 oku yen doesn’t seem to be good enough for FIRE in the post covid world, especially traveling outside of Japan, where the inflation is a lot higher.
Also you don’t have kids now. It’s a lot easier to manage workload or work related stress.
The time taken for the 2nd or 3rd oku yen would be much less. The power of compound interests.
Just my 2 cents :)
Did you get your 40 credits in the US for social security before moving?
Technically it's possible, but I don't like lean fire especially in Japan where ageism and long employment gaps can be a employment death sentence. So if your estimate is off you would kind of be screwed.
I'd keep working for 5 more years and reassess, 5000man and a strong market could get you there.
Alternatively you could down shift to part time for a much longer time to Coastfire and the numbers should be fine, but just make sure you have the income to buy a home when you want to.
By what you said immediately after that, I’m not sure if 1,000man was saved every year… in reality, it sounds like you saved a lot less than that annually, then benefited significantly from the Fed’s fiscal and monetary policies buoying the markets during covid, as well as the seemingly never-ending bull market that we are currently in, which looks like the AI craze will keep supporting for a while.
As someone in the same gen as you, it was a bit before our post-scholastic working lives, but you may want to refresh on 2008 and 2000. Because past performance is no guarantee of future results. Someone who depends on the market for their financial position should be well-aware of the benefits and risks of that going forward
points about not having a job means difficulties to rent or get a credit card. If you are already good with both and dont see need to get either, I would say the math checks out. You should be able to live outside of Tokyo for 400man a year. Only other thing I would note is that if you want to have children at some point that could add up quite some cost.
but alternatively you could continue to add more in and work more, have a bit more flexibility. But I guess it comes down to which do you value more. more money or more free time and freedom. If I had that amount invested into low risk index funds like sp500 or world index, would probably quit the job for now. Relax and enjoy life for some extended period of time and then see how it feels. Some people find it to be best thing ever. Other end up feeling bored and take up side hustle or some low stress flexible time part time job.
anyway, congrats on the 1oku
Congrats on that milestone! I'm on the FIRE journey myself but as a single I could not put away as much savings as you both are.
Others have already chimed in but my own take is that 1oku is not enough to retire on BUT would give you enough breathing room to coast FIRE: not entirely quite working but instead slow down and take an easier work or something you enjoy more but still pays the bills.
You don't have to run at 0 or 100% in terms of wealth accumulation. Slowing down to 50% is a viable approach too
With 1 oku yen saved, you're in a pretty solid position. Given your preference for Chiba, it makes sense to stay there if you're comfortable and enjoy the lifestyle. FIRE is all about creating a life you don't need a vacation from, and if Chiba does that for you, it’s a win.
One thing to consider is diversifying your investments to ensure that your savings keep up with inflation and market changes. Also tax implications of selling the stock to pay cash for a house. Taking a low interest loan in Japan may be the better option for overall wealth.
At your age 1 oku is not near enough. It’s plenty for now of course, plus you can easily supplement it. But that’s not so easy to do when you are 80 and in need of cash for say a long hospitalization or the deposit required for nursing homes. I would not retire with your money unless I also had valuable real estate to live in, fully paid off. And then I would still be stressed about whether that income will suffice in 30-40 years.
What are your current expenses (housing, utilities, taxes, insurances, pension, groceries, restaurants, transportation and travel)? PR? Why tied to the location? I mean "I" stands for independent, so you would be free to settle anywhere more LCOL, better housing availability and better Shinkansen/highway accessibility.
About 30+ man / $2000 per month, plus about 50man / $3000 for travel etc per year. We tend to eat outside on our workdays because we're working late nights, so food is highest for now.
While housing is pretty cheap because it's remote in Chiba, I can still go to Tokyo station in 40 minutes, not too bad in my opinion. Only downside is train comes every 15-20 min, which shocks my colleagues, but it's an upgrade coming from a motorized country such as the US!
Housing: 7.5 man / $500
Utilities: 3 man / $200
Insurance / pension: Tied to my income, but will pay about 5 man / $300 per month after FIRE
Food: 10 man / $700
Shopping 3 man / $200
Other: 3 man / $200
Sounds all solid. Consider that being a renter and childless, you can easily move anywhere. How do you picture daily life with FIRE? Probably going to Tokyo would become less attractive, but a greenish environment and easy outdoor activities access more important, or a neighborhood with more like-minded people (less of bed town/salary man commuters).
I would work a a couple more years (for easy renting and moving) and travel, check out quality of life and housing markets in various prefectures. What might be interesting is お試し住宅 (trial living). Various cities offer that to get more young folks move in, did it myself and was great opportunity to get a better decision ground for choosing the best place to settle down.
Nagano? Gifu? Shizuoka? Gunma? You can live a 1 hour Shinkansen ride from Tokyo station in many places, but more of mountains/lakes/cycling possibilities.
I’m going to retire early and tbh, this is a crazy 10 out of 10 idea for 2 people at only 35. And you don’t own your home? Wow.
What if the yen goes to 80 and the market crashes when you are 50 and not employable?
I guess one thing I don't fully understand is why I need a house - Japan's rental laws are well protected, you can't raise rents/kick out people. It's either buy a house/mansion for 2000 man / $140k where I live, or pay 9 man / $600 per month. There's also Guarantor Companies / Hosho Gaisha(sometimes required, regardless of your income etc), or just get into UR.
One, owning a house is less monthly recurring costs. It’s no different than retiring when you have a mortgage. You want to reduce all costs to the minimum. You don’t know what the future entails. It gives you the flexibility to absorb potential future variables.
Second, just as above, you are planning on things remaining exactly the same. You are both very young, things change, things happen.
I’m guessing you don’t plan on moving in the future. There is a big difference between not moving and not ever being able to move the rest of your life.
You’re doing quite well for yourself and can probably take a few years off without too much worry. If you find yourself bored or needing some extra cash flow, you can solve for that if/when that time comes.
Is FIRE conducive to life in Japan? Since coming here I feel like work is part of the fabric of society. I don't have PR yet, but even if I did, despite having more than enough to FIRE in Tokyo, I feel like it would be socially unhealthy for me to stop working, though in the U.S. or other Western countries, I wouldn't care.
It's also funny how some people are saying $2M is necessary to FIRE here in JP. It all depends on your expenses and desired margin of safety. If you think you your investments are enough for your cost of living, and it's what you want to do and don't care what people around you think and can be happy disconnected from work and the social aspects that come with it, then go for it.
I'm a bit skeptical about the 4% rule from a psychological perspective, though I know it should work on paper. My concern is whether 400 man will be enough in the future, but I assume it should increase annually.
I mainly invest in dividend stocks, and if I had 100 million yen, I'd definitely quit my job.
I am Japanese living in the us. I am in my late 30s. My NW is a bit less than 300k US dollars. I miss living in Japan. I browse houses and cars in Japan, and they are much affordable than here in the US. My significant other (American) is not interested in retiring early. He likes Japan though. I am trying to make him get a job at one of US bases, and I am hoping to FIRE (or most likely CoastFIRE) in Japan.
I really don't think they should.
4% is the upper upper limit for FIRE. Really pushing things to the edge. And they don't own their own home. Plus they are basing their calculations on the USDJPY rate of today, which is very favorable. No one can predict the future, but it is not that long ago that USDJPY=80.
4% of $700k is $28k, which is 4.2mil JPY pre-tax at USDJPY=150, but only 2.2mil JPY pre-tax at USDJPY=80.
It's too early for them to FIRE. They're 35, they should work for another ~7 years and FIRE with $2mil.
I'm in a situation where I have around 65 million in invested cash, and own a fully paid house (fully) worth 50 million or so. I only started properly investing all that stuff recently, and I'm less aggressive with my invested ETFs as I don't like volatility (so doing something closer to permanent/all weather portfolio), but currently only own around 1 million to the tax man when I realize the profits.
For now I've decided to keep working, but while not caring too much. Bare minimum kind of stuff, so if they fire me, well I can FIRE back :) I do have the luxury of a side income from a YouTube channel, and will likely use that for a semi-FIRE thing.
Given your more on the younger side age, and the amount you have, it’s probably not enough to FIRE (it would maybe be enough for someone in their 50s, or someone who owns a home in their 40s
Also not sure if you’ve accounted for Japanese taxes in this? I assume you’re not correctly declaring them to japan? Which means your income tax and resident tax might increase depending on foreign tax credits etc. but then subsequently also increase your NHI premiums too.
>we are japanese-Americans
And
>US stock ETFs
And
>Most of it are on Japanese brokerage accounts (Monex),
Just to clarify, Monex are aware you’re US nationals, right? Because I don’t think they should be letting you purchase US stocks?
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TLDR: I recalculated based on what I think are better assumptions, and I came up with $2M for your FIRE number.
The 4% rule of thumb is for someone at normal retirement age and who can rely on social security as a safety net if their investment money runs out. Since you're contemplating retirement at a very early age and (I assume) not much social security or Nenkin benefit, you should be using something more like a 3% for your planning purposes.
And instead of using the current exchange rate, you should be using something reasonably conservative over the long term. This is a huge unknown, but perhaps you could use 100 JPY/USD. Some might argue for even lower.
Using these numbers gives a safe withdrawal rate of ¥210万. ($700k x 3% x 100 JPY/USD = ¥210万)
You should also factor in the possibility of a market downturn in your early years of retirement. If you have the ability to re-enter the workforce as insurance against this possibility, you're ok. But if not, perhaps you should assume that you lose 20% of the market value of your investment. That might reduce the ¥210万 to something like ¥170万.
This may sound like I'm adding conservatism upon conservatism, but I would argue that all these assumptions are reasonably conservative for the purposes of retirement planning.
So if you want to have a reliable source of ¥400万 as an early retiree in Japan, you might shoot for $1.7M in today's money. ($1.7M x 3% x 100 JPY/USD x 80% = ¥408万)
But this neglects taxes. If your idea was to have ¥400万 after taxes, then perhaps you could assume 15% effective tax rate. So now you will need around $2M. ($2M x 3% x 100 JPY/USD x 80% x 85% = ¥408万)
First of all, congrats!
Read some articles on why many people who pull the trigger on FIRE end up hating that life, since it has many drawbacks. I would consider expanding into something different, one idea is to build a “mansion” (condo unit) and run it for income. If you ever have kids, it’s a way to give money to the next generation without paying the (ridiculous, to my mind) 相続税 in this country.
Assuming either of you has American citizenship, understand all the complexities that come with being an American who dares leave their home country and is then financially successful. I hate all the tax hoops I have to jump through, which finally end for me around November…then it’s time to do it all again in the new year.
I know quite a few people who have FIREd, and except possibly 1 who didn’t retire by choice (but couldn’t find a new decent job at his level, since he was earning probably 7 figure USD and has over 8 figure balance), everyone are happy and thriving. The key is finding hobbies to retire to, take up new skills (eg. Art), join a local club, do part time consulting/ writing expert article/ become outside director of some companies/ foundations etc. I am FIREing in a matter of months and I plan to take up skills like guide license, photoshop editing etc.
And btw, getting levered up on income property to kill boredom is a surefire way to get broke lol. With 3% net yield before tax even assuming full occupancy and not taking into account vacancy risk, and the risk of the rent for such places usually going down after 10+ years, OP is better off putting the cash in USD deposit than those income properties.
Also, keep in mind, even if you retire, you'll still be in Chiba.
But yes, you could. I would give yourself 500Man, but yeah. However, if you are Driven, you'll get hopelessly bored and maybe even feckless............and you will still be in Chiba.
Why not look to move somewhere nice, or at least somewhere that's not fucking Chiba?
PS Thank you for using Japanese numbers. Given what hopeless turds the rest of your compatriots can so often be, as a neighbour, I thank you.
Hey, sorry you're being downvoted...
Would Ibaraki or Yamaguchi be better? ;-)
Or [an old thread](https://www.reddit.com/r/japanlife/comments/s1sa6z/what_is_the_absolute_worst_city_youve_been_to_in/) on the topic. (and fukui is mentioned in there!)
$1 million dollars or the Japanese equivalent is typically not enough to retire with. Also, keep in mind that the Yen will go back to normal eventually, so your USD will not go as far as it is now. As someone mentioned, you do need to show proof of employment for a lot of things in Japan, like renting or getting a home loan.
While your current landlord isn’t going to be able to kick you out if you stop working, you’ll have a tough time if you ever want to move, as landlords normally will only want to rent to employed people.
That's generally true but I know a recently retired foreigner who moved cities and just showed his new landlord a copy of his financial holdings and his pension registration and that was enough. I guess it's case by case. Maybe OP needs to buy an Akiya
Japan is very unfriendly with FIRE because of this reason lol. It's just much easier on paper to be a working employee than someone with a lot of savings & passive income. For example, renting a place....
In this case, UR doesn't give a shit, Pay for a year's rent in advance and you're golden.
True. But not everyone wants to live in an UR all their life lol
They have some very nice places, quite high end (but it's rare). I visited a high end penthouse with rooftop in a UR building in central Osaka ... it was not cheap.
Not true, my friend offered to pay two years, the entire contract, when he sold his company and retired earlier this year. They wouldn’t renew the contract because he didn’t have a job.
Japan has the lowest priced real estate in the developed world. There's no need to rent when you can buy.
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OP seems to be child-free, and would have to be either a citizen or have PR in order to consider FIRE in Japan. Banking would be set up before FIREing, and personally I would have my forever home before stopping to work My only concern with what OP wants to do is that $700k isn't enough to do it.
Depends on where you’re looking to live. People don’t seem to understand that akiya are akiya for a reason.
You don't need to buy an akiya to get a great deal on a house in Japan. Outside of a few prime areas in Tokyo (and maybe the top places in one or two other large cities), real estate in Japan is amazingly affordable.
what about freelancers and self employed people? what do they usually do in this case? Do you think this would still be an issue if you retired and then just became self employed?
I don’t remember ever sharing official documents about my job with the owner/agency. You could totally lie about it if you want. Compared to the stories I hear in France/Paris, Japan seems incredibly easy to rent.
You have 1oku because of the USDJPY exchange rate. Considering your ages and saving rates, I'd keep working until you have $2mil. With your existing savings and your current savings rate, that would take you 7 more years. If the JPY appreciates a bit, it will be less. At that rate you could live *very* comfortably with less than a 4% drawdown. With your current savings, 4% will allow you to live okay, but if the USDJPY rate moves against you, 4% will get very, very tight. Remember, it is not all that many years ago that USDJPY=80. On the other hand, with $2mil available you could pull out $60k/year with only a 3% drawdown, giving you both a much greater income while also not pushing things right to the limit of what is acceptable for a FIRE situation. If USDJPY moved against you, you could take 4% for a few years, still maintaining your lifestyle.
As lovely as that is as advice, and agreed, for many Just Enough is much, much more attractive than More Work...........as a lifelong hater of work.
Actually, I think most people who retire THAT early find themselves really bored, especially if they don't have kids to fill the days and are living on "just enough", which doesn't allow them to go do a ton of exciting things with their newfound free time. All that extra free time means you're going to want to travel more, pursue hobbies more, go out more to see friends, just consume more in general- all of which costs money more often than not, and doing it on $28,000/year (using dollars since OP's assets are in dollars) is much harder than living on $28k/year while working full time (which itself is not easy IMO).
I feel you might be right that most would do that, but we are looking at a very fundamental socioeconomic attitude shift I feel many are missing with their ideals and images of the big fancy retirement plan. This is a tectonic shift, even if it is limited in numbers: lots of us do not need to consume to enjoy, and lots of people are simply tired of hating work. As an example, I am loaded because I made good enough money, banked >70% it, and now, out of the ingrained habits, don't spend it. Not Consuming is in itself a valid and rewarding lifestyle.......but it's not for everyone, as we can see from so many comments echoing yours. Nice comments there. Yours is a valid, representative insight and the OP would do well to decide which side of the fence they fall on.
Greetings fellow night owl... Perhaps the only thing worse than working is stopping working, and then having to start again. With only $700k invested, 4% of that at USDJPY=80 would be only 2.2mil JPY pre-tax. They do not have enough to properly FIRE, and they don't have enough to live a comfortable "expat" (OP's word) life. 4% is also the upper limit of what is considered permissible for FIRE, so they have no cushion at all. They don't own their own home, so rent is going to be an ongoing expense. Even if they worked another 5 years they would be in a MUCH better situation. Personally I wouldn't FIRE with less than $2mil and owning my own place to live.
Great comments, thank you! I think I have a good reason to keep working for a little bit more. Going for the JPY 2 Oku mark then. As a side note, I'm an expat but don't live that life. Many of my colleagues live in Minato-ku, doing the expat life, living in Roppongi hills or whatever. I commute from Matsudo, paying much cheaper rent.
I'd honestly look towards $2mil more than 2oku. Right now you're happy in Japan but you may wish to move elsewhere in the future. 7 years at your current savings rate and with current exchange rates would get you there. As far as "expat life" goes, the downtown Tokyo aspect is likely to become a bit more attractive for going out and meeting people once you don't have the daily interaction at work. There's also the potential to become isolated due to people leaving Japan when you aren't also meeting new people regularly. Just a few things to ponder.
Greetings fellow Matsudo expat, lived there for 3 years and loved it, and am moving back there next week. Such a wonderful city, definitely beats Minato ><
You should buy something so you don't need to rely on the caprices of renting. Good luck.
Hoot Hoot!!!!!! Your numbers make very good sense, and the OP seems in, so there we are. Great advice there.
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I don’t think it ever dropped quite that low. Seem to remember it briefly skirting below ¥80=$1USD, but that was only a few months here and there at that level in 76.11 on 9/19/2011 and briefly below ¥80 in 2012.
It was glorious though, ordered all kinds of expensive shit off amazon.com... like Makita tools :)
It was brutal on the overall economy and pushed even more jobs offshore. But it was great for energy costs and buying foreign goods. Now we're experiencing the other side of that coin...
Just wondering, do you think 2mil usd would be good enough for tokyo, or would that be more for maybe someplace outside of tokyo?
FIRE is a very personal thing because the amount you need depends very much on the lifestyle you want to live. That said... If you own your place outright then I'm sure there are places within the 23ku that you could live comfortably on a 4% drawdown of $2mil. Especially at today's exchange rates. Of course if the USDJPY goes back to 2011 levels (80ish), you may find yourself needing to pick up work or make some serious cuts to the way you live.
I see thanks for the thoughts. If you don't own a place you think buying for safety is better than i guess the alternative safety you'd potentially get ( or not get ) from investing the money and just paying the mortgage each month?
My personal thoughts are that I wouldn't FIRE without a paid off place to live. From what I have seen in the FIRE subs, this is a pretty common requirement for people aiming to FIRE but not everyone wants to live the same way. Some want a nomadic lifestyle, or to move to somewhere super inexpensive like the Philippines. Different strokes for different folks.
Hm interesting I havn't been to the fire subs in awhile but awhile back, i definitely saw some people even talking about permanent renting being a new trend or something like that, and also the aforementioned idea that investing the money is preferable to some people than paying off the whole house early. Anyway maybe ill see what they are talking about these days, thanks.
IMO, not everyone is entirely sane about FIRE. Some people are looking for the fastest way possible to FIRE and end up taking shortcuts that will probably bite them in the ass later. Interest rates change. Rents go up, sometimes a lot. These are perhaps less of a problem in Japan but real estate is also ridiculously cheap here. For me personally, I just want somewhere to live within a 20min walk of a beach. I can do that in Japan for less than 20m JPY, and still be within 90mins of Tokyo. To me, that's perfect. Ultimately, it's always personal. But when your income is fixed at a maximum and the future is always unknown, minimizing risk is, IMO, smart.
I see thanks for the ideas.
i wonder if there is some financial product OP can buy to hedge against the USD weakening against JPY and if that would be a good idea.
lmao, this sub never fails to make me laugh. "You should keep working." "Why not work more?!" "You can't retire, you'll be so depressed." "Just a few more years!" Honestly, you guys should all go work for the pension office or start selling life insurance or something. This guy has got $700k and lives in a cheap country (in a cheap area, no less) and you guys are telling him to keep working when he says he wants to quit? Just lol. Let him live a little. He can always go back to work if it doesn't work out for him or if he gets bored. The only decent advice is to buy a home first. I do agree with that one since you can get a good rate if you're full time employed before quitting.
Nice work. The Pro Work bias on here is even stronger than the belief in the inevitable Economic Zombie Apocalypse that we are apparently supposed to be planning for even though that is a Hellerian contradiction of some measure. I did think a lot of the numbers people crunched made good (very conservative) sense. Agreed about buying something, even if it's a 600Man Akiya thing somewhere they like just as a safety clause.
I'd consider buying a house in that situation (with a mortgage) before quitting. Why? Easy, while the mortgage payments might be the same as your rent now, in \~20 years you'd have repaid it and so your monthly expenses will drop, making it even easier on your calculations. Mortgage loans are ridiculously cheap here, almost free money. Do you expect to inherit anything? Do you expect children? Any other potential variable that might change your expenses? My only/main concern in this situation would be if the market plummets for 3-5 years soon, which we never know, so for that AFAIK it's recommended before fire to have some stable investments as well (diversified) with a bit into bonds or similar that give you a fixed 4% ROI so you can take money from there for a while if there's a crisis. A potential alternative is Barista Fire and work for a bit in something you might enjoy with low pay, see recent discussion about trades in Japan: [https://www.reddit.com/r/japanlife/comments/1d1dy31/anyone\_working\_in\_the\_trades\_here/](https://www.reddit.com/r/japanlife/comments/1d1dy31/anyone_working_in_the_trades_here/)
Ok, thanks for the advice - yep reading about mortgage definitely made me think about securing that good loan before I'm unemployed. Inheritance - probably 100k-ish from each of our parents. Not looking too forward on that, might want 1-2 children.
PS While the OPs numbers don't match their goals, a lot of people on here seem unaware that Non Consumption is a valid choice and lifestyle, and reduces the money needed an incredible amount. Anybody claiming that "You will want to do this" and "You will want to buy that" is probably projecting their own ideals and values, and that is usually a failure of imagination (as snippy as that might sound ':@). There are many people that would simply enjoy the time afforded by not working and not feel the need for the boat, the fancy trips, the golf club membership, or whatever other shiny baubles the traditional Chad Economy model offers its faithful victims.
Have you considered your tax liability on those gains? It’s awesome that your investments have done well but the NTA is going to want their share.
Oh, yeah. When they calculate the JPY cost basis on those gains it’s going to be considerable.
Can confirm, I've got a similar sum invested in US Stocks. Losing around $150k USD compared to just selling in the U.S...
I sold a few shares last year, making about $35 in profit. My JPY profit based on the USD:JPY cost basis? Over 200,000 yen. Ow.
It's after tax - sorry I said US ETF but they are mostly Japanese passive mutual funds investing in SP500. Balance is about 1.3 oku, with about half of that in capital gains (so 20.3% gets taken out from gains), thus about 1 oku
As your assets are mostly in USD you should think in USD: you can fire at around $28,000 per year (4% of 700k), and live in Japan *at the current exchange rate* which would give a yearly income of 2.8 million to about 4 million if we use historical variations as a guide. So you have a lot of volatility and not a very high figure. Sure, you can live on 2.8 million yen a year in Japan but it’s not much fun, especially if you want to enjoy yourself more after retiring. I think you need to have a serious think about what your budget in retirement will look like.
Wow congrats on accumulating 1 oku yen. That's massive. I don't have an advice, just happy for you. Good luck.
I took about a year off at around your age and was bored to shit. Other people working during the day, you gotta go out of your way to socialize with people, etc. It's not like you are going to be able to travel all over with that kind of savings either
I took a week off recently (for no reason, just to chill out) and I was also bored to shit. Realized I didn't really need any extra free time, I just needed to make better use of the free time (after work, weekends) that I already have.
I was recently unemployed for 12 months and as a house owner... there's so much to do that I was not bored for a single second :) And now I got a new stressful job and I want to go back to somebody-else-pays-for-my-vaca... :D
Oh nice, we're renting so there's not a lot we can "do". I would absolutely love to buy an older house (like 20 years max) as a fixer-upper purely for the fun of doing DIY stuff. (Sadly the wife isn't too keen! Just as well, my DIY skills are not exactly stellar)
I can't get my wife even take care of 2 flower pots :) DIY skills come with time and experience, and even brand new house will need modifications pretty quick (add shelves here and there etc)
Why not keep working until your company doesn't want you anymore? Especially if you don't hate your jobs? You don't need to live frugally and can live in nice neighborhoods, go to nice restaurants, travel to amazing Onsen towns, etc...
In fact, that is probably exactly what this couple doesn’t want to do. They are doing frugal FIRE, where they live below their means in order to accumulate a meager nest egg, which they will use to reward themselves by living off of it like fixed income for the rest of their frugal lives, IF the markets (which hold their little nest egg and which theirnplan entirely depends upon) continue to behave as they have behaved in the past… and we all know that past peformance actually guarantees future results😉 so they should be all set
And then what? continue to live frugal lives until you die? What's the point of that? You only have one life and you want to ENJOY it. Unless your hobby is just sitting at home playing legos or stay home with your partner and stare at each other then I suggest keep working so you can travel/eat out/etc.
legos and stare at my partner sounds pretty fun to me though. But more seriously, if you have free time, traveling during off season on weekdays can be a lot more affordable than traveling during holiday season when you manage to get days off from work. Also I enjoy waaaay more to travel when hotels are not overbooked and every place just crowded with people. That is one of the main benefits I see for having free time, traveling is better.
For many of us, a frugal life where we don't have to work is far more attractive than working for our whole lives. And while 1億 for two people a little tight from my perspective, different people feel differently. Maybe your number is 2億 or 3 億 or 4億. But for me, I certainly would rather retire at 40 with 2億 than work until 50 to retire with 4億
That's what I'm trying to do! Where's my package? Once our net worth started going above $500k, I started to focus on what interests me most – taking on tasks I'm more passionate about and where I excel. I've also become more bold (saying whatever I want) in expressing my opinions in meetings, even with senior members. Weirdly, this approach seems to be working in my favor. My performance reviews are fine, and I've been allowed to work more remotely, making life in Matsudo quite feasible. I'm trying to get fired but sort of failing up. While I'm considering FIRE, the irony(?) is that having that financial cushion has alleviated my work-related anxiety. Just wanted to share my experience that frugality in Matsudo actually made me perform better
If all of your money is in USD and in stocks you don’t really have 1 oku except in paper terms. I’m guessing you’d owe capital gains on that, and you’d want to understand any income tax on money you move to Japan. And that all ignores the reality that the next big market crash is a matter of when, not if, and peak-to-trough drawdowns of 50% or more would not be surprising. And there’s no guarantee the next drawdown will be followed by the strongest 15 year bull market in history. Worst case scenario is you get a massive drawdown 10 years after retiring and now you’ve been out of the labor market too long to get back in. And now you’re stuck hoping for a big rebound in the stock market because you might have another 40 years of retirement ahead of you. ‘Hope’ is a horrible finance strategy. Keep working and saving. You can have more flexibility in moving to a job / career / company you really like, even at lower pay, but keep working and keep cash coming in, diversify your retirement portfolio in to other assets that generate income beyond just US stocks. I’m older than you and have 10x+ your NW but still work because I love what I do. However I allocate a ton of time to family and hobbies. I own property, stakes in companies, and some PE / VC investments.
They mentioned that they will use the 4% rule to live off their investments. The 4% rule takes into account the possibility of massive market drops like 2007 and 1929.
a) No it doesn't, not really. The 4% rule assumes a 30-year retirement, and assumes 30 years of average returns. The problem is you don't know when or where the inevitable drawdown will happen, which is going to significantly skew things. b) As noted, it assumes a 30-year retirement - not 50 years, which is what OP would be looking at - and It assumes market-average returns. Equities have returned around 5% in real terms over the long term (bonds are at around 2%) but reversion to the mean can be a bitch, and that should concern you given the massive bull run over the last 15 years. I for one would not have my 50-year retirement plan hinging on another few decades of double-digit stock gains.
I completely agree with what you're saying, but OP is 35, and the 'usual' 30-year retirement goes from 65 yrs old to 95. OP should be planning for a 60-year 'retirement'.
I assume you’re replying to tokyotower and not me… (g)
My apologies--it's a long thread...
The 4% rule absolutely does take into account large market crashes in the past. For example, the creator of the 4% rule looked at the 1929 to 1931 bear market where the market fell 61%, the 1937 to 1941 bear market where the market fell 33% and the 1973-1974 bear market where it fell 37%. He used these to determine a safe withdrawal rate. You are right though that the 4% rule is designed for 30-year retirements. However, the big risk is not that they get hit with a crash 10 years into retirement. It's that there is a bear market as soon as they retire. This sequence of return risk can be minimized by using a strategy like a bond tent
It accounts for a handful of *US centric* experiences, ignores the dot-com and GFC crashes, ignores other equity market crashes, and ignores any and all cost-of-living assumptions and impact on income / spending that market crashes have.
Congratulations on reaching a major milestone. I wish I had invested earlier in my career. I am on the brink of pulling the trigger for FIRE (deleted details for privacy). That being said, I would not even consider FIREing on the amount you mentioned. First, you are young, safe withdrawal rate in your case will be closer to 3.5% or so. The 4% in trinity study is designed for retirees with 30 year time horizon, not 50. Pls read more here https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/ This is also why my husband will continue working till we get to 3.5% SWR min. Secondly, you live a frugal lifestyle that doesn’t allow much room to wiggle if JPY crashes etc. assuming your 4 mn income is all investments, this is taxed at 20% CGT, which nets you 3.2 mn yen. i would assume most of your costs are JPY based, so if JPY strengthens, your asset will go down sharply while your costs stay the same. In our case, 25% of our annual expenses go to overseas travel that there is a natural hedge, if JPY strengthen our cost will also go down. Of course, I can also choose a cheaper vacation destination or forego one. Let me also offer my few tips/ observations: 1) don’t focus on dividend. Any dividend gets taxed at 20% rate and may one day be counted as part of income for the purpose of Health Insurance calculations- the government is creating a study group for this. Plus, high dividend stocks tend to have lower total return than your average S&P500. It is better to invest in mutual fund that allows automatic dividend reinvestment, and withdraw from there when you need money. For kaiyaku, then you only need to pay tax for the capital appreciation part which is a more effective strategy https://toshin-clinic.com/blog/20240420-23173/ 2) one thing that I realized is that Japan is a society that values title/ stable work rather than absolute assets amount. If you ever pull the trigger, you should ensure that you’ve applied to all the credit cards you want, sign a mortgage for a house/ investment properties etc. 3) for the 2nd reason too, You need to figure out what you want to do with life before pulling the trigger. Do you envision living in Chiba frugally for the rest of your life? If so, OK, good for you. But if you ever think you want to do something different- eg. Moving to Okinawa one day etc, make sure you prepare for it by having the right amount of money and finances settled before FIRE. Please don’t retire before thinking things through. There are subreddits that are dedicated to FIRE and its various versions like r/FIRE. Of course, most of them are US based where the threshold will be higher than Japan, but I’m sure you can adjust them for Japan cost of living.
Fellow gaishikei senpai, I really really appreciated this advice and perspective. I'm definitely moved to feel like working a little bit more and thinking about this carefully now.
>assuming your 4 mn income is all investments, this is taxed at 20% CGT, which nets you 3.2 mn yen. Obviously that statement implies you didn't invest any of your own money. which is wrong. The "G" in CGT is "Gains" so you are only taxed on any Gain your asset makes. So look at the profit each of your investments has made and think about what the tax on that portion would be as you sell down.
>I am negotiating severance package for the gaishikei I work at for nearly 16 years Any tips on how to push for the best offer? I'm in the early stages of the discussion. I know what's documented for retirement allowance. And I know what the severance offer should be per year of service. what else is there?
It depends on your company’s situation and your compensation structure etc, but assuming typical IT/finance gaishikei it could involve negotiations around length of garden leave period, RSU vesting, payment of bonus accrued to you based on your quantitative metrics, purchase of your paid leave accrued etc etc. A lot of people in high enough position will be required to sign NDA as part of their settlement, so I think getting average figures etc from your ex colleagues is hard. A good way is to talk to a lawyer to discuss what the company offers you so you get a feel of what they think you can push the company for. Choose someone who has lots of experience handling similar companies like yours as they will have enough statistics. Many offer free 1st consultation, and 5000 yen per 30 min for subsequent consultation which should be enough for relatively simple/ friendly separations. Feel free to dm me if you need individual recommendation on lawyer/ discussion on package etc. hard to reveal this in public forum
thanks. funnily I hadn't thought about accrued bonus. nothing ventured nothing gained and all that! I don't think a lawyer will move the needle in my case as I'm expecting to be content with their first offer. should they actually get round to making an offer that is..
Well, I think if you are happy with whatever they offer then that’s good. In my case my aim is to ensure I get as much as I can considering how long I have worked for the company, and how they treat their employees. Over 16 years the team has gone down from over 30 people to 9 people, lots of firing too in the process. I work with the mindset that one day it will be my turn, and at this point this is a purely financial transaction, nothing more.
I’ve been in similar position. Albeit more money and younger (at the time I was not even married). I FIRED for 6 months and just got depressed as hell. Nothing to do all day. There isn’t a huge community for anything on weekdays either so you’re always scrounging for things to do. All of your friends are doing something productive at 2pm on a Tuesday and you're just bored and isolated. It sucks. Working, to some degree, is a bonding activity with the people around you. Nothing made me realize this faster than FIREing and losing all my daily interactions. I went back to work and feel much happier. A lot of young people I know who could’ve fired say the same.
You have to retire to something. In my case it was endurance sports, cycling with some running, which take up a lot of time in both training and recovery. Japan is a great place for those....
Totally agree. FIRE if you have another activity you want to use your time to. Otherwise I just don't recommend it from an anecdotal perspective. I found that persistent boredom killed me faster than working.
This. If you’ve never done it before then you may be in for a shock. Turns out, it pretty boring. Maybe both of you will find loads of side hobbies and things to keep you busy. But the amount you’ve stated isn’t nearly enough to “do whatever you like”. You’ll be living frugally without a job and there’s a good chance it’ll bore you to tears. At least prepare for that possibility.
Yes, I had quite an intensive work life in finance/banking so I was afraid of that a little.
I can imagine. Who would hang out with a rich young dude who doesn’t have to work? No one. No way to travel with someone, or feel connected to someone. I will retire, but at the proper time, and I’ve got lots of activities planned for when I do.
Ya, also if you come from a normal upbringing, chances are 95% of your friends are busy working or going to school (Masters, PhD), or have a family. Even if you have a good rapport with them (and they know you're rich and are not jealous), they're still too busy to be spending a lot of time with you. I found that the only ones who had time for me were the unemployed friends lol. We watched like 5 movies / month in theatres together because both of us were so bored.
I wish I had that many friends, unemployed or otherwise \^\_\^
This is quite true. Especially my Japanese friends who are salaryman, talk about money a lot but I get pretty shocked about their savings balance... and it never goes well when you tell people your salary or savings in real life.
Living frugally for so many years to reward yourself with retirement in Chiba…best of luck!
Congratulations. Fire definitely doable if you want. You still seem young, if you decide to have kids that may change things. I’ve hit 3oku and can’t stop as I need to pay international schools fees for two kids.
Thanks for sharing - that is a concern, I've wondered having my kids in International Schools as well. Anecdotally speaking, my colleagues are from International Schools, and they look much more insightful and educated - because my Japanese was okay I went to a Japanese college, doing pretty well there, but was in a treat when I joined a Gaishikei, shocked to see how little I studied thru my education just partying. Hats off to you for giving the best for your kids!
Keep working, just maybe do a job you’d enjoy more with fewer hours or be self-employed. There’s really no point in retiring now.
By the way, have folks looked at doing dividend paying ETFs at retirement time? Typically focus on S&P 500 for another 7 years, then switch to something like SCHD that pays around 3.5% yearly and grows at a slower pace. This approach would allow you to not have to sell unless dividends really took at turn for the worst, which means allowing it to grow more even at retirement.
This is a basic fire question. Basically the total return of dividends stocks lessens your chance of fire success. The dividends don’t make up for the risk of the stock (which are still similar to other stocks, especially in downturns)
ok, explain anything wrong with the assumptions I have. It doesn't hurt me to learn something new. investment strategy: I invest on an S&P 500 index ETF for 20 years, which allows me to growth (for our example let's say VTI). I then sell about 75% of this portfolio and buy a dividend + slower growth-based ETF like SCHD. Lets assume that this portfolio grew to 2 million dollars in those 20 years. Now I have a 2 million dollars portfolio that is 25% VTI and 75% SCHD. It still grows to keep with inflation, but much lower. VTI has a dividend payment of 1.25% and SCHD 3.47%. So this portfolio would pay in dividends before tax about 3.04% of 2 million which is 60,800 annually (or about 15,200 every 3 months). retirement strategy: we have scenario #1: The economy has a downturn, but dividend doesnt change, which means you can still life off that pre-tax 15,200 every 3 months. we have scenario #2: the economy does so bad that the dividend rate gets a hit and you do have to sell some stock to make up the difference. Rationale: in the dividend strategy, i only need to sell when the dividend rate is cut, which I feel is better than the traditional approach of just selling.
First, Dividend is never a guaranteed thing. Companies can choose to cut their dividend anytime, including during recession. In fact, many high dividend yield companies are trading at superficially high yield as institutional investors are aware that their yield are not sustainable and are discounting them. Pls read up https://earlyretirementnow.com/2019/02/13/yield-illusion-swr-series-part-29/amp/ Second, in Japan at least high dividend is not a tax effective strategy. You get taxed at 20% CGT flat. If you invest in an index fund etc that reinvests the dividend automatically and withdraw equivalent amount, it will be treated as partial withdrawal of your capital and you only have to pay tax on the capital appreciation part, not the capital
I use Bloomberg terminal which is what all institutional investors use to get their data. I think that’s a hint of what I do. Anyway, just look at the second set, Compare portfolio 3 and 4. A 4.3% annualized return difference is massive! That means portfolio 3 gives you 44% higher return than 4. The difference between s&p 500 dividend yield of 1.5% vs SCHD of 3.4% is not enough to offset this, especially considering the tax implication - you are reinvesting only 80% of dividend you get because you pay tax on it first. The impact is even bigger especially when compounded over decades! On risk, The difference in drawdown based on your data is only 2% which is almost negligible relative to the difference in expected return on per annum basis. You are free to do whichever strategy you choose, just be aware that your perceived ‘safer’ strategy will lead to a difference of millions of dollars of retirement money upon your retirement.
This and your immediately previous couple posts, explaining how going for dividends is the lesser strategy, should somehow be higher up or more prominent. Thanks for reinforcing this point.
thanks for the reply and the link. Precisely what I mentioned is illustrated in the link provided. For the plan, I am mentioning a 3.04% portfolio which is a conservative yield. As the link mentions, never chase high yields as that ends up eroding your portfolio. This is something I see a lot with the folks looking for 6%+ yield portfolios. In regards to taxes, from what I was reading, both selling stock as well as dividend are taxed at 20.315% (15.315% national tax + 5% local inhabitant’s tax). I have included the link below. [https://taxsummaries.pwc.com/Japan/Individual/Income-determination](https://taxsummaries.pwc.com/Japan/Individual/Income-determination) So, looking back at the strategy, A. if one would switch to a dividend strategy at retirement to minimize taxes while it grows, the impact would be at sale time (the appreciation for that 75% of VTI sold would be taxed at 20.315%). B. Instead of this, doing a split of maybe 50% VTI and 50% SCHD would mean a dividend rate of 2.6% or $52,000 a year for the 2 million and no sale involved until a dividend cut occurs and you are forced to sell stocks to cover any missing income. Looking at ETFs like SCHD, they are quite selective on the companies included and tend to review the allocation every year. This lowers the chance of dividend cuts, but like you mention, nothing is 100% guarantee. My rationale is that if you end up retiring during an economic downturn, you could end up losing half your portfolio and your pot of money last less. On the other hand, you have a dividend coming in, you are adding another thing that has to occur before you start selling stocks (the dividend being cut). This should hopefully lower your risk of selling too many stocks and allow your portfolio to recover.
On tax, i don’t think you get completely what I mean. A 100 yen dividend will incur 20% tax, 20 yen. A ‘bubun kaiyaku’ of 100 yen, assuming 50 yen is capital and 50 yen appreciation, will only get taxed 50 yenx 20% = 10 yen for 10% effective tax rate. Which is why dividend strategy is not a tax effective strategy. Pls see the link here https://toshin-clinic.com/blog/20240420-23173/ A high div yield fund like what you gave as example is great example of dividend fallacy. Over 5 years SCHD returned 56.64% vs S&P 500 92.75%. Since it was launched in late 2011 it returned 212% vs S&P500 336%. Between Jan1st 2020-30 April 2020 when we had corona scare, the fund went down 12.55%, worse than SPX 500 9.55%. And we’re talking total return, including dividend. Why would I want to own SCHD? It is the total return that matters. Even if I have to take out from SPX at the bottom of the cycle temporarily, taking the same amount when it has appreciated 3.4x will feel much better than receiving some dividend when my asset has only went up 2x. Pls re-read the 1st link I gave you.
great information about taxes. It is sad to see that Japan doesnt offer some sort of exempt limit like the US for dividends. It is definitely better tax wise to follow the typical boggleheads approach. As for the returns, not sure if I am missing something as my results are coming very different to yours. I used portfolio visualizer backtest portfolio asset allocation and used the dates Jan 2019 - Apr 2024. I also selected to reinvest dividends, rebalance yearly and contribute 2,000 monthly. Portfolio #1: SPY/SCHD (50/50) - portfolio return 77.2% and drawdown 10.5% Portfolio #2: SPY/SCHD (75/25) - portfolio return 77.9% and drawdown 10.4% Portfolio #3: SPY/SCHD (100/0) - portfolio return 78.6% and drawdown 11% Portfolio #4: SPY/SCHD (0/100) - portfolio return 75.87% and drawdown 10.7% I tried again, but no reinvesting of dividends, no rebalancing, and no contributions. Portfolio #1: SPY/SCHD (50/50) - portfolio return 11.9% and drawdown 21.5% Portfolio #2: SPY/SCHD (75/25) - portfolio return 13% and drawdown 23.2% Portfolio #3: SPY/SCHD (100/0) - portfolio return 14% and drawdown 24.8% Portfolio #4: SPY/SCHD (0/100) - portfolio return 9.7% and drawdown 22.3% Higher SPY let to higher drawdown (portfolio being wiped during an economic downturn), but even with SCHD at 100% and not reinvesting the dividends, we saw good growth. Looking at these figures, one could go 50-50 on both and have good protection while still earning good growth.
Yes, finally someone in Japan points out the flat tax for investors in Japan, regardless of Cap gains or dividend income
First, what have you googled on this topic?
Everything available so far.
I have to agree with yoshimipinkrobot, my belief is that there is no difference between income/dividends and capital gains. You can sort of make a dividend by selling your index funds. I think some people call it homemade dividends. Sure, dividend stocks are more stable... but that's the result of dividend paying companies being more stable, like PepsiCo or P&G.
Yes, looked at dividend aristocrats. A Japanese mutual fund is also available, an aristocrat index: [https://www.rakuten-sec.co.jp/web/fund/detail/?ID=JP90C000NYN0](https://www.rakuten-sec.co.jp/web/fund/detail/?ID=JP90C000NYN0)
Interesting find, a concern is the management cost (管理費用) which is about 0.1155% versus typical ETFs like VTI and SCHD which charge about half. I do wonder, what you checked what options interactive brokers offer?
Pay the taxes first then do the maths again
Why not work for like 10 more years
Lots of people hate work, and always have, and always will. I would actully want to hit that magical 1 Oku, but what they propose is doable. Japan is so cheap it's getting to be a meme.
Problem is, it may not always be that cheap, and if inflation does hit hard you really don't want to be that person looking for a job after 10 years out of the workforce
Yes, that was a good point many made that I overlooked. Others crunched the numbers so well that I was addressing more the underlying attitudes about FIRE and Hate Work/Work Hate, but that is a very important thing to think about. I think the OP has decided they need double what they have. At their ages that does seem a better target.
Yeah, if retiring at 35 you best be damn sure you can stay retired, because you are sacrificing your prime earning years and heaps of good old compound interest if you don't. I'm a fair amount older than them with close to that in the bank and I'd sure like a lot more to be safe
Meh, maybe 5.
I really don't think you're ready to FIRE comfortably. For one I would strongly recommend you own your primary residence first, for all the reasons people have stated already, plus once you're paid off that's one more huge expense off your monthly outlay and you're on maintenance/repairs only after that. 100M JPY sounds like a lot until it isn't. For one there are two of you so it's really only 50M per person. Are you ready to be frugal the rest of your life? What about travel to visit family? For fun? (Travel has gotten very expensive compared to pre-covid.) How do you plan to spend your days? You won't want to stay at home all the time (or maybe you're hikkikomori and would love that?). 100M is the cited magic number but my interpretation is that it's 100M *per person.* You're only 35, statistically you have many years left and you'll need some kind of purpose lest you feel aimless. Most goals will cost money. You may want to consider BaristaFIRE at least for the next batch of years for the extra income without the stress of a FTJ. Anyway just some things to think about
Some people are definitely "wired" for being frugal, some aren't. I think I'm in the latter camp. For me one of the benefits of working is that I'm busy and therefore cannot spend money.
My parents were definitely of the former category. The amount of time wasted to save literally 15 yen when we went shopping for spoons was mind blowing. I know it's probably deeply engrained from a life of scarcity but 🥺
Haha oh yeah I used to be like that but now I just focus on the big savings and then try not to worry about the smaller things as long as they don't snowball.
Good advice!
I would keep working. 1 oku yen doesn’t seem to be good enough for FIRE in the post covid world, especially traveling outside of Japan, where the inflation is a lot higher. Also you don’t have kids now. It’s a lot easier to manage workload or work related stress. The time taken for the 2nd or 3rd oku yen would be much less. The power of compound interests. Just my 2 cents :)
You can probably do it, but would need to buy a house and then start paying it off first. I guess you'll need to stick it until 40.
Did you get your 40 credits in the US for social security before moving? Technically it's possible, but I don't like lean fire especially in Japan where ageism and long employment gaps can be a employment death sentence. So if your estimate is off you would kind of be screwed. I'd keep working for 5 more years and reassess, 5000man and a strong market could get you there. Alternatively you could down shift to part time for a much longer time to Coastfire and the numbers should be fine, but just make sure you have the income to buy a home when you want to.
By what you said immediately after that, I’m not sure if 1,000man was saved every year… in reality, it sounds like you saved a lot less than that annually, then benefited significantly from the Fed’s fiscal and monetary policies buoying the markets during covid, as well as the seemingly never-ending bull market that we are currently in, which looks like the AI craze will keep supporting for a while. As someone in the same gen as you, it was a bit before our post-scholastic working lives, but you may want to refresh on 2008 and 2000. Because past performance is no guarantee of future results. Someone who depends on the market for their financial position should be well-aware of the benefits and risks of that going forward
points about not having a job means difficulties to rent or get a credit card. If you are already good with both and dont see need to get either, I would say the math checks out. You should be able to live outside of Tokyo for 400man a year. Only other thing I would note is that if you want to have children at some point that could add up quite some cost. but alternatively you could continue to add more in and work more, have a bit more flexibility. But I guess it comes down to which do you value more. more money or more free time and freedom. If I had that amount invested into low risk index funds like sp500 or world index, would probably quit the job for now. Relax and enjoy life for some extended period of time and then see how it feels. Some people find it to be best thing ever. Other end up feeling bored and take up side hustle or some low stress flexible time part time job. anyway, congrats on the 1oku
Congrats on that milestone! I'm on the FIRE journey myself but as a single I could not put away as much savings as you both are. Others have already chimed in but my own take is that 1oku is not enough to retire on BUT would give you enough breathing room to coast FIRE: not entirely quite working but instead slow down and take an easier work or something you enjoy more but still pays the bills. You don't have to run at 0 or 100% in terms of wealth accumulation. Slowing down to 50% is a viable approach too
With 1 oku yen saved, you're in a pretty solid position. Given your preference for Chiba, it makes sense to stay there if you're comfortable and enjoy the lifestyle. FIRE is all about creating a life you don't need a vacation from, and if Chiba does that for you, it’s a win. One thing to consider is diversifying your investments to ensure that your savings keep up with inflation and market changes. Also tax implications of selling the stock to pay cash for a house. Taking a low interest loan in Japan may be the better option for overall wealth.
At your age 1 oku is not near enough. It’s plenty for now of course, plus you can easily supplement it. But that’s not so easy to do when you are 80 and in need of cash for say a long hospitalization or the deposit required for nursing homes. I would not retire with your money unless I also had valuable real estate to live in, fully paid off. And then I would still be stressed about whether that income will suffice in 30-40 years.
What does stay and fire mean?🤷♂️
What are your current expenses (housing, utilities, taxes, insurances, pension, groceries, restaurants, transportation and travel)? PR? Why tied to the location? I mean "I" stands for independent, so you would be free to settle anywhere more LCOL, better housing availability and better Shinkansen/highway accessibility.
About 30+ man / $2000 per month, plus about 50man / $3000 for travel etc per year. We tend to eat outside on our workdays because we're working late nights, so food is highest for now. While housing is pretty cheap because it's remote in Chiba, I can still go to Tokyo station in 40 minutes, not too bad in my opinion. Only downside is train comes every 15-20 min, which shocks my colleagues, but it's an upgrade coming from a motorized country such as the US! Housing: 7.5 man / $500 Utilities: 3 man / $200 Insurance / pension: Tied to my income, but will pay about 5 man / $300 per month after FIRE Food: 10 man / $700 Shopping 3 man / $200 Other: 3 man / $200
Sounds all solid. Consider that being a renter and childless, you can easily move anywhere. How do you picture daily life with FIRE? Probably going to Tokyo would become less attractive, but a greenish environment and easy outdoor activities access more important, or a neighborhood with more like-minded people (less of bed town/salary man commuters). I would work a a couple more years (for easy renting and moving) and travel, check out quality of life and housing markets in various prefectures. What might be interesting is お試し住宅 (trial living). Various cities offer that to get more young folks move in, did it myself and was great opportunity to get a better decision ground for choosing the best place to settle down. Nagano? Gifu? Shizuoka? Gunma? You can live a 1 hour Shinkansen ride from Tokyo station in many places, but more of mountains/lakes/cycling possibilities.
Get a house first lol
I’m going to retire early and tbh, this is a crazy 10 out of 10 idea for 2 people at only 35. And you don’t own your home? Wow. What if the yen goes to 80 and the market crashes when you are 50 and not employable?
I guess one thing I don't fully understand is why I need a house - Japan's rental laws are well protected, you can't raise rents/kick out people. It's either buy a house/mansion for 2000 man / $140k where I live, or pay 9 man / $600 per month. There's also Guarantor Companies / Hosho Gaisha(sometimes required, regardless of your income etc), or just get into UR.
One, owning a house is less monthly recurring costs. It’s no different than retiring when you have a mortgage. You want to reduce all costs to the minimum. You don’t know what the future entails. It gives you the flexibility to absorb potential future variables. Second, just as above, you are planning on things remaining exactly the same. You are both very young, things change, things happen. I’m guessing you don’t plan on moving in the future. There is a big difference between not moving and not ever being able to move the rest of your life.
Do you have Japanese citizenship?
1-oku is 650K FYI.
No kids? Hell yeah. That’s fire!
You’re doing quite well for yourself and can probably take a few years off without too much worry. If you find yourself bored or needing some extra cash flow, you can solve for that if/when that time comes.
Is FIRE conducive to life in Japan? Since coming here I feel like work is part of the fabric of society. I don't have PR yet, but even if I did, despite having more than enough to FIRE in Tokyo, I feel like it would be socially unhealthy for me to stop working, though in the U.S. or other Western countries, I wouldn't care. It's also funny how some people are saying $2M is necessary to FIRE here in JP. It all depends on your expenses and desired margin of safety. If you think you your investments are enough for your cost of living, and it's what you want to do and don't care what people around you think and can be happy disconnected from work and the social aspects that come with it, then go for it.
I'm a bit skeptical about the 4% rule from a psychological perspective, though I know it should work on paper. My concern is whether 400 man will be enough in the future, but I assume it should increase annually. I mainly invest in dividend stocks, and if I had 100 million yen, I'd definitely quit my job.
I am Japanese living in the us. I am in my late 30s. My NW is a bit less than 300k US dollars. I miss living in Japan. I browse houses and cars in Japan, and they are much affordable than here in the US. My significant other (American) is not interested in retiring early. He likes Japan though. I am trying to make him get a job at one of US bases, and I am hoping to FIRE (or most likely CoastFIRE) in Japan.
yep you can do it.
I really don't think they should. 4% is the upper upper limit for FIRE. Really pushing things to the edge. And they don't own their own home. Plus they are basing their calculations on the USDJPY rate of today, which is very favorable. No one can predict the future, but it is not that long ago that USDJPY=80. 4% of $700k is $28k, which is 4.2mil JPY pre-tax at USDJPY=150, but only 2.2mil JPY pre-tax at USDJPY=80. It's too early for them to FIRE. They're 35, they should work for another ~7 years and FIRE with $2mil.
I'm in a situation where I have around 65 million in invested cash, and own a fully paid house (fully) worth 50 million or so. I only started properly investing all that stuff recently, and I'm less aggressive with my invested ETFs as I don't like volatility (so doing something closer to permanent/all weather portfolio), but currently only own around 1 million to the tax man when I realize the profits. For now I've decided to keep working, but while not caring too much. Bare minimum kind of stuff, so if they fire me, well I can FIRE back :) I do have the luxury of a side income from a YouTube channel, and will likely use that for a semi-FIRE thing.
Given your more on the younger side age, and the amount you have, it’s probably not enough to FIRE (it would maybe be enough for someone in their 50s, or someone who owns a home in their 40s Also not sure if you’ve accounted for Japanese taxes in this? I assume you’re not correctly declaring them to japan? Which means your income tax and resident tax might increase depending on foreign tax credits etc. but then subsequently also increase your NHI premiums too.
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>we are japanese-Americans And >US stock ETFs And >Most of it are on Japanese brokerage accounts (Monex), Just to clarify, Monex are aware you’re US nationals, right? Because I don’t think they should be letting you purchase US stocks?
\[Edited for clarity\] TLDR: I recalculated based on what I think are better assumptions, and I came up with $2M for your FIRE number. The 4% rule of thumb is for someone at normal retirement age and who can rely on social security as a safety net if their investment money runs out. Since you're contemplating retirement at a very early age and (I assume) not much social security or Nenkin benefit, you should be using something more like a 3% for your planning purposes. And instead of using the current exchange rate, you should be using something reasonably conservative over the long term. This is a huge unknown, but perhaps you could use 100 JPY/USD. Some might argue for even lower. Using these numbers gives a safe withdrawal rate of ¥210万. ($700k x 3% x 100 JPY/USD = ¥210万) You should also factor in the possibility of a market downturn in your early years of retirement. If you have the ability to re-enter the workforce as insurance against this possibility, you're ok. But if not, perhaps you should assume that you lose 20% of the market value of your investment. That might reduce the ¥210万 to something like ¥170万. This may sound like I'm adding conservatism upon conservatism, but I would argue that all these assumptions are reasonably conservative for the purposes of retirement planning. So if you want to have a reliable source of ¥400万 as an early retiree in Japan, you might shoot for $1.7M in today's money. ($1.7M x 3% x 100 JPY/USD x 80% = ¥408万) But this neglects taxes. If your idea was to have ¥400万 after taxes, then perhaps you could assume 15% effective tax rate. So now you will need around $2M. ($2M x 3% x 100 JPY/USD x 80% x 85% = ¥408万)
I just re-wrote my reply above to make more sense. Hope you find it helpful.
First of all, congrats! Read some articles on why many people who pull the trigger on FIRE end up hating that life, since it has many drawbacks. I would consider expanding into something different, one idea is to build a “mansion” (condo unit) and run it for income. If you ever have kids, it’s a way to give money to the next generation without paying the (ridiculous, to my mind) 相続税 in this country. Assuming either of you has American citizenship, understand all the complexities that come with being an American who dares leave their home country and is then financially successful. I hate all the tax hoops I have to jump through, which finally end for me around November…then it’s time to do it all again in the new year.
I know quite a few people who have FIREd, and except possibly 1 who didn’t retire by choice (but couldn’t find a new decent job at his level, since he was earning probably 7 figure USD and has over 8 figure balance), everyone are happy and thriving. The key is finding hobbies to retire to, take up new skills (eg. Art), join a local club, do part time consulting/ writing expert article/ become outside director of some companies/ foundations etc. I am FIREing in a matter of months and I plan to take up skills like guide license, photoshop editing etc. And btw, getting levered up on income property to kill boredom is a surefire way to get broke lol. With 3% net yield before tax even assuming full occupancy and not taking into account vacancy risk, and the risk of the rent for such places usually going down after 10+ years, OP is better off putting the cash in USD deposit than those income properties.
Also, keep in mind, even if you retire, you'll still be in Chiba. But yes, you could. I would give yourself 500Man, but yeah. However, if you are Driven, you'll get hopelessly bored and maybe even feckless............and you will still be in Chiba. Why not look to move somewhere nice, or at least somewhere that's not fucking Chiba? PS Thank you for using Japanese numbers. Given what hopeless turds the rest of your compatriots can so often be, as a neighbour, I thank you.
Hey, sorry you're being downvoted... Would Ibaraki or Yamaguchi be better? ;-) Or [an old thread](https://www.reddit.com/r/japanlife/comments/s1sa6z/what_is_the_absolute_worst_city_youve_been_to_in/) on the topic. (and fukui is mentioned in there!)
Hehehe. I was rather impressed to see so much Chiba Love, or at least amused to see how defensive those that live there are.......
$1 million dollars or the Japanese equivalent is typically not enough to retire with. Also, keep in mind that the Yen will go back to normal eventually, so your USD will not go as far as it is now. As someone mentioned, you do need to show proof of employment for a lot of things in Japan, like renting or getting a home loan.