Anxiety about old age
Lately, I have been seeing a lot of features on TV and in magazines about the “accumulation NISA.”
Why has this become such a hot topic?
In a word, it seems to be “a powerful tool for building assets for retirement.“
I think, “Oh, come on, the government is supposed to take care of us in our old age. That’s why I’m paying 18.3% of my salary, which is about the size of a sparrow’s tear, to the company for the employee pension insurance!
Do you remember the FSA report that caused a stir in 2019?
“It depends on how you live, but the pension alone will be insufficient to cover 20 million yen in your retirement, so we ask you to build assets through self-help efforts!” they announced this in no uncertain terms.
The whole nation should rant and rave, “We have been paying high social security costs relying on our pensions in our old age! and the whole nation should have ranted and raved, but after a bit of media coverage, the situation calmed down before long, and asset building has been conducted through “accustomed savings” and “unfamiliar investments.
Many salaried households must have had the emotional support of thinking that they would be able to get by with their retirement savings.
Although savings is a strong point for the Japanese, the interest rates after the lifting of negative interest rates on March 19, 2024 will be 0.020% per annum for Mitsubishi UFJ Bank and Sumitomo Mitsui Banking Corporation, and 0.030% for PayPay Bank.
While there may be something to be done for wealthy individuals with net financial assets exceeding 100 million yen, households that have trouble just saving a few tens of thousands of yen each month will never be able to save the 20 million yen needed for retirement.
Westerners may think, “Why do Japanese people only save money with low interest rates?”
Unfortunately, we do not receive any financial education at school, so many of us do not know where to start when it comes to investment.
They say, “Money is important for life, so why don’t you learn more about it by yourself? Even if they make fun of you, saying “What are you talking about, Wakarikasen…” it can’t be helped because that is Japanese culture.
With the exception of a few “Kansai madams” mentioned in our blog article “The End of Discount-ism,” we have been taught not to talk about money in public, and if anything, to avoid it because it looks vulgar.
I hope some famous publisher will introduce the Japanese mind not to learn about money, like Zen or Bushido.
Also, those who believe that retirement funds are a reliable source of retirement savings should also be wary.
In this day and age, not many people can say, “I will never resist the boss’s unreasonable orders as a yes man, and I will continue to work as a servant of the company for 35 years!
In Japan, where employment mobility is progressing, people no longer have to grit their teeth and work under a boss they dislike until they retire.
The resistance to changing jobs has also waned, and more than 30% of new graduates who have struggled to win a job offer end up leaving their jobs within three years.
According to an article in last December’s Asahi Shimbun, the average retirement allowance in 2022 for university and graduate school graduates who have worked for 35 years or more is 20.37 million yen, a decrease of 4.54 million yen from the average in 2007.
With the possibility of the retirement benefit system itself disappearing in the future, the idea of “living out one’s retirement with retirement benefits” seems too risky.
I have been researching NISA, and once again I am extremely angry at the government for telling people that they should “build assets through self-help efforts, not through pensions” in their old age.
The younger generation, in particular, should be saying, “Enough, I don’t know what I’m working for! They should be more vocal about it.
New graduates are new NISA
From here, I will explain why NISA is “a powerful tool for asset building in retirement” as I mentioned at the beginning of this article.
Again, until now, Japan has had a strong “pension is for old age” and “talking about money is taboo” mentality, so when the government suddenly asks people to build assets through self-help efforts, people tend to say, “Screw it!”
The NISA is an investment system designed by the government with the aim of “allowing people without sufficient investment knowledge to build assets with minimal risk by simply accumulating assets little by little, just like a savings account.“
As you know, taxes are imposed on profits from investments such as stocks, mutual funds, foreign exchange margin trading, and crypto assets.
However, under the new NISA, if you accumulate up to 18 million yen, you do not have to pay taxes on the money you have earned.
It is rare that a government that loves to collect taxes will go so far as to offer such a preferential system, which shows that the government is willing to cooperate with the people in building their assets.
Under the “Savings NISA,” assets increase significantly with the length of the investment period.
For example, if one can invest at an annual interest rate of 3% for 42 years from the age of 23 after graduation to the retirement age of 65, one’s assets will double.
In other words, if one invests 35,700 yen per month (tax exemption limit of 1,800 yen / 504 months) in the new NISA as if it were a savings account, and invests it at a 3% yield, the compound interest effect will double one’s retirement fund to approximately 36 million yen.
If the yield is 5%, 59.7 million yen, and if 7%, 100 million yen, you can become a “millionaire in retirement” if you work hard and save from the time you graduate.
Ordinary stock investments are subject to a tax of about 20% on profits, but as we mentioned, the New NISA is tax-exempt up to the limit, so you can use all of your money as your own.
The New NISA is a generous support program for young people who may start a riot against Japan’s social security system, so I recommend taking advantage of it as early as possible.
I can work my way up to about 30,000 or 40,000 yen a month, but I don’t know what to buy!” I don’t know what to buy!” Don’t worry, investment babes who throw tantrums.
There are more than 6,000 savings trusts available in Japan, but you can rest assured that the products you can buy through the Savings NISA are those endorsed by the Financial Services Agency as long-term, savings, and diversified investments.
Of course, there is no guarantee that they will make money, but they are far safer than those that we, who do not have sufficient knowledge of mutual funds, can choose.
For example, eMAXIS Slim Global Equity (Orcan) and eMAXIS Slim US Equity (S&P500), which are popular investment trust products under the new NISA, are promoted by investment professionals in magazines.
For example, the average yield on the S&P 500 has been about 8.3% over the past 20 years and 10% over the past 30 years.
While the performance may not necessarily be the same in the future, the past 30 years include historical economic crises such as the bursting of the bubble economy, the Lehman Shock, and the Corona Shock, which may serve as a reference for the future.
I have told you that you can become a millionaire with 357,000 yen per month and 7% yield from new graduate to retirement, and we hope you have understood that this is not an unbelievable story based on S&P’s investment performance.
Be a shura If you want to be better
I understand the benefits for the young, but what about the new NISA for those of us in Generation X? I urge all of you ladies and gentlemen to start NISA.
Even if we haven’t seen the “death Star of the Fist of the North Star” yet, we only have a limited time to invest our savings!
Generation X, which has a shorter investment period than the youth, cannot become a millionaire with as little as ¥357,000 per month in children’s pocket money.
If you want to “aim for the top” like Eikichi Yazawa, you should increase their investment amount as early as possible.
If possible, I would like you to challenge the maximum amount of 100,000 yen per month, or 1.2 million yen per year, in your savings NISA.
If your wife scolds you, “I can’t do that, not when I have school fees for my children and a house mortgage to pay! I want you to try to convince your wife, “You can live as long as Mamiya, but I don’t have the time.”
You will either be extremely angry or share your sense of urgency about life.
Those of you who have successfully gone down the path of accumulating 1.2 million yen per year should think about how you will pay for it.
“I pay cash, smilingly!” we should stop thinking in the old fashioned way and choose to pay by credit card only.
Securities companies are competing with each other to give back points for card payments when opening a new NISA account.
SBI Securities offers 0.5% to 5.0%, Rakuten Securities 0.5% to 1.0%, and Monex Securities 1.1%.
The most noteworthy is SBI Securities, which offers 5.0% points.
The 5.0% rate is not available to everyone, but is determined by the type of credit card used to pay.
The 5% rate is offered by Sumitomo Mitsui Card Platinum Preferred, 1% by Sumitomo Mitsui Card Gold (NL), and 0.5% by Sumitomo Mitsui Card (NL).
The annual fee for the Sumitomo Mitsui Card Platinum Preferred is 33,000 yen, but if one can pay 1.2 million yen in mutual funds annually with the card, one can earn 60,000 points (60,000 yen), which is not only no annual fee but also an extra 27,000 yen.
However, this was the rate of return for credit card savings up to 50,000 yen, and the point return rate for credit card payments for savings of 100,000 yen announced on March 19, 2024, has been drastically revised.
According to the announcement by Sumitomo Mitsui Card, with which SBI Securities is linked, 5.0% points will be granted for 100,000 yen of credit card savings from May to October 2024 purchases, after which the rate will be changed to a maximum of 3% depending on the annual credit card usage amount.
Specifically, 3% for annual credit card usage of 5 million yen or more, 2% for credit card usage of 3 million yen or more, and 1% for credit card usage of less than 3 million yen.
For example, a person who pays only 1.2 million yen of his or her 1.2 million yen savings NISA with a Preferred Card would earn 12,000 yen with a 1% reduction.
The Preferred Card offers a bonus of 10,000 points for every 1,000,000 yen spent, so the total is 22,000 yen, but this is less than the annual fee of 33,000 yen, so the benefits of the card cannot be felt.
Simply put, those who can settle at least 3 million yen, and preferably 5 million yen or more per year with the Preferred Card will be given preferential treatment.
In fact, if you spend more than 5 million yen per year on your card, you will receive 36,000 points for the payment through Savings NISA alone, which is more than the annual fee.
In addition, a 10,000 point bonus is given for every 1 million yen spent up to 4 million yen on the card, which means that an additional 40,000 points can be obtained for sure.
After negotiating with your wife, you have decided to move on to the land of Shura, and you must be ready to fight against Rao and Toki’s own brother, Kaioh.
Not to mention NISA, you can consolidate everything from electricity to cell phones to daily purchases into Preferred and aim for 5 million yen that will allow you to master the art of Musho Tensei.
